One of the large clients of Phoenix holds a strong market position in the United States of America as a leading telecommunication and peripheral services provider. Through their services, the company generates millions of dollars’ worth of revenue every day and offer high-quality services to its customers, which are both individual and organizations.
Phoenix collaborated with the client to address their Tail Spend challenges, focusing on identifying and capturing potential savings often overlooked due to lower individual transaction values. By zooming into the tail spend, Phoenix aimed to provide actionable insights and recommendations to effectively manage costs, supplier relationships, and compliance.
Tail Spend
Tail Spend refers to the significant volumes of procurement transactions which although represent a small portion of total expenditure, but collectively add up to a significant amount. These purchases typically fall into the bottom 20% of the expenditure and involve numerous small-scale supplier purchases.
Tail Spend Management involves identifying and optimizing these transactions to improve efficiency, reduce costs, and mitigate risks. Through tail spend management, organizations can unlock potential savings and enhance overall procurement performance by gaining better visibility into spendings and implementing strategies such as supplier consolidation and process standardization.
The Challenge: Increase Visibility into Tail Spend
Phoenix began with identifying the key areas that represented a significant portion of procurement spending. Findings of the study revealed that the lower transaction values of tail spending often led to overlooked savings. Based upon the findings, the following areas of improvement were identified:
- Risks of unmanaged tail spend
- Loss of cost-saving opportunities
- Lack of product quality control
- Potential compliance issues, especially in regulated industries
- Loss of productivity due to avoidable transactions
Phoenix proposed a tail spend management portal into the existing spend analytics solution to track and manage tail spends, effectively generating a tool to make tail spend management efficient for the client.
