What tail spend is
Tail spend is low-value, occasional or one-off purchasing spread across many suppliers: a spare part ordered once a year, a calibration service, signage for a mine site, a tool that is not on any contract.
In value it weighs little. McKinsey estimates it at 10% to 20% of a company's total spend. That is why it is rarely a priority: procurement teams put their time where the money is, in the large contracts.
The problem is not what the tail costs to buy. It is what it costs to manage.
Where the real cost lies
A low-value purchase goes through the same steps as a large one. The difference is that it repeats hundreds of times a year, often with a supplier that has to be onboarded from scratch:
| Step | Who is involved | What it takes |
|---|---|---|
| Request and quotes | Requesting area and buyer | Finding suppliers, requesting and comparing offers |
| Supplier onboarding | Procurement, HSE, legal, treasury | Labor, safety, legal and banking documents, for a purchase that may never repeat |
| Approval and purchase order | Managers by amount, buyer | One approval flow for every order |
| Follow-up and receipt | Buyer and warehouse | Chasing delivery dates from many small suppliers |
| Invoice and payment | Accounting and treasury | One invoice, one match and one payment per supplier |
Added up, that work creates costs that never appear together in a single report:
- Team hours. Not only in Procurement: also in HSE, legal, accounting and treasury, who process every supplier and every invoice.
- A supplier master that keeps growing. Every one-off purchase leaves behind an onboarded supplier that has to be kept up to date.
- Lead times. What we typically see is that, with a new supplier, 18 to 36 business days go by before the purchase order reaches the supplier. On a mine site, that can mean equipment standing idle waiting for a part.
- Little visibility. Spend is scattered across hundreds of orders and nobody quite knows how much is bought, of what or from whom.
Why the usual fixes fall short
The classic answer is to treat the tail like core spend: tender it, build catalogs, negotiate agreements. That works for what repeats and can be planned, such as PPE or hardware. But the heaviest part of the tail is precisely what does not repeat: you cannot tender what you do not yet know you will need.
- An MRO distributor covers what is in its catalog, not services or off-catalog purchases.
- A procurement platform organizes the workflow, but every new supplier still enters your master and every invoice still reaches your accounting team.
- One more buyer adds hours, but does not shorten onboarding or reduce invoices.
Improving the process helps at the margin. What changes the workload is taking the tail out of the process.
How to take the tail out of the process
1. Measure the workload, not just the spend
Take the purchase order extract for the last 12 months below a cut-off amount. Count how many orders there are, how many different suppliers appear, how many received a single order and how many were onboarded during the year. That is the workload your team absorbs today.
2. Decide what leaves the standard process
Choose the categories and the amount below which a purchase does not need to go through the full workflow: off-contract minor spare parts, one-off third-party services, urgent purchases, items bought once. Strategic and recurring contracted spend stays where it is.
3. Route it through a single onboarded supplier
That supplier buys under a mandate from the company: it quotes, issues the purchase order in its own name, follows up on delivery and invoices once a month. The company does not onboard the end suppliers: the tail manager does. For Procurement, hundreds of orders and suppliers become one.
4. Keep control where it matters
Taking the tail out of the process does not mean losing sight of it. The requesting area still approves every comparison, lead times are committed by contract and spend comes back in a monthly report classified by category, supplier and area.
5. Set an entry rule
No new supplier is onboarded for a one-off purchase below the cut-off amount. That purchase goes through the channel defined in step 3. Without this rule, the tail grows back inside the vendor master.
What changes in day-to-day operations
| Today | With the tail routed | |
|---|---|---|
| Supplier onboarding | One for each new supplier | Once |
| Purchase orders | One per supplier, issued by your team | Issued by the tail manager |
| Invoices | One per supplier | One a month |
| Points of contact | As many as suppliers | One |
| Spend visibility | Scattered across hundreds of orders | Classified monthly report |
How to tell whether it is working
Five tail workload indicators
- Purchase orders below the cut-off issued by your team
- Suppliers onboarded in the period for one-off purchases
- Low-value invoices processed per month
- Business days from request until the order reaches the supplier
- Share of tail spend visible in a single report
One supplier for the whole tail
AROLICO is that single supplier for the tail. You onboard us once and purchases in the categories you define go through us: we quote with at least two offers, issue the purchase order the same day the comparison is approved and follow up on delivery. We onboard the end suppliers ourselves: you add none to your vendor master. You receive one invoice a month and the spend report.
Lead times go into the contract, with a penalty if we miss them. To start, we run a diagnostic on your purchase order extract for the last 12 months under CLP 5 million (about USD 5,000) and show you which part of the tail is worth routing to us.
Source of the reference figure: Drentin, Erriquez, Nee and Ziegler, “Long tail, big savings: Digital unlocks hidden value in procurement”, McKinsey & Company, 2018.
Frequently asked questions
What is tail spend?
It is low-value, occasional or one-off purchasing spread across many suppliers. It is a minor share of total spend, but a large number of orders, suppliers and invoices.
Why does tail spend cost so much if the amounts are small?
Because every small purchase goes through the same steps as a large one: quotes, supplier onboarding, approvals, purchase order, follow-up, invoice and payment. The cost is in the management work, not in the price of what is bought.
Should tail spend be tendered?
Only the part that repeats and can be planned, such as PPE or hardware, which framework agreements or catalogs handle well. The occasional part cannot be tendered in advance; it is better routed through a single onboarded supplier buying under a mandate.