How digitally-powered online marketplaces improve tail spend management

A prominent business expert advises procurement professionals seeking the most effective tail spend management strategy…...

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A prominent business expert advises procurement professionals seeking the most effective tail spend management strategy to start leveraging the benefits of online marketplaces. 

Writing in Industrial Distribution magazine, Martin Rohde, General Manager of Commercial Customers at Amazon Business, begins by acknowledging that keeping a lid on unmanaged supply categories, e.g., IT peripherals, office, janitorial/caretaking, food service, maintenance, repair and operations, and more, is a massive and laborious task. All these supplies which are not subject to strategic sourcing and category management, or ‘tail spend.’

While many world-class procurement organisations have developed sophisticated strategic sourcing programmes and streamlined their internal processes, legacy tail spend tactics have significant drawbacks. For example, routing all tactical buys through a team of professional buyers (tactical buying desks) consolidates the purchasing process, but these desks are expensive to maintain and deliver limited added value.

According to global research and advisory firm, Gartner, 75% of all B2B tail spend goods will be bought through an online marketplace by 2022. For Rohde, this is the future of effective tail spend management. Online marketplaces offer purchasers enormous choice while enabling procurement practitioners to pare down the number of suppliers to manage. And the competitive nature of online marketplaces, driven by multiple suppliers bidding for business, ensures that purchasers get the best products at the best prices.

As Rhode explains, they also increase transparency into company spend and deliver appealing cost reductions by providing sophisticated spend analytics with accessible dashboards that show graphs and charts depicting employee spending throughout the organisation. They help procurement pros get the data they need to reconcile company purchases as well as facilitating more accurate expense reporting. Also, machine learning on these marketplaces helps match previous customer selection with alternatives, offering improved price or functionality, while business-specific features can tackle compliance issues, from tax exemption to centrally-managed shipping, options to policy enforcement issues.

For tail spend management, the future is bright – the future is online marketplaces.

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