Tail spend management: Key strategies and tips for cost savings

For many organizations, tail spend—a category of your procurement spend that contains low-value transactions that occur at high volumes—is simply a part of doing business. But this low-cost, high-frequency dynamic increases the challenges that procurement teams face.

For buyers who are looking to navigate tail spend hurdles, regain cost control, and improve operational visibility, a strategic approach is crucial. By using effective data to build a successful strategy, you get a bird’s-eye view of your current spending to improve your decision-making and increase your overall procurement strategy’s odds of success. 

Keep reading for valuable insights that you can use as a tail spend management blueprint. 

What is tail spend management?

Tail spend management, or long-tail management, is your purchasing team’s ability to control, coordinate, and optimize tail spend across your organization. Tail spend purchases make up about 20 percent of your total spend, but they can include up to 80 percent of your vendors—so without proper management, tail spend can quickly become disorganized. As a result, a strategic, data-driven approach to tail spend optimization is crucial.

Tail spend falls under the indirect spend category because it often includes items like office supplies, marketing materials, or IT equipment. Most of the time, your organization restocks these items from a contracted supplier at a planned cadence. However, tail spend purchases differ because of their ad-hoc nature. For example, say a monitor breaks and your team doesn’t have a backup. A buyer will then make a one-time order to replace the device and then classify this expenditure as tail spend.

Because you often can’t predict tail spend, optimization is challenging. A decentralized workflow amplifies this difficulty, and siloed purchasing data leaves procurement managers with little visibility into their day-to-day operations. Without proper support, procurement teams face a higher risk of overpayments, operational delays, and rogue spend.

Overall, understanding tail spend is a core part of controlling cost reduction and ridding your operations of inefficiencies. By collecting and analyzing real-time data, your procurement team can build a successful tail spend strategy that’s bound to uncover significant savings.

Strategies for effective tail spend management 

Use these techniques to increase your tail spend management strategy’s profitability and efficiency:

1. Take a data-driven approach

Useful data leads to informed decision-making. If you use spend analytics and network performance metrics, you gain valuable insight into your present operations. From this perspective, you can identify spending patterns and trends in spot buying. You might then use these purchasing insights to find savings opportunities and improve the buying experience.

For example, imagine that your organization collects long-tail financial data to optimize frequent tail spend purchases. Using this data, you uncover purchasing trends that allow your team to consolidate orders and reduce the number of suppliers at play. Your efforts mean your team is no longer scrambling to manage one-off purchases. 

With data visibility, it’s easier to classify one-off purchases into procurement spend categories and create more efficient, cost-effective supply chain management. This level of purchasing organization is crucial for long-term growth and profitability. 

By investing in data analytics tools, such as Spend Visibility (a paid Business Prime exclusive feature), organizations can drive smarter buying decisions that build a strong foundation for their procurement strategies.

2. Integrate with scalable, agile procurement solutions

For a new, robust e-procurement tail spend management solution to have the most impact, buyers need to use it—so keep your users top of mind when considering your options. 

One of the best ways to increase the odds of smooth adoption is to choose a solution that seamlessly integrates with your existing systems. That way, you won’t uproot a buyer’s existing process with their preferred partners—but you will regain purchasing control and be able to stick to your organization’s procurement policies.

In addition to integration capabilities, look for a solution that values automation. This feature streamlines workflows and makes routine tasks like purchase requisition approvals and invoice verification happen instantly. Then procurement teams no longer have to contend with time-consuming manual tasks. Instead, they can focus on finding creative techniques to drive growth and revenue.

The right solution ensures you maintain control over tail spend categories and buyers get the resources they need without unnecessary hurdles. In doing so, you empower your organization’s buyers to make the best decisions for their teams. 

Amazon Business connects with over 300 different third-party e-procurement, expense management, and iDP systems, empowering organizations to create a more seamless purchasing journey for their tail spend users. At the same time, Amazon Business empowers users to purchase from a wide selection of products without leaving their spend management or e-procurement system.

3. Educate and empower employees

Your buyers want options, and they don’t want to feel like you’re pushing them toward a vendor that doesn’t properly suit their needs. Amazon Business recognizes this desire and meets buyers where they are by providing a Professional Services solution that works closely with your team. 

Amazon Business teams up with robust supplier management e-procurement tools, such as Supplier.io, so you can select from a wide supplier base. By taking this step, you give buyers more options, boosting the odds that they’ll stick to approved channels when making future purchases. They may be more likely to feel empowered while remaining compliant with your purchasing policies. 

At the same time, for your buyers to make good purchasing decisions, they need to be knowledgeable about the options and resources available to them. To accomplish this, you might create a series of educational materials that include onboarding training and timely email reminders. That way, when a buyer submits an expense for a purchase they made outside the established process, they receive an email reminder that highlights the benefits of buying on Amazon Business instead. It's a simple yet impactful way to encourage employees to use the desired purchasing solution while keeping purchasing power in buyers’ hands. 

The benefits of tail spend management

The following seven benefits are among the most common you’ll see with tail spend management (but you could experience far more):

• Risk reduction: Full visibility into your tail spend means you can spot areas that are vulnerable to bottlenecks or maverick spend. Also, with greater insight into your supply chain, you can spot problem areas quickly and avoid costly delays. 

   

• Spend control: By understanding where your organization spends every long-tail dollar right now, you can better control costs. You can then use this spend analysis data to make accurate budgets that reduce rogue spend and enhance your bottom line.

   

• Supplier rationalization: Your procurement team can strengthen and better manage a supply chain through supplier consolidation. Doing so streamlines vendor and contract management and allows for cost savings. 

   

• Strategic sourcing: A well-managed tail spend network allows you to carefully choose which vendor relationships to prioritize, strategically consolidate orders, and optimize your supply chain based on buyer need.

   

• Forecasting: Your ability to meet future buyer demand hinges on accurate forecasting. Good tail spend data spotlights trends in your network that you can use to predict your buyers’ needs. 

   

• Audit readiness: Being audit-ready means your documentation is up to date and easily accessible. You should also have a firm grasp on all your processes, including tail spend management. 

   

• Operational efficiency: Data-driven insight into tail spend allows you to find places to consolidate one-off orders, save money, and run leaner processes, which helps you maintain control over your procurement operations. 

   

When your procurement team gets your organization’s tail spend under control, the impacts trickle down to reinforce every part of the business. Not only can your buyers purchase from their preferred partners to get the goods and services they need, but you can also keep these one-off purchases confined to an approved and controlled workflow. All of this allows you to maintain cost control and compliance for sustained long-term growth.

Stay ahead of tail spend with Amazon Business

Every team needs supplies and services to accomplish their goals, but purchasing teams must provide guardrails for these purchases. To accomplish this, you need a solution that offers visibility and control of your operations. 

Amazon Business is an e-procurement solution that offers robust integrations and automations to streamline your operations without disrupting your existing systems. By doing so, it reduces administrative burden and allows procurement teams to focus on strategic initiatives that drive your organization’s key goals. 

At the same time, Amazon Business also aggregates and organizes valuable purchasing data. You can then use these insights to strategically consolidate buyers, predict future buying conditions, and guide buyers toward approved vendors—all of which gives your organization more power to drive revenue and save money.