Integrated Tail Spend Management Services

 Definition

Tail spend refers to small but numerous and dispersed procurement projects within a company. These procurement projects are usually fragmented and low in value, and may have other names such as edge procurement, low-value procurement, sporadic procurement, tail-end procurement, tail spend procurement, and some companies may categorize them as C-class materials.

Whether in terms of procurement amount or types of parts, typically 80% of the procurement amount in a company accounts for only 20% of the total product categories, and also only 20% of the total number of suppliers. The remaining 20% of the procurement amount covers 80% of the product categories and is provided by 80% of the suppliers. However, based on the Pareto 80/20 management principle, this portion of procurement is often overlooked in management.


 

Importance

In an increasingly competitive market environment, with rising costs in terms of both labor and time, companies need to seek various ways to reduce costs, including downsizing staff, improving efficiency, and enhancing focus on core competitive areas to maintain competitiveness. Therefore, companies should pay more attention to the advantages that tail spend procurement management can bring to their competitiveness. These potential advantages include:

1. Cost control: By effectively managing tail spend, companies can effectively reduce procurement costs. According to research, through the optimization and integration of the supply chain and components, especially for edge procurement products, total costs of related components and services can usually be reduced by 10-20% through simplified supply chain operations, centralized procurement, and improved efficiency, and the reduced costs will directly translate into corporate profits.

2. Supply Chain Optimization: Tail spend Management contributes to integrating the supply chain, reducing the number of suppliers, improving procurement efficiency, lowering procurement costs, and enhancing product quality.

3. Risk Mitigation: Effective tial spend management can reduce potential compliance and supply risks, ensuring adherence to regulations and standards while minimizing product quality risks and quality management costs.

4. Controllability and stability: By managing tail spend procurement, companies can comprehensively control the overall procurement situation, thereby making more reasonable operational decisions.

Challages

While tail spend overview management is important, there are also difficulties and risks in enterprise management：

1. Data and visibility:Tail spend procurement overview typically involves frequent purchases of multiple types of small batch parts, involving numerous suppliers, making data collection and visibility difficult. Lack of transparency may lead to difficulties in discovering cost savings and efficiency improvements. For example, material category integration, necessary data for procurement resource integration, and scattered transactions also make it difficult to provide objective quality data and statistics on supplier service levels.

2. "Hard-to-Manage Supply Resources: A high volume of small transactions often involves multiple suppliers, increasing management complexity. With low order quantities per product but stringent quality requirements, individual enterprises struggle to gain pricing leverage in supplier negotiations. This often results in insufficient investment and support in quality, technology, and service—posing significant risks, particularly in compliance and product quality control."

3. Workflow and management: Tail spend management requires the establishment of effective workflows and management mechanisms to ensure that procurement decisions comply with company policies and standards, which may require additional resources and efforts.

4. Time and cost: Due to the small amount of individual transactions, the time and cost invested in tail spend procurement management by some companies may be underestimated compared to the benefits.

5. Risk Management: Due to the involvement of multiple suppliers and small procurement projects, tail spend procurement management may increase compliance and supplier risks, requiring the company to strengthen supervision and management, which requires additional manpower and management resources, and may affect the operational efficiency of core business.

Solutions and Services

As a professional manufacturing supply chain integration and supply service enterprise, we have been seeking cooperation with potential customers to help them solve the difficulties of tail spend and bring considerable value-added benefits to customers in this area. We are based on the decades of supply chain work experience of the founding team and a professional management team, and have established deep cooperation with many industrial product manufacturing ecological chain companies. With outstanding upstream and downstream supply chain integration capabilities, we provide customers with integrated supply chain and one-stop product component supply services. Our services cover all aspects of supply chain integration, including assembly and supply services of components. By deeply participating in the internal and external supply chain integration process of customers, we help them achieve efficient operation in complex supply chain environments, optimizing supply and quality management costs. We particularly focus on the management of tail spend management projects of multi-product, multi-variety, complex, low-value Class C product categories. Currently, we have thousands of supply resources in various industries and manage and supply thousands of components for customers. We have made positive contributions to customers in supply chain integration, cost, and quality management.

Through the following services, we help customers solve the pain points in tail spend management, reducing costs, improving efficiency, and supporting customers to focus on their more critical core areas：

Supply Service：
1. Rolling material demand review and fulfill base on customer demand。
2. Ensuring inventory availability by providing inventory stocking support based on the customer's actual business situation.
3.Optimizing and integrating the supply chain to maintain efficiency and reliability, enabling timely and accurate deliveries.
4.Stable, secure, and timely logistics services are crucial, and we always collaborate with the most reliable logistics providers in the industry.

Supply Resource Management:
1.Supplier evaluation and performance monitoring to identify and mitigate supplier supply risks.
2.Strengthening supplier selection and collaboration to improve the stability and consistency of component supply.
3.Integrating component types, enhancing component standardization, reducing fragmented procurement, and lowering overall supply chain costs, including management costs, production costs, and quality costs.
4.Through optimization and integration of the supply chain and components, especially for products with decentralized procurement, simplifying supply chain operations, centralizing procurement, and improving efficiency can typically result in a 10-20% reduction in total supply chain costs.

Quality Management:
1.Implementation of a comprehensive quality management system and compliance with ISO 9001:2015 system audit. Strict reviews are conducted on supply chain partners, including IATF 16949, AS9100, ISO 14001, EMAS (Quality and Environment), and service systems, based on industry and customer requirements. This ensures our confidence in the quality of all supply qualifications and products, guarantees that the products meet design and production requirements, and adheres to environmental policies to fully meet customer expectations.
2.Each batch of components undergoes batch quality inspections before delivery to ensure compliance with customer quality specifications and requirements.
3. Imported products are subject to strict compliance reviews, including PPAP, RoHS, REACH, and other requirements based on customer demands. Normative documents, such as product component certificates, are provided accordingly.
4. Internal and external audits and continuous improvement activities are conducted based on customer quality requirements to ensure the effectiveness and compliance of the quality management system.

Technical Support and Early Involvement in Customer Product Design (ESI):
1. We provide technical support in Design for Manufacturing (DFM), collaborating with customers in the early stages of product design to ensure optimized designs suitable for efficient and cost-effective manufacturing processes. This includes considering factors such as material selection, manufacturing capabilities, assembly methods, production feasibility, and availability.
2. Evaluate the lifecycle of market components and provide replacement recommendations for those nearing the end of their lifecycle.
3.We collaborate with customers to drive the certification process for material substitutions.

We provide international business, import-export, and payment services.
1. We provide flexible international currency payment and collection services.
2. Based on the customer's credit situation, we provide payment credit support with a credit period ranging from 2 to 6 months.
3. We handle import and export transactions for products and components on behalf of our clients.
4. We strictly adhere to commercial regulations while proactively safeguarding corporate credibility, ensuring secure and timely payments for all entrusted and payable transactions. This commitment sustains seamless and efficient supply chain operations.