Preparedness is a critical driver of business success. That’s especially true in procurement: When an organization prepares for unexpected expenses, it can foster a financially healthy, efficient operation. But failure to plan ahead can lead to dysfunctional, costly business practices.
To plan effectively, procurement teams need to manage what’s known as tail spend — the way they approach their one-off, ad hoc purchases. While some procurement teams attempt to manage these expenses independently, smart analytics tools offer an alternative to help them manage spend more strategically.
Below are a few common questions about tail spend, and how procurement managers can best answer them.
While planned or managed procurement spending often accounts for much of a company’s procurement budget, building a strategy around tail spend is equally important.
“Most procurement teams don’t want to spend their valuable time helping an individual employee at their organization buy a single desk lamp,” said Todd Heimes, VP of Amazon Business. “They want to be focused on the more strategic activities, such as negotiating with their largest suppliers.”
While tail spend is a relatively small percentage of overall spend at many organizations, it can create inefficiencies. When procurement teams are so focused on handling these smaller purchases that they can’t plan for larger, more regular, managed procurement spending, that becomes a significant challenge.
Why should my company plan for
tail spend?
Question #1:
Here’s what can happen when organizations implement a strategic approach to managing tail spend:
Reduced Costs.
A better buying experience for employees.
More clarity around delivery timelines.
Enhanced visibility into product availability and employee spending limits.
A full picture of tail spend for the procurement team.
When considering a procurement strategy for tail spend, you need to rely on your users to fill in the blanks. And while tail spend visibility, as it’s known across the industry, is key to strategizing for one-off purchases, it’s not always easy to come by.
“Tail spend visibility has really been lacking,” Heimes said. “And being able to embed your organization’s procurement rules in regards to tail spend procurement is also very difficult. There are so many different places that users can go to buy things that are one-off or tail.”
Heimes said the best way to build an effective tail spend procurement strategy is through smart team enablement — a notoriously difficult process made easier with innovative tools like those offered by
Amazon Business.
A few Amazon Business features are really relevant here: Spend Visibility, Guided Buying, and Budget Management.
What are some best practices for building an effective tail spend procurement strategy?
Question #3:
Spend Visibility
allows businesses to see which types of spend, either planned or tail spend, their users are incurring, including how often goods are bought and what users have paid. Using Spend Visibility (available with a Business Prime membership), customers can identify areas where they may be able to move something from a tail spend purchase to a planned spend in the future.
Find out how Amazon Business tools can help your procurement team manage tail spend and save on unnecessary costs.
Learn More
Guided Buying
enables organizations to steer their tail spend users to the products they prefer them to buy. Guided Buying (available with a Business Prime membership) also allows organizations to direct their buyers to preferred suppliers.
Budget Management
allows Amazon Business customers to set budgets for different teams across their organizations so that individual users don’t overspend. Using Guided Buying and Budget Management together, companies can also set approvals based on the individual, the team, and the spend size.
tail spend
Planned Procurement
Managing approvals without slowing down the buying process
Creating and managing key supplier relationships
both
Finding quality products that fulfill an organization’s needs
Hover on each area to reveal areas of focus
Focus areas for a planned procurement strategy vs. a tail spend strategy
When building a planned procurement strategy, the focus is typically on the bigger picture, like streamlining RFP processes or maintaining relationships with key suppliers.
Tail spend, on the contrary, depends on a number of smaller services and negotiations. That’s because purchases are typically made to address temporary shortages or fill a specific short-term need.
“When we think about how to build a strategy around tail spend, we should be looking at what rules we can put in place and what types of approvals we can put in place,” said Heimes. “Most companies are trying to implement processes to help their organization buy the right things from the right suppliers, using self-service tools while still adhering to the right internal procurement goals.”
For both procurement types, the ability to see what your users are buying — and the analytics to back it up — can help your organization make smarter decisions to save time and money.
“When you provide better visibility into what your employees are spending on, you have the opportunity to make decisions that are going to improve their overall experience at the organization,” said Heimes. “You can cut costs this way, too. But you can also make sure that your users don’t have to go out and buy things on a one-off basis.”
What’s the difference between an effective tail spend procurement strategy and a planned procurement strategy?
Question #2:
Sponsor content is produced in collaboration with advertisers by Insider Studios, the branded content team at Insider Inc. Insider's editorial staff is not involved in the creation of this content.
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How to manage tail spend and drive your procurement operation forward with smart business buying
Your 3 Most Pressing Questions About Tail Spend, Answered
Streamlining the RFP process
Following procurement rules or guidelines
Analytics and visibility into processes
Saving on costs where possible
Maintaining control over tail spend budgets
Building dependable one-off purchasing processes
A better buying experience for employees.
Enhanced visibility into product availability and employee spending limits.
More clarity around delivery timelines.
A full picture of tail spend for the procurement team.
Spend Visibility
When considering a procurement strategy for tail spend, you need to rely on your users to fill in the blanks. And while tail spend visibility, as it’s known across the industry, is key to strategizing for one-off purchases, it’s not always easy to come by.
“Tail spend visibility has really been lacking,” Heimes said. “And being able to embed your organization’s procurement rules in regards to tail spend procurement is also very difficult. There are so many different places that users can go to buy things that are one-off or tail.”
Heimes said the best way to build an effective tail spend procurement strategy is through smart team enablement — a notoriously difficult process made easier with innovative tools like those offered by
Amazon Business.
A few Amazon Business features
are really relevant here: Spend Visibility, Guided Buying, and
Budget Management.
What are some best practices for building an effective tail spend procurement strategy?
Question #3:
allows businesses to see which types of spend, either planned or tail spend, their users are incurring, including how often goods are bought and what users have paid. Using Spend Visibility (available with a Business Prime membership), customers can identify areas where they may be able to move something from a tail spend purchase to a planned spend in the future.
tail spend
planned procurement
both
While planned or managed procurement spending often accounts for much of a company’s procurement budget, building a strategy around tail spend is equally important.
“Most procurement teams don’t want to spend their valuable time helping an individual employee at their organization buy a single desk lamp,” said Todd Heimes, VP of Amazon Business. “They want to be focused on the more strategic activities, such as negotiating with their largest suppliers.”
While tail spend is a relatively small percentage of overall spend at many organizations, it can create inefficiencies. When procurement teams are so focused on handling these smaller purchases that they can’t plan for larger, more regular, managed procurement spending, that becomes a significant challenge.
What’s the difference between an effective tail spend procurement strategy and a planned procurement strategy?
Question #2:
enables organizations to steer their tail spend users to the products they prefer them to buy. Guided Buying (available with a Business Prime membership) also allows organizations to direct their buyers to preferred suppliers.
Guided Buying
allows Amazon Business customers to set budgets for different teams across their organizations so that individual users don’t overspend. Using Guided Buying and Budget Management together, companies can also set approvals based on the individual, the team, and the spend size.
Budget Management
Sponsor content is produced in collaboration with advertisers by Insider Studios, the branded content team at Insider Inc. Insider's editorial staff is not involved in the creation of this content.
