AgaCanGroup Point of Procurement

What is tail spend management?

Tail spend management includes controlling and mapping purchasing expenditure at all non-strategic suppliers. The expenses at these C suppliers are also referred to as C-Spend. The Tail Spend expenses represent approximately 20% of the total costs.

Often companies lack the knowledge, expertise or scope to manage these expenses. No less than 80% of all suppliers are so-called C-Suppliers and do not form a direct part of the business operations. Tail spend management enables companies to achieve a more efficient supplier base and better insight into expenditure and savings.

Tail end spend management is based on the Pareto principle, often referred to as the 80/20 rule. The Pareto principle states that in many cases about 80% of the outcomes arise from 20% of the causes.

80% of the suppliers (C-suppliers) are responsible for only 20% of the total purchasing expenditure where 20% (strategic suppliers) are responsible for 80% of the purchasing expenditure.

Learn more about Tail Spend Management

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Focus on strategic spending

About 20% of the suppliers are strategic suppliers that have an important relationship with the company. These are suppliers that are indispensable for a company, in contrast to C suppliers.

By outsourcing the Tail spend, there is room to focus more internally on strategic purchasing. It is important to maintain a good relationship with strategic suppliers, resulting in good delivery and payment conditions.

Strategic suppliers comprise only 20% of the supplier base but represent 80% of the purchasing expenditure.

The problem of C-suppliers

The Tail Spend expenditure at non-strategic suppliers is also referred to as C-spend. These expenditures represent only 20% of the total purchasing expenditure and comprise as much as 80% of all suppliers of an organization. These are so-called C suppliers that are not a direct part of the business operations.

The relatively small part of the purchasing expenditure at the C suppliers has a huge impact on a purchasing and/or administration department. Companies often have no insight into the size of these expenditures. This is mainly due to the fact that these are low-value, low-risk expenditures.

The products are in many cases purchased from non-contracted suppliers and consist of varying and often unnegotiated terms. This results in a large number of transactions per year, which are either too small to go through the (strategic) purchasing department or the C-items are not part of an existing framework contract catalogues.

C-suppliers only comprise 20% of the entire procurement expenditure, but they are responsible for 80% of the supplier base.

Outsourcing procurement from C-suppliers leads to more control and a more efficient supplier base and offers opportunities for saving direct and indirect costs, better cost control and better analysis and reporting. A large part of the tail spend is a one-time purchase, where onboarding a new supplier often takes a lot of time for many organizations. Thanks to AgaCan Group, a single creditor model is created and the creation of new suppliers is no longer necessary.

Characteristics of tail spend at C-suppliers are:

Non-contracted purchases
Uncontrolled Expenses
Low value/low risk
Low volume
One-off and (ad hoc) purchases
Not or barely negotiated prices and conditions
Declarations
Maverick buying (buying outside contracts)

Tail spend management illustration

Why is tail spend management important?

In many cases, there is little or no insight into the expenditure and purchasing behaviour of buyers at C suppliers who are located in the tail, or tail of the spend. By having the tail spend managed by AgaCan Group, there is more insight into the expenditure, the buying behaviour of buyers/requestors and the savings achieved thanks to transparent reporting. The time spent on C-suppliers who are in the tail of the spend creates an imbalance in the work of a purchasing department. A purchasing department spends a lot of time buying a variety of low-value products and/or services that are purchased only a few times or once.

It is almost impossible for many companies to purchase these products on the most favourable terms as each purchase is a time-consuming process. When mapping out the costs, it is important to keep the entire purchasing process under a magnifying glass. This not only provides insight into the direct purchasing costs but also the indirect purchasing costs. These costs vary from sourcing, expediting, vendor onboarding, invoice handling to logistics operations.

Outsource tail spend management to one total supplier

Over the past 25 years, AgaCan Group has developed into a specialist in the field of purchasing and tail spend management. Internationally represented and with more than 100 specialists, we are at your service every day.

AgaCan Group is an extension of your procurement department

By outsourcing all tail spend purchases, you achieve many benefits. From insight, manageability, control to direct savings. You shift the focus of all purchases to the strategic partners with the most important products that influence your day-to-day business. You reduce your supplier base by up to 80%. AgaCan Group is a specialist in the field of Tail Spend Management. From (RFQ) to invoice settlement and shipment. AgaCan Group offers a total solution; from taking over tail spend management to supplying specific commodities.

Our method

Because every organization is unique, AgaCan Group tailors its services to your wishes and requirements. AgaCan Group has developed a unique concept in which significant procurement improvements are achieved by simplifying the procurement process and reducing costs. AgaCan Group is 100% transparent and works on the basis of open calculation.

AgaCan Group is an independent supplier without a fixed range. We supply an unlimited product range and are not a stock-keeping partner. Thanks to our qualified “preferred suppliers” we can guarantee good quality, service, prices and delivery times.

Our advantages

We offer insight into procurement behaviour, delivery conditions, expenses and savings. Thanks to monthly KPI reports with information at the order line level, the entire tail spend becomes transparent for our partners. AgaCan offers the option of taking care of invoice settlement as well as the entire sourcing process. Thanks to our purchasing volumes, you also benefit from favourable purchasing conditions and negotiated and reduced rates.

Pay only

You place the order with a supplier and use AgaCan Group as an invoice creditor. The invoice is received, checked, scanned, booked and paid by us.

Procure-to-pay

AgaCan Group places a purchase order with the supplier you have already selected. We then monitor the order until delivery has taken place and we handle the invoicing process.

Source to pay

AgaCan Group will look for the purchase option with the best conditions for you. Based on the specifications provided by your organisation, AgaCan Group will look for suppliers with the best commercial conditions.

Integration with systems

Integration with systems provides a lot of insight and a more efficient working method. We offer various options for this, ranging from manual workarounds, hybrid solutions and full end-to-end integrations with various ERP systems.

In addition, we have developed our own E-procurement tool RedGround. Via RedGround, buyers can easily source various products, request quotations and place orders. RedGround is available as a web-based standalone version or integrated PunchOut.

We have also developed TENDER-PRO where users can submit their procurement requirements. These requirements are shared with our partners and suppliers so that you can get feasible proposals.