What is Technology’s Role in Tail Spend Management

In the world of procurement, tail spend management remained for a long time a problematic issue for many companies. Tail spend constitutes about twenty percent of total company spending but it usually involves eighty percent of suppliers thus it may be very costly for a firm when not well controlled. However, as the technology has improved, and companies have started utilizing technology to execute their supply management solutions, they have some excellent tools at their disposal.

Understanding Tail Spend

Tail spend can be defined as the many small, and miscellaneous, purchases that are outside the view of strategic sourcing. These are sourced from a number of suppliers and may encompass everything from paperclips to maintenance contracts or one-off equipment hire.

The Challenges of Tail Spend Management

Lack of visibility: Since the number of transactions is usually high and the value of each transaction is usually small, visibility into an organization’s tail spend is often a challenge.

Fragmented processes: Budget spend is usually fragmented across different departments and carried out by a number of different people; it is therefore unpredictable and can cause compliance problems.

Resource intensity: Manual methods also entail a lot of effort to track tails spend and can be cumbersome thus taking a lot of time as compared to other strategic procurement functions.

Missed savings opportunities: If not well managed, organizations may have areas of their spend which have the potential of being optimized to reduce expenditure and improve its supplier base.

Leveraging Technology for Effective Tail Spend Management

There are a several options that help to manage these challenges and optimize the workflows associated with the tail spend in the contemporary world. Here are some key ways in which software solutions are transforming this area of procurement:

Spend Analytics and Visibility

Sophisticated spend analytics technologies incorporate AI and machine learning to analyze massive procurement data. Such tools can group buying, analyze patterns, and give near real-time information concerning the activities of tail spends. They facilitate the provision of better visibility to the procurement teams so as to make choice about opportunities for possible savings and or improvements.

E-Procurement Platforms

E-procurement platforms therefore aggregate and facilitate control over many aspects of procurement, including that of tail spend. They can help organization to monitor and maintain its policies on purchase, automate the approval of purchases, and at the same time give the employees a friendly interface with which they have to make their purchase. The effectiveness of direct tail spend is that employees are forced to transact through the company hence organizations get control and visibility over such transactions.

RFQ Software

The utilization of Request for Quote (RFQ) software is central in the right management of tail spend. A few of these tools help one to call for bids from several suppliers for low value, high variety products that one can buy rarely. The potential that RFQ software can serve to minimize the management time and efforts associated with the task, at the same time as guaranteeing competitive prices, is invigorated by the emergent relevance of the tail spend issue.

Supplier Management Systems

By managing suppliers appropriately, this area of spend can be brought under control. Supplier management frameworks help organizations in centralizing their supplier lists, monitoring supplier performance, and managing contracts. 

Artificial Intelligence

These technologies help in:

• Automatically categorize spend data
• Detect peculiarities in spending or some kinds of fraud
• Suggest suppliers that should be used based on past trends and pre-determined specifications
• Anticipate future expenditure trends for the purpose of making the right predictions on savings.

Robotic Process Automation 

RPA is a good fit for most of the routine, high-velocity activities that are involved in the tail spend management. This ranges from keying in data, handling checks, calling suppliers and handling of invoices. Some of these benefits include prevention of mistake occurrences, time saving and allowing staff in procurement departments to dwell more time on high value-added activities.

Mobile Applications

Mobile procurement apps allow employees to perform approved purchase or submit an expense report on the move. These applications can assist to manage purchase that may otherwise occur outside the strategic procurement process and hence offer better control.

Blockchain Technology

Blockchain’s adoption in procurement is still nascent; however, it holds the potential to significantly disrupt the way organizations handle tail spend. Thus, through creating the system of record that is decentralized, tamper-proof and transparent, blockchain is a potential instrument to build trust, mitigate risk and help optimize specific tasks in the long-tail of procurement.

Implementing Technology for Tail Spend Management

Start with data cleansing: Before you roll out new technologies in this chain, it is important that the procurement data that is being feed into the technology solutions is correct and properly arranged.

Choose integrated solutions: Select software that can work in collaboration with your current systems to prevent the creation of silos.

Focus on user adoption: Allocate resources in training to make sure that its employees support the changes that may include introduction of technology and processes.

Implement gradually: It might be wise to stagger the application of such policies and undertake pilot projects initially before going big.

Continuously monitor and optimize: It is also important to constantly reassess the options of the technology products and services you are using and make changes that are useful for its optimal usage.

Conclusion

Technology is rapidly transforming the central and particularly the complex area of tail spend management and providing solutions to problematic issues that have never been solved effectively. Whether through spend analysis tools, and e-procurement solutions and through the Request for Quotations software solutions and through the artificial intelligence tools, all these are making tail spend more visible, more manageable and much more controlled for organizations.

When these solutions are utilized effectively, companies have the ability to revolutionize their organizational approach to manage tail spend, increase savings, increase compliance and drive value to the procurement core. Looking to the future of this particular type of spend management, it is clear that the growing use of technology will make tail spend even more automated, smart, and beneficial for companies and organizations of various types.