How to Use Automation Solutions for Your Business Longtail

Introduction

In today’s business landscape, managing long tail spend can be a challenging task. Long tail spend refers to any spend that is not strategically managed or under management. This typically includes purchases made without a contract framework agreement or negotiated purchase order. In fact, long tail spend accounts for around 80% of all expenditures, with only 20% being managed spend. It is important to address and manage long tail spend in order to optimize costs and improve procurement efficiency.

Making Your Spending More Visible

Managing long tail spend can be difficult due to poor data visibility. Complex supply chains, different IT systems, and fragmented processes can make it challenging to track and manage spend effectively. To overcome this, it is essential to consolidate all your purchasing data into a central tool that offers a thorough spend analysis feature. An excellent tool like i2B can help you achieve this by providing a comprehensive view of your spending data.

Identifying Your Tail Spend

Tail spend varies from organization to organization. Some measure it based on spend thresholds, while others use the 80/20 Pareto principle. It is crucial to identify and define what tail spend means for each business unit or site within your organization. This will enable procurement teams to accurately measure and manage tail spend effectively.

Streamlining Internal Processes

To save costs and gather relevant data, streamlining internal processes is vital. Establishing agreed-upon processes and ensuring their enforcement can lead to better payment terms with preferred suppliers across departments. Moreover, streamlined processes facilitate more strategic procurement within your organization, resulting in improved cost management.

Putting Your Procurement Data to Work

Once you have streamlined your internal processes, it is essential to organize, classify, and analyze your spend data using a tool like i2B. This will help you gain greater spend awareness, make informed purchases, and drive procurement and business decisions. A study conducted by The Hackett Group found that better managing tail spend can result in average savings of 7% or more, along with reduced time spent per purchase and a decrease in ad-hoc spend.

Taking It One Step at a Time

When implementing automation solutions for managing long tail spend, it is crucial to develop a solid plan and start slow. Begin by identifying one business unit with a significant tail spend issue and roll out the i2B spend management program there. Ensure that key stakeholders are aligned and supportive of the initiative. Connect automated ERP and sourcing platforms, as well as contract management platforms, to the i2B system to streamline the process. Communicate the importance and success of the program to stakeholders and end-users. Once you have proven the effectiveness of the program, gradually increase its scope within the business unit. Introduce more automation to ensure structured data and establish a positive feedback loop. With stakeholder buy-in, expand the program to all business units and fully automate tail spend management globally. This will free up your procurement team’s time to focus on more strategic initiatives.

Conclusion

Managing long tail spend is crucial for optimizing costs and improving procurement efficiency. By utilizing automation solutions like i2B, you can make your spending more visible, identify and define tail spend, streamline internal processes, put your procurement data to work, and gradually implement automation solutions across your organization. This will ultimately lead to cost savings, better spend management, and enhanced procurement practices for your business.

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