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Unlocking the Value of Tail Spend

 
 
 

Company: A.T. Kearney
Tag: Tail Spend Management
Sourcing & Procurement


Non-strategic tail spend presents a challenge for most procurement organizations. The term is often defined as the 80 percent of suppliers that represent just 20 percent of an organization’s spend. The desire to balance resources with level of spend becomes a difficult task for conventional sourcing approaches, as complexity often outweighs expected benefits. Additionally, organizations often find themselves in single-sourced situations with little competition for materials, resulting in a steep climb up the cost curve and increased supply risk. As organizations grow and their offerings diversify, so does the challenge.

For prepared organizations, this challenge can be turned into a significant opportunity. In our experience, organizations with the right approach can achieve 10 percent to 15 percent savings across broad portfolios. By applying an advanced methodology, these companies have reached those targets while doubling the productivity of staff. An Advanced Tail Sourcing framework helps unlock the value trapped in non-strategic tail spend by focusing on the two activities listed below.
1. Align internal capabilities, processes, and technology to manage tail spend.
2. Increase the attractiveness of the tail spend to generate market competition.


By Hendrik Disteldorf, Tobias Fehre, Guttorm Aase, and Mike Piccarreta
Supply Chain Management Review, March/April 2014

 

 





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