Tail spend management – the Amazon perspective

A senior procurement leader at Amazon suggests that effective tail spend management rests on ensuring…...

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A senior procurement leader at Amazon suggests that effective tail spend management rests on ensuring employees and internal stakeholders can easily access what they need to do their jobs, because when they can’t, ‘rogue spend’ tends to rocket.

Molly Dobson, who heads Amazon Business Services’ Enterprise Customer Success, was speaking at eWorld last week and made a case for catalogue-type solutions as the key to good tail spend management. This isn’t as easy as it may sound. Most organisations have a surplus of small suppliers, while the number of their procurement teams is shrinking. In Britain, this may be uppermost in the minds of procurement pros at the moment, as they study their UK Budget overviews to determine the implications of the Chancellor’s Autumn Statement for their roles.

Effective tail spend management, for Dobson, requires integration with other applications, detailed reporting and analytics capabilities, and ready access to approved suppliers and categories. She said: “Procurement people need to control, restrict and curate what is available to their buyers.” She described Amazon’s “dynamic pricing model” which is integral to the commercial leviathan’s platform. Unlike conventional contractual negotiations, which usually fix process for specified periods, the Amazon model lets the constant changes from many suppliers on the platform to reach the right market adjustments. A possible flaw with this approach is that prices can go up as well as down, leaving many procurement professionals to conclude that locking in prices isn’t always a bad idea.

The notion that tail spend management is improved when buying rests on competitive ‘best in market’ prices is compelling, and likely more often than not to outperform many conventional procurement deals, and definitely better than popping down to the high street to make impromptu purchases. The Amazon platform yields greater visibility to procurement teams on what is being spent, and also allows for controls to be integrated into the process. Amazon’s tail spend proposition appears to be worth studying.

Ed Cross

Ed founded Odesma in 2014 with the explicit intent of creating a new kind of procurement consultancy founded entirely on cloud principles. Deploying best-of-breed subject matter experts alongside the best on demand technology to deliver rapid and effective change for customers.

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