In today’s COVID-19 world, many companies have successfully put a hold on all discretionary spend, resulting in what we procurement professionals call tail spend being ‘cut off’ in just a few short weeks.
Tail spend Challenges
Our challenge moving forward will be to prevent the renaissance of that tail as companies return to work. In many areas, like meetings and events, we don’t expect to see a significant resurgence anytime soon. However, in other categories, such as facilities and maintenance, the tail is likely to come back stronger than ever as these teams prepare our facilities for our colleagues’ return.
Spot Buy Strategies
Because tail spend consists of many transactions with very little spend, our strategies for tail spend management should not be focused on value delivery, but instead on increased efficiency and decreased transaction costs. While there are opportunities to migrate a portion of the tail into our preferred contracts and suppliers for decreased cost and increased compliance, these strategies don’t typically deliver significant value due to the fragmented nature of the spend and user base. Spot buy is typically made up of ad hoc, non-repeated purchases, so spending time on optimizing the supply chain adds limited or no value.
Tail spend Outsourcing
However, improving tail spend can deliver a significant impact on overall process efficiency and costs of Accounts Payable and Supplier Data Management teams. To the extent end-users are using purchase orders and invoices to secure ad hoc transactions, tremendous transactional work of limited value is generated. Our goal should be to automate the processing of spot buy transactions as much as possible to reduce the burden on these functions. This automation can be accomplished by migrating the spend to p-cards, our BPO providers’ spot buy desks, or new fintech companies, such as Buy Made Easy. Automating these processes results in the ancillary benefit of clean data for category managers that can be leveraged to manage maverick spend going forward.