So, you might have heard the term "tail spend" thrown around in the consulting world, and you’re probably wondering what it means. Well, let me break it down for you.
Tail Spend refers to the purchases that a company makes that fall outside of their core procurement processes. These purchases may be small in value, individually, but can add up quickly, and often go unnoticed.
Think things like office supplies or travel expenses. While individually these purchases may seem insignificant, together they can make up a significant portion of a company’s overall spending.
In other words, Tail Spend Management is a well-known source of cost savings for procurement departments. With the constant pressure on cost reductions and long-term savings, many businesses are becoming aware of their Tail Spend, even in the consulting category.
Indeed, small consulting projects contracted directly by business line managers are frequently overlooked by companies. When consolidated at the company level, they can account for up to 25% of the consulting spend.
You may think it’s not much. However, when consulting costs can range from 0.5% to 3% of total revenue, any savings in this area can significantly improve your bottom line and delight your CFO.
And that’s why it’s important for consulting firms to help their clients identify and manage their tail spend in order to cut costs and improve their bottom line.
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