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In over 20 years, I’ve never seen an issue come up as constantly as tail spend

A couple weeks ago, I came across a piece on Spend Matters about 5 new types of “alt suites,” a growing market concept that is completely distinct from the “source-to-pay” (S2P) market.

In a world where companies emerge all the time trying to carve out new “categories,” it was frankly great to see what we’ve been living for quite some time at Simfoni so clearly defined. As the CEO of Simfoni’s Spend Automation offering and having spent 20 years in the space myself, the idea of a “Strategic Spend Terminal” (SST) just makes sense.

To paraphrase, being an SST provider means that we place deep category and market intelligence at the center of all sourcing decisions, category management, commodity management and projects. Put simply, we are data-led. Technology can only be as beneficial as the information that it’s being fed, and most organizations now know that they need high-quality, useful data infused with market intelligence – not just process enhancement, which has historically taken precedence.

SST and all categories within the ‘alt suite’ space are incredibly timely with today’s “supply chain disruptions” (to be euphemistic). As the times are rapidly changing, procurement and finance organizations can’t only look to the monolith source-to-pay market. S2P technology has been designed around fixed processes, and while this has helped companies adopt best practices, “best practices” are being redefined daily right now. Alt suites, on the other hand, are flexible, modular and user-friendly. The alt suite bends to the needs of the user rather than the other way around.

More companies will take interest in alt suites because they are accepting the fact that their mishmash of legacy systems and full suites lack the depth (and flexibility) that they need. My team comes into many situations where clients have invested a lot into a S2P implementation only to end up with solution gaps and an underwhelming ROI. Companies are looking for tools that solve the specific pain points that their S2P suites do not – especially the pain point of tail spend, which is when alt suites like Simfoni enter the search algorithm.

Tail spend has been largely neglected

In over 20 years, I’ve never seen an issue come up as constantly as the issue of tail spend. It can represent between 10% and 20% of a company’s overall indirect spend, yet has been largely neglected. But now, with supply chain disruptions impacting fulfillment and production, traditional sourcing for the purposes of cost reduction is deprioritized. Companies want to source strategically – factoring in economic costs and risk into their sourcing decisions – and this includes looking at tail spend via spend analysis and finding the opportunities.

For example, I recently met with a client and after three minutes (with the aid of our spend automation AI engine) our team was able to identify numerous indirect goods/services that we were already sourcing on behalf of other clients: parking lot resurfacing, onsite security services, doors, landscaping and freight services and more. We were able to secure savings that the client’s small procurement team wouldn’t have been able to secure on its own. This problem has been addressed in the past with BPOs – and more lately with technology – but neither solve the problem on their own. What’s key is the combination of these (along with a focus on rapid sourcing at the local level). Big supply chain disruptions necessitate the use of big networks, which is why we partner with consultancy firms, GPO, BPO tech providers and more to give clients as much competitive intelligence and purchasing power as possible.

As for large enterprises: they simply cannot address 100% of the spend, especially those operating globally, which is why our solution supports both the strategic procurement function and requisitioners at the plant level who don’t otherwise have procurement resources. A bit of a commercial here, but imagine if you, like all Simfoni users, could:

  • Identify savings opportunities before making a purchase that falls under tail spend
  • Spot overlapping services/suppliers before making purchases
  • Get pricing predictions for up to 90% of transactions
  • Access pricing data for improved negotiations
  • Benefit from Simfoni’s pre-negotiated marketplace deals

… and that’s just at the start.

I know, I know. Sure, this is a sales pitch, and I’d love it if you reached out and wanted to talk about Simfoni, but this should also read as a PSA. Traditional S2P solutions just don’t offer such rigorous spend analysis support, especially not to all requisitioners across an organization. There’s really no better time than now to double down on strategy, and SST suites like Simfoni bring spend strategy to a new level. Other types of alt suites provide strategy in other areas like supply strategy (“Design-for-Supply”) or supplier selection strategy (“Assess-to-Monitor”). There are literally dozens of technology solutions meant for specific outcomes and there are new and exciting solutions coming out all the time – as evidenced by tracking organizations like DPW, ProcureTech and of course Kearney via Dr. Epstein.

So, procurement should be aware of what is out there. There’s an entire space of alt suites that are affordable, solve complex issues, and are the modular islands of tech that plug the gaps of legacy architecture. You don’t need to ruminate over the business case or necessarily secure big budgets, either. With alt suites, you can just execute (and with Simfoni, pay-as-you-save). Over time, you can scale up or down as requirements change, or in other words: your technology can adapt to you. Stop twisting yourself into a pretzel to adapt to your technology.