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Companies make millions of small purchases that are too small for procurement handling or too infrequent for cataloging. These tail spend purchases often fall outside the purview of procurement personnel with a mandate to strategically manage it and the ability to leverage the full buying power of the organization, but neglecting tail spend can have significant repercussions for companies.
Accenture examines tail spend and offers ways of managing that spending, realizing savings, and delivering strategic business value.
Tail spend represents those funds that fall out of the spotlight by not being strategically managed. They often represent purchases that are not managed by a company’s procurement policy and are made by employees who may not have the expertise or options to make the best choices. This can lead to cross-enterprise waste—potentially draining millions from a company’s reserves.
Complicating everything, tail spend can include tens of thousands of low-value purchases across myriad categories. The small transactions fly under the radar, but collectively represent a marked drain that can be a daunting one to tackle without the right approach.
Even for companies that know they have a tail spend problem, curbing it can be difficult. Sheer numbers can complicate matters, visibility may not be present, busyness can cause tail spend fatigue, and the expense of hiring procurement specialists to solve problems are all possible roadblocks.
Once solved, five beneficial outcomes are possible:
10-20 percent savings in spot buying.
One time savings of 10-15 percent from strategically managed spend; 2-5 percent year to year after.
Increased efficiency through consolidated supplier base; improved visibility leading to better productivity by allowing procurement personnel to focus on higher value issue.
Increased compliance through leaner supplier base.
Increased customer satisfaction through ease-of-use, clarity, and reduced process cycle times through up-skilled procurement resources.
Accenture believes the key to successful tail spend management (TSM) requires a dedicated team conducting an assessment. This should be followed by a 3-6 month “spot buy reduction” program aiming to address a segmented tail (Hidden Tail; Head of the Tail; Middle of the Tail; Tail of the Tail).
The focus should be on:
Ralf Mägerle is a managing director in Accenture’s Operations Management Consulting practice and is the lead for Sourcing and Procurement in Austria, Switzerland, and Germany. During his more than 20 years with Accenture he has helped clients from a variety of industries to change and improve their procurement and supply chain through strategy, processes, organization, and systems. He is focusing his client work on increasing the value procurement brings to the business over and above cost savings, particularly with regard to risk management, innovation, sustainability, and contribution to top-line growth. Ralf holds a degree in computer science, a post-graduate degree in economics, and an MBA.
Kyle Rosenthal is a tail spend services delivery lead in Accenture’s Procurement Business Process Outsourcing (PBPO) domain. He leads Accenture’s major tail spend global delivery programs for various client sectors including finance, consumer package goods, and life sciences. Within the past 10 years Kyle has led and supported procurement transformation programs at more than 40 Fortune 1000 organizations. He has extensive experience in on-demand e-sourcing solutions with modules in auctions, sourcing, contract management, supplier management, and sourcing project management.
Christian Meyer is a manager in Accenture’s Operations Management Consulting practice, where he specializes in the area of Sourcing and Procurement. During his time with Accenture, he has supported and led procurement transformation projects for clients in diverse industries across Europe, covering the complete procure-to-pay process chain. Christian holds a degree in Business and Engineering with a strong focus on supply chain management.
February 19, 2014
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