Written by Marijn Overvest | Reviewed by Sjoerd Goedhart | Fact Checked by Ruud Emonds | Our editorial policy

Tail Spend Management Process

This is how to manage tail spend effectively:

1. Identify Your Tail Spend

The first step in tail spend management is to clearly identify which part of the company’s total spend belongs to tail spend. This usually requires collecting purchasing data from all available sources, such as invoices, ERP systems, procurement platforms, and supplier records. Once the data is combined, the company can detect small, scattered, and often unmanaged purchases that make up tail spend. This step creates the foundation for all further analysis and action.

After identification, tail spend should be segmented to better understand where costs occur and where savings opportunities exist. Some parts of tail spend may involve larger suppliers but still lack strategic control, while other parts may include many small suppliers with very low transaction values. This segmentation helps procurement teams set priorities and focus on the areas with the highest improvement potential. As a result, spending becomes easier to understand and manage.

2. Streamline Internal Processes

The second step is to improve internal processes so spending can be controlled more effectively. When procurement processes are unclear, slow, or too manual, employees are more likely to make unplanned purchases and use too many suppliers. For this reason, organizations should standardize how purchasing requests are created, approved, and completed. This reduces uncontrolled buying and increases visibility across the business.

One of the best ways to do this is by implementing a procurement system or software that supports a structured buying process. Instead of making informal purchases, employees follow a defined workflow that includes request submission, approval, and purchasing execution. This approach improves spend control, strengthens compliance with company policies, and reduces unnecessary transactions. It also helps the organization identify more areas for cost savings.

3. Organize Your Data

The third step is to organize and structure data so it can support better decision-making. Collected data is not enough on its own if it is not sorted, categorized, and presented in a clear way. That is why companies need reports, dashboards, and visual summaries that show spending patterns, differences between departments, and potential savings opportunities. Well-organized data helps procurement teams detect issues and opportunities more quickly.

When spending data is presented clearly, the organization can better understand where it is overspending and where purchases can be consolidated. For example, it may reveal that different departments are buying similar products from too many different suppliers. These insights support smarter and more targeted procurement decisions. In other words, organized data turns spending from a hidden problem into a manageable area of improvement.

4. Let Your Data Work for You

The fourth step is to use the collected and analyzed data to take real action. It is not enough to only understand where the company is spending money; those insights must be used to improve procurement decisions. This includes selecting better suppliers, negotiating stronger terms, and directing purchases through more efficient channels. In this way, data becomes a practical tool for improving procurement performance.

In practice, this means using spend insights to consolidate suppliers, reduce off-contract buying, and improve purchasing strategies. When decisions are based on data, procurement becomes more proactive and strategic instead of reactive. The company does not simply buy what it needs, but buys in a more controlled, informed, and cost-effective way. This step is essential for turning analysis into real tail spend management.

5. Monitor What You Implemented

The fifth step is to monitor results after the changes have been introduced. Tail spend management is not a one-time task, but an ongoing process that requires regular measurement and adjustment. Companies should define clear performance indicators such as cost savings, faster procurement cycles, higher use of approved buying channels, and better supplier control. Without monitoring, it is difficult to know whether the actions taken are actually delivering value.

Regular monitoring helps the organization understand what is working well and what still needs improvement. For example, it can track how much spending has been shifted to approved suppliers or how much unmanaged purchasing has been reduced. This type of review supports continuous improvement and keeps the tail spend strategy aligned with business needs. As a result, the company builds a more effective and sustainable procurement process over time.

5 Real-Life Examples of Tail Spend Management

1. Dollar Tree

Dollar Tree used Zip to gain control over a large pool of non-product spend, which is a common area where tail spend problems appear. Before the change, the company had no standard intake process, relied heavily on manual work, and procurement influenced only 13% of more than $5 billion in non-product spend. That meant the team had limited visibility into requests and often became involved too late to shape supplier choices or sourcing strategy.

To improve this, Dollar Tree created a single, structured front door for procurement requests and redesigned workflows with internal stakeholders. This helped employees submit requests in a more compliant way, while procurement gained earlier visibility into demand and could focus on sourcing work with higher impact. As a result, cycle times fell by 70%, procurement influence rose to over 40% of non-product spend, and the company reported $125 million in supported savings through smarter renewals and better sourcing control.

2. Invesco

Invesco is a strong example of how a company can address mid-tail spend and repetitive low-value sourcing by improving process visibility. The company was managing $1.1 billion in spend with only a 19-person team, but the process was reactive, based on email and Excel, and lacked audit trails. Its own case study says mid-tail spend received only light-touch engagement, while high-volume repetitive sourcing kept the team busy with tactical work instead of strategic procurement.

