Reading lecture 10 Flashcards
Tail spend
amount of money an organization spends on purchases that make up 80% of transactions but 20% of spend volume
Long tail spend tactics
- standardization and bundling
- catalogs and purchasing cards
- outsourcing
Standardization and bundling
harmonization of component specifications reduces the number of items
consolidating suppliers makes collaborations easier
catalogs
- 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%
purchasing cards
- ensures compliance
- records who is buying and what
- more efficient
- prices are lower than with other methods
outsourcing
- eliminates difficulties
- cuts costs
- can hamper flexibility and innovation
advantages of digital approaches
- better visibility into expenditure
- boost efficiency of key procurement processes
creating tail spend transparency
- internal spend data
- supplementing PO data
- supplier data
internal spend data
- consolidation of programs to combine data
- spend cube analysis for expenditures
Supplementing PO data
Po data is insufficient for classifying and consolidating spend items
advance analytics can help with differences in product specification
supplier data
OCR can read and capture supplier information quickly and accurately
platforms provide suppliers with semi filled out forms
Managing tail spend more efficiently
improve mass tenders
e-RFI
e-RFQ
e-auctions
improve mass tenders
used to be very challenging
the new e’s help improve it
e-RFI
possible to issue large scale eRFI over the world
a heat map can illustrate the number of suppliers across the world
e-RFQ
allows each distributor to see only the line items that a company can provide
e-auctions
companies can select by cherry picking (suppliers with lowest price)
can consolidate suppliers in a portfolio by keeping a healthy level of competition
reducing tail spend to extract value
using big data, advanced analytics and AI
automating processes related to purchase orders and invoices
ensuring sustainability of tail spend management
Maverick buying
the buying of goods and services for which an established procurement process is in place based on pre-negotiated contracts with selected suppliers
reasons for maverick buying behavior
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
