Amazon Business

The telltale signs of a tail spend problem

Sourcing and procurement teams are constantly under pressure to create value for their organizations, whether that’s through cost reduction, strategic sourcing or optimizing the purchasing process. But while teams allocate time and resources to strategic initiatives intended to drive long-term value, there’s a significant piece of the purchasing puzzle that often goes unmanaged: the tail spend.

Tail spend purchases are unplanned purchases made by buyers across organizations, often involving hundreds or even thousands of suppliers. These spot buys are usually smaller purchases, but the combined spend can account for large portions of procurement budgets. When tail spend purchases add up they can lead to a fragmented and inefficient procurement operation.

The lack of focus on tail spend may indicate that companies aren’t considering the inefficient nature of tail spend and the costs involved.

According to Accenture, your company may have a problem with tail spend if:

  • The number of the suppliers you use is greater than the number of employees in your organization
  • Two-thirds or more of your suppliers support only 5% of your spend
  • Less than 70% of your orders are negotiated by your procurement team
  • More than 10% of your suppliers are new each quarter
  • Less than 50% of your transactions are through preferred suppliers
  • Less than 50% of your purchases are automated (for example, through catalogues)

Amazon Business helps companies gain visibility into and address the tail-spend problem by offering a one-stop shop for business purchases. With millions of sellers and hundreds of millions of products, Amazon Business provides a convenient destination for employees needing to make spot buys.

For procurement teams, Amazon Business improves visibility and control over unplanned purchases. After you create a business account and upload your users, your team will be able to move your unplanned purchasing to Amazon. You’ll get the benefit of multiple bids on a single page, consolidated billing and improved visibility into what your team is spending. This eliminates the cost of setup and management of hundreds or even thousands of individual suppliers, setting up accounts payable for new vendors and the need to manage hundreds of individual suppliers.

Create your free business account to start consolidating your tail spend with Amazon Business.

Blog_cta_2