A New Third-Party Tail Spend Service Model for SMEs

Last year, European procurement consultancy and managed services provider, 4C Associates, soft launched its Savings Acclerator model – a low-cost service to help SMEs realise improved supplier and financial performance from their tail spend. Just last month the service was launched officially.

The model, we understand, is a completely new service for the firm, and what they describe as ‘a unique approach to the procurement consultancy market.’ Unique because it is designed specifically for small and mid-size companies with an influenceable third-party spend of between £1 million and £50 million. These are the firms for which the more ‘traditional’ consultancy model might not be appropriate, or commercially viable – perhaps their procurement teams are still growing or currently lack the capacity or skills to manage supplier performance, monitor tail spend, evaluate whether contracts are managing risks and delivering value for money, and control how that is impacting their own financial performance.

This would seem to be a model for firms looking for quick results from a (now) proven solution with low risk. As Simon Terry, CEO of the firm told Spend Matters it would be “of interest to Private Equity portfolio client companies but is also suitable for wider SME clients where these conditions exist.”

We asked Simon what gap they saw in the market to lead them to develop this solution:  “As the supply market is constantly changing, it is critical for firms of any size, but particularly smaller firms, to determine whether they have the right fit supply base for the scale of business in their sector, and whether their key suppliers are still financially stable. It is true that many small to medium-sized firms have little insight into their spending, especially in terms of who is buying what, from whom, and at what price. Unchecked, third-party indirect spend can quickly accumulate; it often isn’t controlled, and can erode the profitability of the business. Because the Accelerator model is a low-resource, high-return service, it is ideal for those firms needing a proven approach to delivering increased equity value easily, cost-effectively and quickly.”

There would appear to be two levels of service:

  • Accelerator - light touch savings support which scans spend data to identify categories with savings potential; introduces a preferred supplier to work together to reduce costs. The fee for this is based on savings delivered, if there’s no saving, there’s no fee.
  • Accelerator+- which runs 4C’s ‘Diagnostic Lite’ to pin-point opportunities, runs a mini-competition with shortlisted suppliers, negotiates and contracts on the customer’s behalf. The fee is based on both fixed and variable costs depending on success rate.

But for both, to sum up – the Accelerator model offers the following:

  • Ability to influence increased market share by extending the range of client engagement options and commercial models for those clients with an influenceable spend below £50M
  • A cost-effective procurement consultancy model suitable for SME organisations
  • Complements the existing client procurement resource to increase their revenue and rate of return
  • Supports clients who do not have a dedicated procurement function or have limited resource, or where there is a single resource that may not be trained or qualified in procurement skills or where there are natural capacity constraints
  • Provides visibility of annual spend by category via a light data request and resulting category plan
  • Creates a contract register for the clients strategic and critical suppliers enabling planning well in advance for these contract renewals
  • Speeds the delivery of value
  • Increases influenced third-party spend under management and delivery of improved equity value
  • A light solution with the preferred suppliers managing the change and implementation process supported by the client’s sponsorship

More about 4C Accelerator can be found here.

Disclaimer: Spend Matters has not trialled this service; this is based on conversations with the firm.

 

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