Common strategic sourcing best practices dictate that the top 70-80% of an organization’s procurement expenditure is typically classified as strategic. Catalog pricing solutions (often accessed via eCatalogs and eProcurement tools) generally manage to cover another 10-15% if organized efficiently…
But what happens to tactical purchasing requirements that don’t exist within your eCatalog solution nor can they be added to a larger strategic sourcing relationship?
Tactical buying requests are, by definition, tactical…And they add up! Often referred to as “spot buys,” “random purchase requests,” or “tail spend requirements,” these requests often occupy far too much of an organization’s attention.
Most tail spend (non-catalog) spend requests:
- Involve at least some level of urgency
- Have a much lower value in proportion to more common strategic requirements
- Are non-strategic but important to support a business function
- Are mostly unplanned
- Mostly comprised of small order sizes
- Are mostly executed via some form of immediate payment/delivery basis
So how does an organization minimize the negative productivity distractions caused by true non-catalog, tail spend requests?
An increasingly common answer can be correlated to the emergence of the entire “fee for service” business model that has disrupted everything from medical services to transportation to picking up your dry cleaning.
Simply put, virtual tail spend solutions allow organizations of all sizes to farm out their non-catalog, non-strategic, tactical procurement requirements, to 3rd party organizations that specialize in the processing and rapid execution of low-value spend requests.
In much the same way that eCatalogs and Strategic Sourcing initiatives can drive significant savings, help consolidate suppliers and rein in “rogue” spending within an organization, virtual tail spend support can operate via a pre-approved set of rules that govern how, when, from whom and how much a 3rd party provider will secure each requirement.
Further “rules” can be established to ensure that multiple quotes are retrieved if the tactical spend request exceeds a specific monetary amount or that every quote submitted must be at or below the lowest price found on the web.
Creating a set of governing rules for your tactical spend solution will minimize needless and costly loss of productivity from your procurement team while ensuring your organization still receives tactical, non-catalog products & services in a compliant format.