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Driving benefit from your low value spend – a sting in the tail13/10/2015
Blog, Practice guide
A significant amount of spend falls under the procurement radar as it is made up of low frequency small payments that companies usually make to many different suppliers.
Best practice in corporate procurement is typically reserved for companies’ strategic purchasing. Greater savings are expected from tackling larger areas of spend, which comprise the majority of a company’s buying.
Transactional procurement and low value purchasing, known as tail spend, is estimated to make up half of a company’s indirect and direct spend.
But this non-core spend is often difficult to track and manage, and projected figures suggest that 20 per cent of these transactions are unmanaged. Figures also suggest that a minimum of 15 per cent waste occurs in the tail spend. Small, infrequent purchases with lots of suppliers add up. A long tail spend can also affect levels of compliance and risk in the supply chain.
By managing tail spend in an organisation, procurement professionals can enable financial savings to be made, and also improve compliance, allow current contracts to be renegotiated, and consolidate and reduce the number of vendors.
Download our guide which sets out the key principles of how to manage low value spend and make sustainable savings.