The Human Element of Improving Tail Spend Management
Procurement as a whole has transformed over the last 20 years from a largely back-office, operational function to become one of the more strategic, value-added activities for businesses. Now, the area of procurement known as tail spend or unmanaged spend — the small purchases in areas like office supplies or ad-hoc services in areas like marketing and maintenance — is also becoming more of a priority for organizations, as optimizing tail spend can lead to cost savings, improved risk management, better employee experience and more.
While automation can play a significant role in improving tail spend management, such as with automated data collection, getting the most out of tail spend still requires a human element. The following areas highlight a few of the ways that talent makes a difference for tail spend management:
Implementing data analysis
Automating data collection enables organizations to gain visibility into their tail spend, yet simply having the data does not make an impact. Instead, companies need to make sense of that data and find ways to act on it, such as by implementing stronger budget controls, improving forecasting, negotiating better rates with suppliers based on prior spend, etc.
While some e-procurement and spend management platforms can automatically analyze the data to varying degrees, companies still need a way to implement insights, which is why it’s important to have strong procurement talent. For example, if tail spend data reveals that certain departments are going over budget, procurement staff need to figure out how to best manage this situation.
In doing so, they may decide to shift budgets from other areas, or they may strategize with department leaders on how to curb spending without harming business goals. That could mean sourcing products at lower rates, working with HR to hire employees if that would lower the overall expense of ad-hoc purchases for specific services, or any other method to handle these budget challenges.
Improving Supplier SourcingBy leveraging spend data and RFP tools from an e-procurement or spend management platform, employees can also make a big impact in terms of improving their supplier base. For example, spend data may reveal that employees tend to purchase from expensive vendors, in which case procurement staff can source more cost-effective suppliers and establish an easy way for employees to purchase from those vendors, such as by creating automatic approvals for purchases made with those suppliers through an e-procurement platform.
Employees can also improve supplier sourcing such as by adding more diverse vendors, which can take time and skill to establish new relationships and identify quality suppliers that may fall outside their immediate networks. Even if technology is used to narrow down a field of potential suppliers, a human element is still necessary to fully understand these suppliers’ business models and practices to see which ones are the right fit. Furthermore, employees that can form bonds with suppliers may be able to secure better rates, access to new products or customize terms such as for delivery schedules.
Aligning Tail Spend Strategy With Overall Corporate Strategy
Being able to implement data insights, improve supplier sourcing and ultimately extract more value from tail spend requires the human element of aligning tail spend strategy with overall corporate strategy.
For example, if a company has an overall goal of increasing its sustainability, procurement staff need to find and implement ways to improve the sustainability of their supply chain, such as by working with more environmentally friendly vendors or adjusting their delivery methods to batch orders together.
Procurement staff can also align tail spend strategy with overall corporate strategy in areas such as employee experience. If companies want to make it easier for employees to work remotely, for instance, then procurement staff may need to implement tools such as digital wallets to enable employees to make tail spend purchases from anywhere while staying within corporate purchasing controls.
Overall, having talented employees helps companies optimize tail spend and improve as a whole. Ideally, staff can work in conjunction with technology to unlock more value from tail spend data, increase efficiency and improve the overall purchasing experience.
For organizations that need procurement staffing support, whether that’s for contract workers or permanent employees, GoProcure can leverage its proprietary database of over 2,000 sourcing and procurement professionals to help you find the right talent for your organization.
To learn more about how your business can benefit from combining talented staff with automated tail spend management, get in touch with GoProcure today.