Reading lecture 10

Question 1

Tail spend

Answer 1

amount of money an organization spends on purchases that make up 80% of transactions but 20% of spend volume

Question 2

Long tail spend tactics

Answer 2

• standardization and bundling
• catalogs and purchasing cards
• outsourcing

Question 3

Standardization and bundling

Answer 3

harmonization of component specifications reduces the number of items
consolidating suppliers makes collaborations easier

Question 4

catalogs

Answer 4

• offer one option and supplier for each item
• don’t always provide the needed parts
• good for corporate governance
• support compliance
• can reduce transaction costs by 30-40%

Question 5

purchasing cards

Answer 5

• ensures compliance
• records who is buying and what
• more efficient
• prices are lower than with other methods

Question 6

outsourcing

Answer 6

• eliminates difficulties
• cuts costs
• can hamper flexibility and innovation

Question 7

advantages of digital approaches

Answer 7

• better visibility into expenditure

- boost efficiency of key procurement processes

Question 8

creating tail spend transparency

Answer 8

• internal spend data
• supplementing PO data
• supplier data

Question 9

internal spend data

Answer 9

• consolidation of programs to combine data

- spend cube analysis for expenditures

Question 10

Supplementing PO data

Answer 10

Po data is insufficient for classifying and consolidating spend items
advance analytics can help with differences in product specification

Question 11

supplier data

Answer 11

OCR can read and capture supplier information quickly and accurately
platforms provide suppliers with semi filled out forms

Question 12

Managing tail spend more efficiently

Answer 12

improve mass tenders
e-RFI
e-RFQ
e-auctions

Question 13

improve mass tenders

Answer 13

used to be very challenging

the new e’s help improve it

Question 14

e-RFI

Answer 14

possible to issue large scale eRFI over the world

a heat map can illustrate the number of suppliers across the world

Question 15

e-RFQ

Answer 15

allows each distributor to see only the line items that a company can provide

Question 16

e-auctions

Answer 16

companies can select by cherry picking (suppliers with lowest price)
can consolidate suppliers in a portfolio by keeping a healthy level of competition

Question 17

reducing tail spend to extract value

Answer 17

using big data, advanced analytics and AI
automating processes related to purchase orders and invoices
ensuring sustainability of tail spend management

Question 18

Maverick buying

Answer 18

the buying of goods and services for which an established procurement process is in place based on pre-negotiated contracts with selected suppliers

Question 19

reasons for maverick buying behavior

Answer 19

lack of awareness of policy
desired products or services not covered by corporate contracts
lack of insight in the benefits of the corporate contract
perceived superiority of a local deal
personal preferences
favoring local interests
lack of incentives to comply
expected repercussions from supply market or management in case of non compliance