Industries face challenges in managing indirect procurement to meet the quicker needs of end users from various business and functional units, such as productions, operations, engineering, administration, IT, and finance, etc., often procurement executives struck by spending more time on low-value buys (tail spends) as a process to meet the KPIs.

What is Tail Spend:
Tail spends are majorly defined as low-value items resulting by the large number of smaller-value transactions, that collectively account for a significant number of suppliers associated with the procurement function.

In manufacturing industries, tail spending includes Office supplies, safety items, MRO (maintenance, repair, and operations) items, and services. Effective management of tail spend can result in the following benefits,

a. Streamlined procurement processes,
b. optimizes the overall procurement efficiency,
c. Controlling the procurement budget,
d. Optimizing the PR – Delivery Turnaround Time (TAT).

The following approaches can help us to manage the tail spending better,

1. Procurement Spend Analysis: Comprehensive analysis of the last 2 – 3 year’s procurement data can provide us the visibility of tail spend items and their associated suppliers. Categorize the spend bucket and prioritize their criticality and impact on production and operations.

2. Standardization: Material data cleansing can help organizations to get rid-of duplication and specification enrichment and standardization can restrict the various price point purchase in different specifications. By reducing product variations, we can negotiate better deals with suppliers and simplify inventory at stores.

3. Centralization: Centralized procurement process will provide visibility and control over the items and spend value. The procurement process standardization and enforcing contracts will improve functional efficiency.

4. Harness Technology: Implement tail spend management tools or e-procurement software that can automate the process and provide real-time monitoring. The platforms help in making data-driven decisions, improve efficiency & reduce manual intervention and errors.

5. Supplier Rationalization: Reduce the number of suppliers for tail spend items by consolidating vendors. Work with a select group of reliable consolidators who can offer reliable deliveries, competitive pricing and streamline the procurement process.

6. Continuous Improvement: Continuously review and refine the tail spend management with the consolidators to strategies. Monitor spending patterns and tweak purchasing approaches to adapt the changing needs.

Instatenders provides various operating models to manage the tail spending effectively and efficiently using the in-house tail spend management tool. InstaTenders currently working with manufacturing Industries of various product lines and facilitating the smooth tail spend process transition and enabling following benefits.

a. Cost savings,
b. Reduction in total cost of ownership, and
c. Free up resources to focus on strategic initiatives that drive growth and innovation to the organization.

Write to us to know more at info@instatenders.in

Call us at +91 – 9150081257