By Sarah Scudder
Managing tail spend has been a major topic of discussion among sourcing professionals for at least the past two decades. In most companies, external spending has a Pareto-like distribution – the largest 20% of suppliers (by dollar volume) typically account for about 80% of the total external spend. Tail spend is generally defined as the 20% (or so) of the total external spend that is attributable to the smallest 80% of suppliers.
The Tail Spend Conundrum
Solving the Print Tail Spend Problem
Direct Cost Savings
The use of a print e-sourcing solution will reduce the direct costs of printed materials and creative/marketing services by 14% to 22% in most companies. Print e-sourcing solutions drive direct cost savings primarily by making it easy for companies to use competitive bidding on a widespread basis. Competitive bidding is particularly valuable when purchasing printed materials because excess capacity in the printing industry motivates suppliers to offer attractive pricing when competition exists. When companies initially implement a print e-sourcing solution and expand their use of competitive bidding, the direct cost savings can be considerably higher than 14% to 22%. In our work with clients, we often see pro forma cost savings of 30% to 50% based on an analysis of previous purchases that were made without competitive bidding.