Procurement executives can call on multiple strategies and solutions to manage critical spend. But what about non-critical spend? Things like printer cartridges, office supplies, sodas and snacks for your break rooms, and beer and wine for your Happy Hour Fridays?
For many businesses, these types of purchases become a black hole of waste and inefficiency, because they require a disproportionate amount of management resources and oversight relative to their strategic importance. (Although you could argue that Happy Hour Fridays are a super-critical part of business, right?)
Non-critical spend – or tail spend – typically comprises about 20% of an organization’s procurement expenditure. If you spend $300 - $400 million with outside vendors, that 20% makes up about $70 million.
That’s not chump change.
If you think you might be a victim of the tail spend conundrum, ask yourself these questions:
- Are we managing tail spend manually?
- Are we getting lost in exception management?
- Are too many vendors wasting precious employee time?
If you answered “yes” to any of the above, you might want to explore the concept of Integrated Supply Management (ISM), an emerging third-party management and cloud-based solution in the global procurement solutions category.
In a nutshell, ISM leverages digital technology and intelligent automation to streamline the labor-intensive, time-consuming and inefficient tasks and processes that characterize the management of non-strategic spend.
In addition to applying these tools, ISM involves process optimization and the handing off of day-to-day oversight activities to a third party. That means that, rather than managing the invoices for printer cartridges and office supplies, and the purchases of beer, wine and snacks, your procurement teams focus on how they can benefit the business.
In Part Two of this blog I’ll outline four specific ways ISM can help your business. And, if you’re a CIO, here’s a link to my article in Future of Sourcing magazine discussing how ISM can be applied to IT tail spend.