If you are new to the world of procurement, you should learn everything there is to know about tail spend management. Most organisations do not focus on tail spend, preferring to concentrating on core spends. They are under the misunderstanding that tail spend is unimportant, and so does not need as much attention as other category spends. However, tail spend causes organisations to lose millions of pounds each year. With the right tail spend management in place, it can ensure the following benefits.
A company that manages its tail spend can realise significant savings of anywhere from 15 to 20%. If an organisation opts for spot buying management, it can enjoy minimum one-time savings of 10 to 15%.
Strategic spend does not offer ongoing savings but this is not the case with tail spend. Overspend is a major issue with tail spend as most organisation end up purchasing these items for 30% higher than their real cost. So, incorporating tail spend management can help an organisation enjoy on-going savings in different categories.
Great return on investment
As a new procurement professional, you should not believe that tail spend management is expensive. It can ensure an excellent return on investment. For each £1 spent on tail spend management, your organisation can realise a return of up to £8.
Minimises organisational risks
Almost 20% of the total spend of an organisation is devoted to tail spend. Since this spend is invisible, most companies do not pay attention to it. However, it can pose a considerable amount of risk to the organisation, including risk to the company’s reputation, non-compliance risk, supply risk, and the high cost of processes. If you work to manage tail spend, you are limiting these risks.
As a procurement professional, you should focus on getting a grip on tail spend. The benefits will be visible in no time, and you will add value to your organisation as a procurement expert.
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