Home » Competencies » Tail-Spend Optimization
Your tail-end spend is the accumulation of your relatively small-scale spend, representing "only" 10-20% of your total spend, but with high transactivity due to relative fragmentation. Dealing with tail-end-spend involves two key challenges. First, high transaction costs are related to a low value contribution of these products and services to the company; and second, the effort involved in potential cost optimization initiatives is typically not at a healthy ratio to the expected monetary success.
The first 80% are in focus. This is where your strategic suppliers are located.
Many companies ignore the final percentages of the spend cube. Not us!
Due to their low volume and the broad distribution of these needs among various areas of demand in the company, these purchases are often not actively managed. Therefore, in many cases a high cost reduction potential can be assumed, especially by using process and pooling efficiencies. We help you to leverage this potential.
The procurement process can be broken down into three steps to optimize your tail-end spend: Bundling, Negotiation and Elimination.
We bundle your needs to reduce administration and build negotiating power by combining existing long-tail needs into larger lots.
Larger purchase quantities lead to cost advantages due to economies of scale. With quickly implementable negotiation strategies, we realize noticeable savings for you.
We use demand management measures to check whether the expense associated with procurement is in proportion to the benefit and eliminate unnecessary expenditure on a sustainable basis.
Tail-spend optimization is also primarily about keeping the use of resources as low as possible so that effort and benefit are in a positive relationship.
For short-term optimization of the tail end, short- to medium-term optimization quick-win negotiations are suitable.
For long-term and sustainable optimization, however, the focus should be on using e-procurement tools that make the procurement process efficient, create bundling effects, and conserve your resources.
We assist you in finding the right tool!
With D&P you achieve a noticeable change in your purchasing organization. We reduce your costs and increase your performance.
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