How to Manage Tail Spend in 5 Steps

Tail spend refers to the portion of an organization’s procurement that accounts for approximately 80% of transactions but only 20% of total spend.

Though often overlooked, managing tail spend effectively can unlock substantial savings and operational efficiency. 

According to a 2024 Boston Consulting Group study, organizations can realize 5% to 10% cost savings by actively managing tail spend.

This guide will help you:

• Understand what tail spend is

• Identify key challenges in managing it

• Explore the benefits of a tail spend program

• Learn a 5-step process to manage it

What is Tail Spend?

Tail spend includes a high volume of low-value purchases that are often indirect, non-core, and spread across many suppliers.

These purchases are essential but can fly under the radar of procurement teams focused on strategic sourcing.

Common characteristics of tail spend:

• High transaction volume

• Low monetary value per transaction

• Involves many suppliers

• Typically unmanaged or poorly tracked

What Makes Up the Tail?

Every procurement team will have a different perspective on what a spend tail is. What it constitutes in one organization or within one spend category may be different from another.

It can include:

• One-off or spot buys

• Maverick purchases made outside approved contracts

• P-card and petty cash transactions

• E-catalogue purchases

• Any low-value transactions that bypass procurement controls

Want to understand spend categories better? Check out Spend Analysis 101.

Challenges in Managing Tail Spend

Despite its potential for cost savings, tail spend is often ignored due to the following challenges:

• Poor data visibility: Disparate systems, inconsistent data, and decentralized purchasing

• Low strategic priority: Focus is typically on larger, high-value categories

• Time and resource intensive: Managing high transaction volumes requires effort

These factors make tail spend appear less valuable, even though it holds hidden opportunities.

What are the benefits of Tail Spend Management?

Implementing a strategic approach to managing tail spend can yield significant benefits beyond just cost savings.

When done right, it enhances procurement operations across the board—from cost control and efficiency to better compliance and stakeholder engagement.su

Increased Efficiency and Productivity

Reducing the number of suppliers and introducing automation simplifies procurement and cuts down on time-consuming tasks.

• Supplier consolidation: Fewer vendors and contracts to manage.

• Automation through e-catalogs: Speeds up purchasing and reduces manual steps.

• Self-service procurement: Enables compliant buying without procurement involvement.

Reduced Supplier Risk

Improved oversight of tail spend reduces exposure to non-compliant purchases and supplier fraud.

Organizations gain more control over their vendor base, leading to safer and more reliable procurement.

• Fewer rogue purchases: Monitoring and guiding spend behavior reduces unauthorized buying.

• Improved SLA and contract compliance: Enforcing preferred suppliers and processes strengthens policy adherence.

• Lower fraud risk: Cleansing supplier data and removing duplicates or obsolete vendors limits vulnerabilities.

Improved Stakeholder Satisfaction

When procurement systems are transparent, intuitive, and efficient, users are more likely to adopt them.

• Simplified guidelines: Rules are easier to follow.

• Faster cycle times: Quicker approvals and transactions.

• Higher productivity per employee: Less time on low-value tasks.

• Enhanced data quality and reporting: More reliable insights.

How to Manage Tail Spend in 5 Steps?

Once you understand the scope and scale of your tail spend, apply these steps for better control:

1. Identify Your Tail Spend

Tail spend isn’t a universal concept. Start by defining what it looks like within your organization. Is it based on transaction size, supplier category, or business unit?

Pinpointing its nature is your first step toward improvement.

2. Streamline Internal Processes 

Having a clear, documented procurement workflow that is easy to follow and enforce is essential. Engage stakeholders early and often, especially those outside procurement who may not see the immediate benefit.

• Establish clear procurement workflows

• Communicate expectations and benefits to stakeholders

• Engage users early to build buy-in

3. Organize the Data

Accurate spend analysis depends on clean, structured data. Before you can analyze or optimize anything, ensure your information is consistent and normalized.

• Cleanse and classify spend data

• Standardize formats (e.g., dates, currencies)

• Use digital tools for spend analysis and supplier normalization

4. Use the Insights

You’ve gathered the data, now make it actionable. Tailor reports to reveal savings opportunities by category, supplier, region, or spend behavior. The insights should lead to action, not just observation.

• Leverage reporting dashboards

• Identify consolidation and savings opportunities

• Execute changes based on insights

5. Monitor the Benefits

Define your success metrics and track them over time. Consistent monitoring helps ensure that your tail spend strategy continues to deliver results. Examples of KPIs are:

• % of tail spend via approved channels (e.g., e-catalogs)

• Cost savings vs. benchmarks

• Supplier consolidation metrics

• Time saved on procurement tasks

Don't Tackle Tail Spend Alone

Tail spend management requires time, expertise, and resources. Consider:

• Dedicated internal teams with KPIs and goals

• Technology and automation tools for classification and tracking

• External experts to accelerate implementation and results

Many organizations see the best results when they blend in-house capabilities with external solutions, especially for data analysis and AI-driven spend management.

“Sievo delivers value we've never experienced before. We see so many opportunities we previously missed that are just ripe for picking. It's as simple as looking at Sievo.”

Angel Simenov, MediaMarktSaturn

Frequently Asked Questions (FAQ)

What types of organizations benefit most from tail spend management?

Organizations with high volumes of low-value transactions—such as manufacturers, large enterprises, universities, and government agencies—stand to gain the most. These entities often operate with decentralized purchasing and a wide supplier base, making tail spend optimization especially impactful.

Can tail spend be completely eliminated?

Not entirely. Some degree of tail spend is inevitable. However, it can be significantly reduced, better monitored, and brought under control with the right processes, tools, and governance.

Should the tail be managed in-house or outsourced?

It depends on your internal capacity. Some organizations build dedicated internal teams, while others outsource portions like data classification and analytics to specialized providers for faster, more scalable results.

Is it worth investing in automation for such low-value spend?

Yes. While individual tail transactions may be low in value, the cumulative impact is substantial. Automation streamlines approvals, improves compliance, and enables more strategic use of procurement resources.

How do automation and AI change the game?

AI-powered classification and auto-suggested savings opportunities reduce the manual lift typically required to manage tail spend. This allows large enterprises to scale their efforts across multiple divisions without proportionally increasing headcount.