To tackle or take control your tail spend, you will need to keep the below points in mind.
#1. Start by collecting data on previous projects
When dealing with tail spend, one of the main challenges is accurately identifying projects that fall into this category. This can be especially difficult for decentralized organizations without easy access to clean data. In such cases, it’s important to seek support from different parts of the organization to ensure an accurate understanding of the situation.
If a spend analysis hasn’t been conducted before, now is a great time to initiate one. Analyzing your tail spend will provide valuable insights into where your money is going and how you can enhance your procurement process.
#2. Evaluate the performance of providers
To identify high- and low-performing providers in tail spend, conducting interviews with project sponsors and leaders can be highly beneficial. Creating a list of preferred providers based on feedback from internal stakeholders demonstrates your commitment to listening and considering their input.
In return, stakeholders will be more inclined to provide proactive feedback on consulting firms. Engaging with project sponsors and leaders also offers insights into overall project performance, helping identify areas that require improvement.
#3. Enhance your knowledge of the local consulting market
After establishing preferred suppliers, maintaining control over tail spend without excessive management efforts can be achieved by maintaining a list of additional providers.
Exploring the local consulting market enables you to identify potential suppliers and build relationships. This proactive approach ensures readiness when a business line wants to initiate a one-time project within a specific sub-category.
#4. Consolidate wherever possible
Tail spend is often viewed as a necessary but undesirable aspect of procurement—recurring and duplicate projects that no one wants to deal with, yet they must be managed.
However, it’s essential to change this perspective and recognize tail spend as an opportunity for strategic management. Implementing frame contracts for coaching, cross-business-unit RFPs for excellence programs or digital transformation, and similar initiatives are ideal candidates for strategic management.
By adopting a proactive approach to tail spend, you not only save money but also improve overall business performance. So, the next time you encounter tail spend, reconsider its potential as an opportunity rather than an inconvenience.
#5. Avoid falling into the trap of false tail spend
Sometimes, without realizing it, you may unknowingly accumulate false tail spend. This can become a significant problem if not addressed promptly. To prevent this, establish workflows with appropriate agile checks and balances to track and control false tail spend.
Additionally, ensure your internal clients are not circumventing demand management principles by splitting projects or inflating tail spend artificially. It can be challenging to address this issue, but it’s crucial to maintain control over tail spend and prevent unnecessary expenditures.
#6. Lastly, utilize vendor management systems
According to the Abernathy Mackay Report, "tail spend" represents around 20-30% of an organization’s total procurement spend. However, most organizations lack a best-in-class system to manage this tail spend effectively.
This is often because tail spend consists of one-off supplemental workforce members who are not managed by the organization’s full-time staff. Implementing an automated system to find, procure, and manage this external talent helps organizations remain fully compliant with their policies.
By leveraging a best-in-class digital solution for tail spend management, organizations can avoid the hassle, wasted time, and financial implications associated with this area of procurement.
Finally, in today’s competitive business landscape, it is essential for every organization to utilize best-in-class digital solutions for tail spend management. This allows them to focus on their core business activities while maintaining compliance with their policies.
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