Tail spend refers to business and professional services that fall below the radar of large, multi-year, outsourced services and strategic procurement departments – but in an increasingly fragmented industry, represent the bulk of services bought worldwide by business – small, medium and large.
Why are we talking about tail spend?
The term tail spend is derived from the Pareto principle, which asserts in this instance, that 20% of an organisation's suppliers will account for 80% of its spend. Conversely, 80% of their suppliers will account for 20% of spend. It is this ever-thinning series which figuratively draws into a long tail. Stack this long tail up and it's often your biggest supplier.
It's a huge issue for thousands of companies as they make millions of purchases around the world. For many businesses it's the primary procurement pain point, and is a complex challenge. In a single company the tail spend may include tens of thousands of transaction intensive, low value purchases across a huge and intimidating range of categories – from hundreds of suppliers.
How can this challenge be overcome?
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To read more about Tail Spend and hear some thoughts of blurs CEO Phillip Letts about this topic click here: http://www.blurgroup.com/blogs/group/letts-talk-vol-3-tail-spend/
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