Supply base reduction
Practically all organizations will find that approximately 80% of the spend is covered by 20% of their suppliers (the head) and thus 20% of the spend consists of 80% of the other suppliers. Smaller suppliers with each progressively smaller amounts of spend.
The long tail consists thus of many “smaller” suppliers. Too many suppliers. And is rapidly growing due to spot buys and maverick buying. To tackle the problem, companies often start with a supply base reduction project. In the spend analysis that preceded the actual supplier inactivation, a stakeholder mapping is performed. A result of this exercise, is that you will notice that nearly the whole company is using the tail spend suppliers. And very often, for good and for bad reasons, the re-activation of suppliers is requested, and your supply base will grow again.
Since the tail holds the majority of the suppliers and the minority of the spend, it is a logical step to outsource these purchases to a local tail spend service provider. Faster, better, cheaper and you can reduce your supply base with at least 50%, forever.
Everybody is impacted
But, since many stakeholders are involved, adoption and change are key for the success of the program. Therefore the stress is on: “a local service provider”. Proximity (being on-premise), having local market knowledge, speaking the language of the supplier and the stakeholder, are key to have people embrace the program.
Close collaboration during the daily operations is a no-brainer, but before that, an adoption program is a key milestone that cannot be overlooked. Without good communication prior to go-live, failure is almost for sure. And you don’t want to create troubled water by outsourcing the smallest piece of your spend. Remember, the whole company is involved. Therefore a good tail spend service provider is focusing on preparation and communication when attacking a new program:
It is one of the major challenges organizations experience when implementing a new tool or process: the lack of adoption among the end-users as well as the embedding of the new way of working. This challenge could be simply understood by the fact that the users are human and need time to adapt to the new environment and to adopt the new way of working.
It is one of the major challenges organizations experience, when implementing a new tool or process: the lack of adoption among the end-users as well as the embedding of the new way of working.
Make it stick!
Tremendously important is the design of a tailored adoption-journey with the client. It consists of developing and executing specific adoption activities, targeting the leadership and the operational layers.
Enough cases testify that the major difficulty in a new tool/process adoption resides in translating the leadership vision into daily tasks and responsibilities. To tackle this, one should have an adoption approach which consists of 5 integrated building blocks that, are strongly interrelated and interconnected. An efficient approach with high impact results:
1. Engage the leaders
2. Co-build the solution
3. Simulate, adapt & adopt
4. Communication & branding
5. Make it stick
The conclusion is that stakeholder involvement and adoption of the new tool and processes is key to unleash the potential of your tail spend.
There is gold in your tail! But with the right service provider, you might just dig it up!