The benefits of tail-end spend management
We’ve recently seen a huge growth in interest from clients who want to manage their tail-end spend better. Tail-end spend refers to the large volume of low value, unclassified transactions that aren’t strategically covered by corporate contracts. For many large organisations, whilst it remains unmanaged, tail-end spend can have serious cost implications in terms of time and money. The good news is, there are solutions to help you consolidate your spend and optimise your indirect procurement, logistics and supply chain processes. But before we talk solutions, let’s take a more detailed look at what tail-end spend actually is and the challenges it can cause.
What is tail-end spend?
Typically large organisations manage around 80% of their total third party spend through carefully negotiated, secure, long-term contracts. These tend to be the priority and largest spend categories. The remaining 20% are the lower priority areas. They generally comprise of large volume, but low value transactions that are too fragmented to justify diverting resources to manage them. These are what are known as tail-end spend, or long tail or low value spend.
Tail-end spend is hard to manage because the purchases tend to be unclassified and infrequent. They therefore don’t warrant going through the official procurement system. Quite often this can mean maverick, large purchases that should have gone through standard procurement channels, can slip through the net.
Why try to manage tail-end spend?
There are several very good reasons that justify more proficient management of tail-end spend. Let’s look at a few of them.
Large organisations can have hundreds of delivery locations each receiving large numbers of deliveries from individual suppliers. Keeping track of every low value order is a procurement nightmare.
It results in procurement departments spending an unprecedented amount of time processing purchase orders, and finance departments processing thousands of individual invoices. This can tie up a huge amount of resource and can cost an organisation millions of pounds in the long-term.
It creates a vast quantity of low-value deliveries, each made by individual suppliers with their own carriage charges, and each releasing tonnes of CO2 into the environment.
Stock levels and lead times are unmanaged.
Maverick spending leaves the organisation open to an increased level of third party risk.
Without any control, product purchases do not necessarily represent the best value for money and bulk discounts cannot be taken advantage of.
What’s the solution?
The aim of managing tail-end spend is to achieve a better understanding of your supplier base and to have less ‘one time vendor’ activity with lesser-known suppliers. This not only reduces risk and cost, but helps organisations make better and more informed procurement decisions.
Here’s some of the ways it can be achieved:
Reduce product cost – Consolidate products and reduce costs by bulk buying and applying principles of economies of scale to tail-end spend.
Reduce numbers of suppliers – Consolidate your supply chain to reduce internal workloads and simplify ordering and returns processes.
Improve your supplier information – Enrich your supplier data to enable product purchasing to be rationalised and standardised and share data to enable users to be guided to select products that represent the best value for money.
Reduce risk – Eliminate non-compliant suppliers and introduce effective stock management.
Align logistics technology – Create one logistics platform across your entire tail-end supply chain to source, stock and distribute products quickly and efficiently.
Unsurprisingly, many of the organisations we talk to find the idea of managing their tail-end spend rather daunting. Most can see the value that could be derived, but tackling it themselves isn’t necessarily a commercially viable option. That’s where the Clares bespoke tail-end spend service can help.
Introducing the Clares tail-end spend service
We work with clients to consolidate tail-end spend through one supplier – us! Our aim is to make your tail-end spend a manageable part of your standard procurement process.
How do we do that? We are a national provider of business products and services. This enables us to consolidate your organisation’s spend across multiple product categories, which in turn optimises your indirect procurement, logistics and supply chain processes.
We will significantly reduce the number of deliveries made and the number of invoices sent, whilst helping you achieve cost and process benefits across your organisation.
Powering your procurement
As we’ve already discussed, tackling tail-end spend isn’t exactly a walk in the park. Of course we will build on your existing operating procedures, but we’ll also add the benefit of a national logistics platform, a state of the art e-procurement platform and a dedicated account support team.
Our national logistics platform
Our national logistics and supply chain infrastructure includes 400,000 square feet of storage capacity across the country. This enables us to guarantee next day delivery for stocked products from one of our regional depots. In fact our fleet of 400 vehicles make over 3000 deliveries each day. What’s more, our delivery fleet has satellite tracking to accurately estimate delivery times and we have a delivery guarantee of over 99%.
Our e-procurement platform
Our e-procurement platform is easy and intuitive to use. Although we stock tens of thousands of products, we’ll tailor the platform to your needs, so that your users are only able to order from an authorised and contracted list. Anything outside of the agreed contract will go through an authorisation process before it is approved and ordered.
The platform also makes it easy to access your organisation’s historical order data and financial reports, and to manage multiple delivery locations and favourites lists.
Our account team
You will be allocated a dedicated account manager who will act as your trusted adviser. They will proactively manage the relationship through regular site visits. They will also present project implementation and training planning, carry out quarterly reviews to measure our performance against objectives, and identify further savings opportunities.
We also provide a dedicated customer service team who will be available to your users between 8.30 – 5.30, to assist with purchase orders, deliveries and general support and information. Our customer service also includes online live chat and 24 hour technical support.