At Fairmarkit we define tail spend as procurement spend that is not strategically managed. For many companies, this includes most purchases under $100K. This is the smaller item spend that comprises 20% of a company’s annual spend and involves interaction with 80% of its vendor community.
We like to illustrate tail spend using the 80-20 rule. It turns out that most companies dedicate the vast majority of their time and resources to about 20% of their yearly transactions. This is because those core transactions represent 80% of their yearly procurement spend.
We define the other 80% of transactions—accounting for 20% of total value—as tail spend. For a mid-sized organization, the tail can include tens of thousands purchases, all without a management strategy.
This combination of high volume and low value make tail spend management a challenge.
Most tail spend purchases are low-cost, non-recurring items. For procurement teams that are already working at full capacity, this can present a significant strain on resources. Most procurement departments handle tail spend on a purchase-by-purchase basis, rather than use their requests for quotes (RFQs) and services as strategic tools to drive aggressive pricing.
Fairmarkit’s SaaS platform is optimized for tail spend, allowing management to bring all spend under management. It simplifies the procurement process to give buyers control of their strategic sourcing. Fairmarkit’s machine learning increases spend visibility and process automation, yielding greater operational efficiency and driving savings of 7-12%.