Have you ever found yourself scrambling to track down contract renewals or wondering why small purchases keep piling up with little oversight?

If so, you’re not alone. This could be a sign of a bigger issue—tail spend.

Tail spend represents the bottom 20% of your spend but can account for up to 80% of your transactions. Yet, it’s often left unmanaged.

Why does this happen?

Because tail spend is made up of small purchases that slip through the cracks. 

These purchases seem insignificant, and no one has the time—or the will—to manage them.

In this article, we’ll explore the challenges of managing tail spend and the solutions that can help you bring order to the chaos, saving your organization time and money.

Decentralized Purchasing Practices

One of the biggest challenges with tail spend is purchasing decentralization.

You’ve probably seen it: individual departments or employees make purchases on their own, disregarding procurement policies. 

And you’re not alone in this struggle. 

According to the 2024 State of Procurement Data report, less than half of procurement leaders believe that employees outside their departments consistently follow procurement policies. 

Illustration: Veridion / Data: Amazon

That means the majority are, in fact, not following standardized processes, creating the perfect breeding ground for unmanaged tail spend.

This leads to inconsistent approaches across your organization, missed opportunities for bulk purchases, and reduced negotiating power with suppliers. 

On top of that, these small purchases add up quickly, making it even harder to track where the money goes.

And without proper processes, tail spend often turns into maverick spend—a significant challenge for 91% of procurement leaders.

To make matters worse, 87% of them report that it has increased over the past year. 

Illustration: Veridion / Data: SDI

So, how do you overcome this challenge?

The solution is clear: by centralizing your purchasing. 

Procurement automation tools are essential in making this happen. 

They automate and standardize procurement processes, enforce purchase order (PO) approvals, and even give you real-time insights into spending patterns.

With standardized processes in place, rogue purchases disappear, and you have more control over your tail spend.

McKinsey reports a case in the chemical industry where a global distributor with $2 billion in direct spend, including $500 million in tail spend, turned to procurement technology.

The result? 

Better visibility into spending trends, stronger negotiation terms with suppliers, and an impressive $40 million saved—just by transforming decentralized, fragmented purchases into a strategic process with automation and e-procurement.

Illustration: Veridion / Data: McKinsey

So, while decentralized purchasing practices are a big hurdle, centralizing them with procurement software makes managing tail spend much easier and leads to significant savings.

Purchase Data Dispersed Across Systems

When purchasing practices are decentralized, it doesn’t just affect who’s buying—it affects your ability to track spending, too.

Data becomes scattered across multiple systems and departments, making it nearly impossible to get a clear view of your total spend, and especially those low-volume transactions that make up tail spend.

This creates two major problems.

First, manually gathering the data takes too much time. 

You might find your procurement team pulling data from various departments, systems, or even scattered spreadsheets, and that takes time.

Second, data is often siloed, so it’s hard to access in the first place. 

Many companies use different systems across teams, which makes it difficult to consolidate that information. 

In fact, an Informatica survey from 2021 found that over 25% of organizations manage between 1,000 and 9,999 different data sources! 

Illustration: Veridion / Data: Informatica 

Just imagine trying to pull clean spend insights from that many systems.

Poor integration between key systems, like procurement and contract management platforms, complicates things even further. 

Without a link between these systems, identifying off-contract purchases or analyzing contracted versus non-contracted spend becomes nearly impossible.

Another headache? 

The quality of the data. 

Tail spend is often made up of small, fragmented transactions, which tend to be riddled with inaccuracies like:

• incorrect supplier names, 
• missing descriptions, 
• duplicate entries, and
• junk characters. 

Without standardized data, it’s difficult to track spending patterns, let alone analyze supplier performance, or find cost-saving opportunities.

But don’t lose hope, as there’s a solution.

To fix this, you can turn to technologies like spend analysis tools or spend management software.

Spend analysis software, for example, automatically gathers data from multiple systems, giving you real-time visibility and detailed analytics. 

Source: Simfoni

With a tool like this, you can eliminate the manual work and get access to accurate, clean spend data in no time.

Plus, spend analysis tools can dramatically improve data quality. 

With automated data cleaning and validation, you’ll see fewer duplicate entries, correct supplier and material names, and gain the insights needed to make smarter, faster decisions.

In short, while managing dispersed tail spend data may seem overwhelming, the right software can centralize it, improve its quality, and turn your tail spend into an opportunity for better control and savings.

Limited Negotiation Leverage

Tail spend transactions are typically small, which makes it hard to negotiate better prices or more favorable terms with suppliers. 

Without the buying power that comes with bulk purchases, you’re often left paying full price for low-value items, missing out on opportunities to optimize your spending.

Let’s say you make small IT purchases from multiple vendors. 

Each transaction on its own is too small to negotiate a discount. 

And even though your total spend across all vendors is significant, the fragmented nature of the purchases keeps your costs high and limits your ability to secure better deals.

So, how do you fix this?

By making your tail spend management more strategic.

One strategy you can implement is supplier consolidation. 

Source: Veridion

You can increase your leverage by reducing the number of suppliers and grouping similar purchases together.

