Tackling Tail Spend and Spot Buys (Part 2)

Hackett suggests that the largest opportunities for improving process effectiveness for spot, tactical and tail spend buying focus on four areas: complexity and compliance, supplier participation, technology, and contracting. In the area of complexity and compliance, opportunities include simplifying the bidding process, standardizing the template for collecting bids from suppliers, identifying and tracking cycle time delays and establishing “clear targets for each phase of the bidding process.”

From a supplier participation perspective, Hackett suggests that both “identification of suppliers that are going to comply with policy and process” and “establishment of clear objectives and expectations” with suppliers are opportunities for many companies. When it comes to contracting and contract management, the two largest opportunities are contract simplification and the automation of contract workflow and electronic signatures. There are numerous opportunities for technology, but we’ll cover that separately.

Perhaps more important is what do Hackett’s benchmarks, best practices and opportunity suggestions suggest to us overall? For one, tactical sourcing works when it is well defined to support specific business processes, practices and geographies. It does not happen by accident. Second, companies have well defined activities and tools to support tactical and spot buying needs. These include supplier discovery, sourcing, contract management and related (and integrated) req-to-pay capabilities.

One opportunity that Hackett did not suggest during the presentation is to punt on the issue of tail spend entirely, working with third-party services and solutions providers to take on the sourcing and management of tail spend activity.  FedBid, GEP and Procurian, among others, all have teams that do nothing but spot buying activity for customers. It’s our view that the outsourced option is likely to gain more traction as procurement organizations invest further to understand what is core or non-core in their practices.

As our analysis concludes in Part 3 of this series, we’ll explore tactical buying technology.

Previous Coverage: Part 1: Tackling Tail Spend and Spot Buys: Quantifying the Opportunity, Strategies and Tactics

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