TAIL END SPEND MANAGEMENT Presented by Olivier Chalon
Jun 12, 2015
TAIL END SPEND MANAGEMENTPresented by Olivier Chalon
© 2014 Xchanging plcTail end spend management
AGENDA
2
1 What is tail end spend?
3 Challenges and best practices
Why is it important?2
© 2014 Xchanging plcTail end spend management3
WHAT IS TAIL END SPEND?Traditional spend management covers only 83% of an organisation’s spend.Source : CAPS Research – Cross-industry report on standard benchmarks (2012)
Tail-end spend usual characteristics :– Unadressed by the procurement team (under the radar)
– Large (and growing) number of suppliers
– Misclassified spend – we don’t really know what is bought
– Large number of small transactions
– Spot buys
– Maverick spend (non compliant)
– Fragmented spend – each company entity is buying for itself only
– Low volume, low-price items (tail of the tail)
Percentage of spendPercentage of vendors
80
80 20
20Traditionally managed spend
Tail-end spend
Source : “Betting on tail spend to save coins” Everest Group 2014
© 2014 Xchanging plcTail end spend management4
WHY IS IT IMPORTANT?
TSM can generate savings between 15% and 17%– So for an organisation generating 8% savings on its strategic spend, TSM
can potentially add up to 50% savings globally
– Where do these savings come from?• Spend reclassification and vendor consolidation• Compliance and demand management• Automated processes (eRFx, P-card & e-catalog can reduce operational cost)
TSM can help mitigate risks in the company spend– Supply disruption
– CSR issues
– Business ethics, fair practices etc
Source : “Betting on tail spend to save coins” Everest Group 2014
© 2014 Xchanging plcTail end spend management5
CHALLENGES AND BEST PRACTICES
Finally, experience shows that in order to promote adoption and reap the full benefits from TSM, a significant portion of the delivery team has to be local. A quick turnaround time and a deep knowledge of the supply market are prerequisites to a successfull TSM programme.
Despite the huge potential, organisations find it difficult to manage their tail-end spend.
Source : “Betting on tail spend to save coins” Everest Group 2014
Challenges in Tail spend management
Industry best practices
Poor data quality and visibility
Technology-focused solution implementation
Fragmented nature of spend with disparate stakeholders, technology landscape and lack of compliance
Stakeholder alignment, change management and effective compliance
High cost, seemingly low savings potential and lack of management interest
TCO approach to business case creation
Lack of dedicated team and expertise
Utilisation of third-party expertise and global best practices
THANK YOU
For more information please contact:
Olivier ChalonPhone +33 (0)1 70 39 70 61 Mobile +33 (0)6 13 66 48 06Email [email protected]
Website www.xchanging.com