With a background in Finance, Jon is pretty good at looking at the numbers and controlling the costs. In this blog we take a closer look at how companies can reduce their procurement spend by approaching the “tail-spend” in a more strategic way.
It’s no surprise that when companies are looking to tighten their spending belt, procurement is an easy go-to. But without first having a good understanding of which approach works for you – you might end up costing your business more in time and resources… without realising any benefit.
Some companies tend to go for the reduce everything approach – “let’s ask all our suppliers for a discount”. Some just go for the big spend items and try and get as much discount or rebate off them as possible (often this ends up being the most challenging negotiations of all). Others spend countless time doing analysis and counting every pound.
It can get pretty confusing but in my experience there is fairly simple place to start. It’s one which lets you can unlock significant savings – your tail spend. Your tail spend represents the small stuff that you don’t think will have much impact, but combined can make a really big difference.
So, how do you approach your tail-spend?
When we are talking about tail-spend we ignore the larger, more strategic suppliers and focus on the smaller one-off, non-core ones. Most probably don’t yet factor into category management and often they are on unfavourable payment terms, which can impact your cash management and forecasting.
By identifying this group, and moving them to an outsourced solution you can realise immediate benefits in your business. These benefits come in the form of only having to deal with one supplier, instead of many. You will have one invoice, with agreed payment terms, instead of many suppliers asking for cash upfront. And finally, you will have reduction in costs by leveraging the buying power that comes with consolidated buying.
Learn more about our outsourced service – tail spend management.