1. Enterprise Manager of the Commercial Sales Amazon Business
Jerrod Steele
Enterprise Manager of the Commercial Sales Amazon Business

2. Typical Tail Spend Profile
Cumulative spend (Pareto Analysis)
Tip of the tail
Mid-tail
Managed Spend
85-90% of spend
5-10% of suppliers
Well-controlled transactions
Tail Spend
10-15% of spend
90-95% of suppliers
Transactional “Wild West”
Tail Spend Segments (which overlap with each other)
One-off/one-time “spot” buys
Off-contract “maverick” spending
Commercial cards
Expense reimbursement
No-PO invoices and/or “after the fact” POs
Spend per supplier (per year)
Source: Fix the Tail to Propel Procurement, Spend Matters 2017

3. Only less than 25% of purchases were “no touch”
Procurement Leader Tail Spend Pain Points
The average procurement full-time equivalent (FTE) manages more than $50 million in indirect spend, 300 suppliers (with >85% in the tail) and more than 2,500 purchase orders per year
Only less than 25% of purchases were “no touch”
The average procurement professional spends 58% of time on non-strategic work (i.e., poor ROI)
“Mid tail” one-off spot buys that go unmanaged is roughly a 1% spend savings opportunity
Off-contract “maverick” spending is estimated at a roughly 1.2% spend savings opportunity
Nearly 60% of procurement professionals cited a lack of penalties or enforcement for non-compliance
If tail spend is 15% of total spend, and two-thirds of it is mid-tail spend, and procurement forfeits 10% negotiated savings on the deal, that’s 1% savings left on the table.
Will explain mav spend number. *Note that maverick spending often occurs by well-intentioned requisitioners who either didn’t know how to use the corporate deals or sought to save the company some money by finding better deals out in the market. While this behavior frustrates most procurement professionals, many admit that their long-term corporate contracts have not necessarily stayed competitive in the market over time.
Only less than 25% of purchases were best-practice “no touch” (w/ 7% via eMarketplaces)
11% of invoiced tail spend had invoices with no POs when POs were required. This is the earmark of non-managed (or poorly managed) spend. The rest of tail spend had procurement “touching” this low value spend
“Mid tail” one-off spot buys that go unmanaged is roughly a 1% spend savings opportunity.
Off-contract “maverick” spending is estimated at a roughly 1.2% spend savings opportunity
Firms waste money and introduce risk by setting up one-off / low-value supplier in the vendor master file (which costs roughly $100 per supplier per year). This is how the tail grows.
Purchases made on a commercial card (e.g., p-card or travel card) and employee expense reports can seem easy form an efficiency standpoint, but also are channels for maverick spending and risk. This spend is poorly visible to analyze for broader spend management
Staff are overwhelmed. The average procurement professional spends 58% of time on non-strategic work (i.e., poor “ROI”).
The average procurement full-time equivalent (FTE) manages more than $50 million in indirect spend, 300 suppliers (with >85% in the tail) and more than 2,500 purchase orders per year. It’s hard to be strategic if procurement has to touch the majority of these transactions.
Nearly 60% of respondents cited a lack of penalties or enforcement for non-compliance. But, 41% said that users didn’t understand the process/policy/system (34% said requisitioners went rogue because other channels like e-marketplaces and p-cards were easier to use).

4. Trends and Outlook for Optimizing Tail Spend
Guided Buying, including AI and machine learning
Leaders pursue strategic sourcing, eProcurement solutions, eMarketplaces, managed services, and payment tools individually, but also trying to integrate for
Requisitioners wanting a B2C like experience and catalog selection to get what they need, and…
Rightsized controls and spend visibility
Next spend frontier for indirect spend: services spend
Mobile, IoT and new user interfaces
Provider partnerships and ecosystems to support end-to-end processes
“Guided Buying”: B2C best practices for usability with B2B controls
Main theme: convergence of individual strategies and solutions to create a simpler and more frictionless buying experience across the source-to-pay continuum.
Leaders pursue strategic sourcing, eProcurement solutions, eMarketplaces/networks, managed services, and payment tools (e.g., virtual commercial cards) individually, but also trying to “connect the dots” to create integrated for:
requisitioners wanting a B2C like experience and catalog selection to get what they need, and…
rightsized controls and spend visibility from a procurement best practices standpoint.
Next spend frontier for indirect spend: services spend
Mobile – of course. And move towards IoT and new user interfaces.
Trend towards AI and machine learning to learn what users want AND what the enterprise wants (i.e., “guided buying”)
Provider partnerships and “ecosystems” to support end-to-end processes