Tail Spend Management: Essential Guide for Procurement

Okay, so you work in procurement? Are you in charge of finding cost-saving opportunities for your business?

Then, you must be familiar with tail spend management.

No?

Maybe you have heard the term but haven’t paid it too much attention.

That needs to change now.

Tail spend management is a critical, yet often overlooked, part of any effective procurement strategy.

Should we show you why?

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What’s Tail Spend?

In some cases it can be also known as rogue or maverick spending, but in general tail spend refers to all those low-value, infrequent, or unclassified purchases that collectively represent a large portion of an organization's procurement transactions but only a small part of total spend.

Feeling confused?

Let’s put it this way

Your company has, of course, established purchasing contracts with a network of suppliers, but occasionally, you buy small items outside those contracts. It’s almost nothing, so why you should worry about making it official?

That’s why tail spend management exists 

Believe it or not, those insignificant purchases can make you lose money in the long run. 

Common Example of Tail Spend

• Low-value supplies: Things like stationery, printer paper, or small tech accessories often slip through the control of the procurement department.
• One-time services: So you want to have a quick fix in your computers maybe?  Are you looking to hire someone for a brief speech at a corporate dinner?
• Maintenance: Small maintenance jobs, like fixing a broken light or servicing an appliance, often go through non-standard channels.
• Department-specific purchases :Teams might make department-specific buys, like training materials or special software, without involving procurement.
• Emergency purchases: Last-minute buys, made in a rush, tend to bypass the usual approval processes, adding to tail spend.

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Importance of Tail Spend Management 

Reduce Costs

Yes, in theory tail spend transactions don’t include lots of money spent but if they are frequent you can bet that the total amount will add up. By bringing this spend under control, you can identify savings opportunities that will help you have better cash flow levels in the long run. 

Supplier consolidation

The problem with unchecked tail spend? You have to deal with too many suppliers, not an ideal scenario for supplier relationships management. On the other side if you take the time to bring your suppliers into a single platform or system you can negotiate better rates and improve efficiency.

Risk management

Tail spend can expose your organization to risks, such as working with unvetted suppliers or facing compliance issues. Better control reduces these risks and guides your processes to be fully adhered to your company policies.

Efficiency

Yep, tail spend management is also important for keeping your efficiency high. Why? Because it makes procurement easier,reducing the administrative burden on your team and freeing up time for more productive tasks.

Data and insights

You can gain insights into spending patterns and use this data to inform broader procurement strategies.

Rogue Spend, Maverick Spend and Tail Spend

While it’s certainly true that these terms are sometimes used as if they were all the same, there are some basic differences that you should consider, rogue spending, for example, is considered, to be hard to predict, Maverick, on the other hand, is more unorthodox.

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How to Manage Tail Spend

Start with a spending analysis 

You'll want to begin by analyzing your current tail spend so you can understand where your money is going. Key things to look for include: frequent purchases, suppliers, and all possible inefficiencies.

But how can you do that?

Well, a good place to start is your spending data. Once you have it, you can determine what tail spend is according to your company's policies so you get the most accurate calculation.

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Segment your tail spend

• Hidden tail: This is where you’ll find some big names. They’re mostly covered by carefully negotiated and monitored contracts as part of strategic spending. But sometimes, there’s a “hidden” element, it could be because the contracts don’t include certain materials or services, or because purchases are made outside of the agreed terms.
• Head of the tail: This section includes spending that doesn’t fall under strategic management. It typically ranges from $50,000 to $1 million per year and often flies under the radar.
• Middle of the tail: Here, you’ll find spending spread across many suppliers, with amounts ranging from $2,000 to $200,000 per supplier. Since each supplier’s spend is relatively small, this segment usually isn’t actively managed.
• Tail of the tail: This is the tiniest slice of spending—less than $2,000 per supplier. It’s very fragmented and mostly consists of one-off, transactional purchases across a wide range of suppliers.

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Implement better procurement policies

Establish clear procurement guidelines for tail spend. This could include setting up approved supplier lists, implementing purchase thresholds, or requiring department heads to approve certain buys. To facilitate things, you should consider having a digital procurement system so everyone who needs to make a purchase can quickly submit an official purchase requisition and get approval before any purchase is made.

Use technology

Right to the previous point, don’t be afraid to choose procurement technology so you can automate and streamline tail spend management. Spend analysis tools, e-procurement platforms, and automated approval workflows will reduce manual effort and improve efficiency. Automation also provides better visibility and gives you the opportunity to extract relevant data from your processes. 

Organize your data

Yes, working with data is useful and all, but if you don’t have a clear system, you won’t make any real progress. Classify the data you extract in formats that matter to your company, like dates, currencies, or supplier names. 

Use a P-card 

For small, frequent purchases, consider implementing a P-Card program. P-Cards are company-issued credit cards that allow employees to make low-value buys while still providing oversight. You can set spending limits and monitor transactions to keep everything in check. Quite useful, isn’t it?

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Challenges in Tail Spend Management

Managing tail spend comes with significant challenges, primarily due to its scattered and unstructured nature. Lack of visibility is a major issue, as tail spend is often spread across departments and involves numerous suppliers, making it difficult for your team to track where money is going. This gets worse as there are too many decentralized purchases, where individual teams make independent buying decisions, ignoring standard procurement practices. The result?

Chaos filled by supplier proliferation, with an overwhelming number of vendors, many used infrequently, creating complexity and reducing negotiation power. Additionally, the increasing volume of small transactions creates an administrative burden, stretching your procurement team thin and taking focus away from things that could be definitely more productive. 

On top of all that, you get the possibility of dealing with a rise in compliance risks, such as working with unapproved vendors or breaching internal policies. Together, these challenges highlight the need for a structured approach to tail spend management to regain control, be more efficient, and minimize risks. 

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Best Practices for Tail Spend Management

Set clear goals

This is an old advice, but we promise you that it always works. Define what success looks like for your tail spend management efforts. What are exactly your goals? Are you aiming to reduce costs, improve compliance, streamline processes, or achieve all of these? Clear objectives will help you stay focused and measure progress effectively.

Use data

What’s the point of having access to your spend data if you are not going to use it? Regularly analyze your information so it’s easy to identify trends, inefficiencies, and even find opportunities for improvement. Next time you have to make a decision related to your spending, you’ll know what’s best for the business. 

Standardize

Implement consistent procedures for common tail spend purchases. This could include using preferred suppliers, creating a catalog of pre-approved items, or setting clear thresholds for purchases requiring approval. Standardization simplifies processes and guarantees compliance.

Monitor performance

Treat tail spend management as an ongoing effort. Get used to constantly review progress, track performance metrics, and gathering feedback from stakeholders. Use this information to make updates and keep your strategy aligned not only with the market but most importantly with what your company needs. 

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