Invesco responded by introducing centralized intake, automated workflows, and a single procurement entry point. This gave the team real-time visibility into requests, improved collaboration, and reduced repetitive administrative work that often surrounds tail spend. In the first year, the company reported a 26% increase in savings, improved procurement ROI from 4X to 7X, and avoided the need to hire 20–30 additional employees.

3. Anaconda

Anaconda faced a classic tail spend challenge: decentralized software and vendor buying with weak controls. The company described its earlier purchasing environment as the “wild west,” with users buying tools directly, limited visibility into contracts and renewal dates, and instances of over-purchasing, such as buying too many licenses. This is the kind of fragmented, unmanaged spend that often grows in fast-moving companies when small purchases happen outside a structured procurement process.

To fix this, Anaconda gave all employees access to a structured request process and built parallel approval workflows across IT, security, legal, and finance. It also used the platform as a central record for vendors, contract terms, renewal dates, and spend data, replacing large spreadsheets and making vendor information easier to control. The result was better visibility, stronger approval discipline, less rogue spend, fewer redundancies in the software stack, and tighter control over vendor sprawl.

4. ADT

ADT’s example shows how companies can manage tail-spend-like purchasing in IT procurement, where many software and service requests are small, urgent, and spread across teams. Before the redesign, requests came through emails, spreadsheets, and phone calls, with no standardized intake and no clear status visibility for requesters. The sourcing team also tracked renewals in spreadsheets, which created a risk of missed notices, unwanted auto-renewals, or even service disruption.

ADT addressed this by routing all IT purchase requests through one intake layer and using rules to send requests to the right teams based on category, spend threshold, and complexity. Administrative tasks were separated from strategic sourcing work, while the renewal dashboard created proactive alerts so the team could renegotiate or terminate contracts on time. The company says this helped it maintain an average cycle time of 22 days, keep renewals under better control, and shift sourcing managers toward higher-value supplier and negotiation work.

5. Canva

Canva’s case is a good example of reducing unmanaged spend friction by replacing informal procurement workflows. Before the change, the company used homegrown workflows based on spreadsheets and Jira tickets, which created manual effort for procurement and IT and gave requesters little visibility into where spend requests stood. Those kinds of fragmented workflows often make it harder to control smaller, distributed purchases consistently across the business.

Canva introduced a dedicated intake and procurement orchestration platform with customizable workflows and integrated it with tools such as NetSuite, Slack, IronClad, and Vendr. That gave stakeholders visibility into request status and freed procurement, finance, IT, and AP teams to spend less time on request chasing and more time on strategic work. The company reports a 70% reduction in cycle times, showing how better process design can improve control over the kinds of purchases that typically sit in the long tail of spend.

5 Challenges of Managing Tail Spend

5 Benefits of Managing Tail Spend

Why is Tail Spend Important?

Tail spend is important because it often hides a large number of low-value, high-volume purchases that receive little procurement attention but still create meaningful cost, inefficiency, and administrative burden. Even though each transaction is small, unmanaged tail spend can reduce spend visibility, weaken procurement control, and consume disproportionate time because it is spread across many suppliers and many separate purchases. This is why companies increasingly treat tail spend as an important area for cost savings, process efficiency, and better procurement governance.

Tail spend is also important because poor control in this area can increase compliance risk, allow maverick spending, and make it harder to monitor supplier quality and contract use. When organizations improve tail spend management, they usually gain stronger visibility, better supplier consolidation, and more consistent purchasing processes across the business. In other words, tail spend matters because it affects not only savings, but also risk management, policy compliance, and overall procurement performance management.

Conclusion

Tail spend management plays an important role in improving procurement performance because it helps organizations gain control over low-value purchases that are often scattered across many suppliers and departments. When companies identify, organize, and monitor tail spend, they can reduce hidden costs, improve compliance, and create more efficient purchasing processes. This makes procurement more proactive, more visible, and better aligned with business goals.

At the same time, effective tail spend management supports long-term value by strengthening supplier control, reducing unnecessary administrative effort, and turning small purchases into measurable improvement opportunities. Real-life examples show that companies can achieve better savings, faster cycle times, and stronger governance when they manage tail spend in a structured way. For that reason, tail spend should not be treated as a minor issue, but as an important part of a smarter and more strategic procurement approach.

I created a free, downloadable spend analysis template. This includes an editable Excel template and a PowerPoint presentation to help you record and analyze your spending data. I even created a video where I’ll explain how you can use this template.