Tips to manage long-term tail spend in the supply chain

Managing and controlling of the expenditures is at the heart of every organization. Each organization wishes to keep its expenses low and have a better return over investment. However, tail spend management is still a daunting task due to a large number of suppliers, smaller transactions, off-contract agreements, ad hoc buying, one-time vendors, lack of economies of scale and a little mismanagement. Since tail spend mostly escape the oversight of the management team, but the entire transactions sum together makes the tail spend a dominant supplier. Since these transactions require a lot of time and resources more than the controlled portions of the procurement strategy, tail spend management can help to tackle these rouge suppliers and contribute to savings.

Due to the supply chain managers often buy too many products for too many suppliers, which increase the costs and result in tail spend, these issues can be solved by following these tips:

1. Spend analytics:

For a good tail spend management, analysis of the spend- maverick spend must be done. It includes non-compliant transactions which should have been performed under the existing agreements. Other spends must also be analyzed to encourage the company’s compliance.

2. Consolidation:

Managers must take the stock from a unite supply base. All the parties must follow the company’s compliance principles and the relationship with the suppliers should be reviewed carefully. It is essential to analyze that the relationship with the suppliers are maintaining or failing.

3. Sourcing helpdesk:

All the procurement and sourcing queries can be solved by the sourcing help desk which is provided by the third party. The resulting inquiry must be directed to either the customer’s in-house sourcing department or the supplier’s agreements. The inquiry is done through pre-agreed parameters of spend.

4. Price comparisons:

Reviewing and running price comparisons from different vendors are necessary. A strong tail spend management includes a mix of several category partners merged in order to gain maximum benefits and impacts.

5. Simplify:

The company must try to simplify the processes by directly purchasing from the suppliers and skipping distribution. It affects all aspects of the supply chain management from the finance to logistics.

6. Tracking the system:

In order to maintain tail spend management, the company must track the lead times and performance of the supplier on the regular basis. Every system’s operation needs efficiency and transparency in order to be effective.

7. Identifying the bottlenecks:

The managers should identify the bottlenecks related to material or particular parts so that the company operates without delays of the shipments. The problematic components must be given better solutions.

8. Having supply market knowledge:

Having local supply market information is very important as it delivers enhanced understanding and efficiency and therefore can be a reason for savings. The outsourcing providers are now equipped with a portion of local resources in the teams which provide tail spend management.