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Managing Low-Value, Infrequent Purchases: A Guide to Tail Spend Management in Procurement

Learn how to effectively manage tail spend and minimize risks and costs associated with it. A comprehensive procurement process for reducing costs, increasing efficiency and improving supplier stability.

Procurement is a vital function for any organization as it encompasses the acquisition of goods, services, or works from external sources. However, managing tail spend, which refers to a small percentage of a company’s total spending directed towards low-value and infrequent purchases, can be a common challenge.

In this article, we will provide a comprehensive procurement process for effectively managing tail spend and minimizing risks and costs associated with it.

  1. Identify and classify tail spend: Analyze the company’s spending data to identify and classify tail spend. This includes identifying the suppliers, products, and services that fall into the tail spend category, as well as the frequency and value of these purchases.
  2. Assess risks and costs: Evaluate the risks and costs associated with tail spend, such as supplier instability, lack of competition, and inefficiencies in the purchasing process.
  3. Consolidate suppliers: Look for opportunities to consolidate suppliers to increase competition, improve supplier stability, and reduce administrative costs.
  4. Standardize products: Look for opportunities to standardize products to reduce the number of suppliers and increase the volume of purchases.
  5. Automate purchasing process: Implement systems to automate the purchasing process for tail spend, such as e-procurement platforms, to reduce administrative costs and increase visibility into spending. Visit www.collectivespend.com tail spend marketplace for tail spend management platform.
  6. Implement purchasing controls: Establish purchasing controls to ensure that tail spend is made through established procurement processes and policies.
  7. Increase visibility of approved suppliers: Ensure that employees know who the approved suppliers are for tail spend purchases.
  8. Provide training on procurement policies: Provide training on procurement policies to ensure that employees are aware of the company’s policies and procedures for making tail spend purchases.
  9. Conduct regular audits: Conduct regular audits of spending to identify and address any tail spend that may occur.

Managing tail spend is an important aspect of procurement as it can help organizations reduce costs, increase efficiency, and improve supplier stability. By following this process, companies can effectively manage tail spend while minimizing risks and costs associated with it. This can help organizations have better control on their spending, increase visibility into spending, and make better decisions.

To learn more about tail spend management, email us at hello@collectivespend.com.

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