This will give you more buying power, which puts you in a stronger position to negotiate discounts, longer payment terms, or other favorable conditions.

But how do you identify which suppliers to consolidate?

Start by analyzing your tail spend categories. 

Focus on areas with frequent low-value purchases or where multiple suppliers provide the same or similar products. 

This could include office supplies, IT equipment, or maintenance services. 

With the help of spend analysis, you can track which suppliers these small transactions are scattered across and determine where consolidation can yield the most savings.

However, consolidation comes with its own set of risks. 

Relying too heavily on a single supplier can lead to over-dependence, which creates a single point of failure. 

If that supplier can’t meet your needs—whether due to supply chain disruptions, financial instability, or quality issues—it can leave you vulnerable.

So how can you manage this risk?

It’s crucial to thoroughly vet suppliers and continuously monitor them to ensure they meet your criteria over time.

Veridion, our supplier discovery service, is efficient in both of these tasks.

First, you can use it to find suppliers that align with your standards—whether it’s ESG, financial stability, or compliance requirements, as you can see in the video below:

Source: Veridion on YouTube

Second, Veridion helps you stay ahead when you’re already working with suppliers by alerting you in real time about any significant changes in their operations. 

Source: Veridion

For instance, if a supplier loses a key certification that matters to your organization, you’ll be notified immediately, so you can take quick action to mitigate risks.

By consolidating your suppliers and using tools to manage them carefully, you can turn limited negotiation leverage into a strategic advantage. 

Even for the smallest of transactions.

Managing a Large Number of Suppliers

While only around 20% of a company’s total spend falls into the tail spend category, it’s often spread across 80% of the supplier base. 

This results in a huge number of low-value transactions that can quickly become overwhelming.

But it also means you have to manage lots of suppliers. 

For example, procurement leaders at Consero’s Procurement and Strategic Sourcing Forum reported managing anywhere from 5,000 to 30,000 suppliers—a logistical nightmare. 

Or take a company like TotalEnergies, a multinational integrated energy and petroleum company.

In 2023, they worked with over 100,000 suppliers globally, with a total spend of $30 billion. 

Source: TotalEnergies

Fostering strong relationships with such a large number of suppliers can easily become unmanageable.

Especially when you’re juggling compliance, negotiating terms, and trying to maintain quality control for all of them. 

But what happens when this isn’t handled well?

• Supplier compliance can slip through the cracks.
• Maverick spending increases as employees use non-vetted suppliers.
• You miss opportunities for bulk purchasing or negotiating better terms.
• The procurement team struggles to maintain consistent quality across vendors.

So, how can you overcome this challenge? 

One effective way to manage this large supplier base is by creating a pre-approved list of suppliers for all goods and services—even those that fall into the tail spend category. 

This streamlines the procurement process by limiting purchases only to vetted suppliers, ensures compliance, and reduces the risk of maverick spending.

In fact, according to a report by The Hackett Group, 56% of procurement leaders had already implemented pre-approved suppliers for all categories of spend by 2019. 

Illustration: Veridion / Data: Coupa

Why? 

Because focusing on a curated list of suppliers reduces complexity, improves compliance, and allows you to build stronger relationships with a smaller, more reliable group of vendors. 

This also makes it easier to track and maintain quality across the board.

However, keep in mind that it’s not just about creating the list.

Rather, it’s about continuously managing and reviewing your suppliers to ensure they’re meeting your business standards. 

Lack of Resources for Managing Tail Spend

Managing tail spend requires time, tools, and dedicated resources, which many organizations simply don’t have.

In many cases, procurement teams are already stretched thin, focusing on larger, more strategic purchases. 

As a result, they may lack the personnel or specialized resources to effectively manage tail spend. 

One solution for that is outsourcing tail spend management to external service providers that specialize in this area. 

Companies like GEP, for example, offer procurement outsourcing services that can manage tail spend effectively.

This can reduce the internal workload while ensuring compliance and cost savings.

Here is what they offer:

Source: GEP

But if a company doesn’t have the budget for outsourcing, there are still cost-effective ways to manage tail spend.

For instance, you can identify the categories where tail spend is most prominent, and focus your limited resources there. 

By narrowing the scope of tail spend management, you can target the areas with the highest potential for savings without overwhelming your procurement team.

You can also engage with your suppliers to negotiate long-term contracts, even for small purchases.

This way, you can have more of your tail spend under management.

Finally, establish clear procurement policies that also apply to tail spend. 

When employees are aware of these policies, they will be less likely to make off-contract or non-compliant purchases, which will reduce the overall need for active tail spend management.

Conclusion

Managing tail spend is indeed challenging. 

Especially if your spend data is dispersed through systems and you don’t have centralized purchasing channels.

As we explained, this leads to poor or no negotiation leverage and missed opportunities for cost savings.

However, there’s a silver lining: the adoption of digital tools.

By implementing these tools, you can gain a clearer view of your spending patterns, streamline procurement processes, and enhance your negotiation power with suppliers.

Take the initiative to explore these digital options. 

You’ll find that investing in technology pays off by turning your tail spend challenges into opportunities for savings and better supplier relationships.