How companies can consolidate uncontrolled small-scale spending with a single creditor, simplify processes, and unlock hidden savings potential in tail spend.
Tail Spend is one of the largest untapped potentials in procurement for many companies. It refers to numerous smaller and often decentralized expenditures that appear insignificant individually, but cause substantial costs in total. The problem rarely lies in the actual value of the goods, but in the many manual processes that arise around these orders.
A single purchase of 50 or 100 euros can incur several hundred euros in process costs due to coordination, approvals, supplier onboarding, invoice verification, and payment processing. This is exactly where the challenge lies: companies want to provide departments with flexibility while simultaneously creating transparency and reducing administrative overhead.
An approach that is becoming increasingly established for this is managing tail spend via a central creditor. In this model, many different small orders are bundled through a single supplier, who then organizes the procurement in the background.
Tail spend refers to the portion of indirect spending that consists of many individual orders with a comparatively low value. Typical examples include office supplies, spare parts, minor operating equipment, consumables, individual departmental requirements, or rarely needed services.
While strategically important product groups are usually managed professionally, tail spend often remains decentralized. Different departments order from various suppliers, use their own processes, or rely on spontaneous sources of supply.
This leads to several challenges. Companies lose track of which products are actually needed, how many suppliers are being used, and where potential savings exist. At the same time, internal effort increases because many individual orders and invoices must be processed.
A frequently underestimated factor here is process costs. An order with a low value can incur costs many times its actual purchase price due to internal handling, supplier management, and invoice verification.
Many companies try to structure tail spend using digital catalogs or internal ordering solutions. These approaches work well primarily when there are clearly defined products and recurring requirements.
However, tail spend is often much more complex. The challenge lies less in mapping a specific category and more in catering to the multitude of different requirements and brand preferences. A department might need a specific spare part, a particular software license, a custom tool, or a product from a preferred manufacturer. Standardized catalogs can often only partially cover this variety.
As a result, many orders remain outside of structured processes. Employees continue to purchase directly, use existing suppliers, or bypass solutions if they do not lead to the desired result quickly enough. A successful approach must therefore not only make products available but also simplify the entire procurement process.
How catalog and platform solutions and the single creditor model complement each other is shown in the article single creditor model vs. traditional catalog and procurement solutions.
In the single creditor model, a single central supplier is set up as the only creditor in the ERP system. Departments continue to order the products and services they need, but the entire process is handled through a unified workflow.
The process is simple. The central creditor is set up in the ERP system as the point of contact for tail spend. Employees submit their requests as usual. The service provider then handles procurement from suitable suppliers. Delivery is made directly by the respective vendor, while ordering, payment, and invoicing are managed through the central creditor. The company receives one consolidated invoice instead of many individual supplier invoices.
The advantage is that companies reduce their supplier diversity and process complexity without limiting flexibility for individual departments.
Instead of managing numerous individual orders, supplier contacts, and invoices, you gain a streamlined procurement channel with greater transparency and less administrative overhead.
One provider that consistently implements this model is Pedlar. Companies set up Pedlar once as a creditor in their ERP and process all their tail spend through them, regardless of which supplier the products or services come from.
A central creditor creates value, especially where traditional procurement processes reach their limits.
Companies benefit from:
It is not about centrally controlling every order. The key is to simplify the process in the background while simultaneously creating transparency.
Not every provider is suitable for managing tail spend via a single creditor model. The decisive factor is how well the service provider can be integrated into existing processes and how much operational effort they actually reduce.
Important selection criteria include:
A central creditor can be particularly attractive if several of these points apply.
Tail spend consists of many individual, mostly indirect expenses with a low unit value, which together form a significant cost block. The main challenge lies in the sheer volume of transactions and the associated process costs.
No. A single-creditor model does not replace procurement; it unburdens it. Procurement can focus more on strategically important issues, while recurring small-scale requirements are handled more efficiently.
Not necessarily. The goal is not to replace every existing relationship, but to handle tail spend in a structured way and reduce administrative overhead.
A central creditor reduces the number of supplier processes, invoices, and administrative steps. This lowers process costs and gives companies a better overview of their spending.
Tail spend is not problematic because individual orders are small. The challenge arises from the multitude of uncoordinated transactions and the high administrative effort behind them.
A single-creditor model creates a link between flexibility and control. Departments retain access to the products they need, while companies gain transparency and simplify processes. This turns a frequently underestimated cost block into an area that can be actively managed.
Learn how the single-creditor model manages tail spend in a structured way: Find out more →
