Betting on Tail Spend to Save Coin

28 Mar 2014


Executive Summary

Cost reduction has always been a prime concern for organizations across the globe. Today’s increasingly stringent economic environment is further aggravating it, and pushing organizations to maximize savings from their cost base.

In the past, traditional techniques of spend management have been instrumental in driving cost savings in procurement. Organizations started with optimizing direct spend and then, over time, moved to indirect spend as well. They invested a large proportion of time managing more significant spend categories, as this represented the bulk of spend and hence provided opportunity to generate significant savings with optimal effort. However, these organizations are now beginning to exhaust the savings potential from their actively managed spend portfolio. As a result, they are now focusing on yet unaddressed spend, namely tail-end spend, to drive additional savings.

Tail-end Spend Management (TSM) can assist organizations to optimize this left-over spend and drive incremental savings of up to 15 to 17% on the addressable cost base. This translates to an additional 50% savings over and above the 5 to 10% achieved by traditional spend management.

This research focuses on understanding TSM, its savings potential, and the best practice and challenges in unlocking value from TSM. The key themes covered in this research are:

  • Components and scope of TSM
  • Benefits of effective tail-end spend management including savings potential
  • Tail-end spend management process
  • Challenges and best practices in implementing TSM
  • Service provider landscape for TSM including live case studies

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