Identifying Hidden Costs in Tail Spend

In many companies, procurement focuses on the large strategic categories and suppliers that account for most of the spend. What’s often overlooked is that a substantial share of suppliers and orders sits in the so-called tail spend.

Tail spend includes all those low-value, irregular, and often unplanned purchases that take place outside of framework agreements. Even though they represent only a small percentage of total spend, they create a disproportionately high administrative burden. Every new vendor set up for a one-off need adds extra processes in procurement, accounting, and compliance.

This blog article highlights the challenges of dealing with tail spend, explains why traditional approaches are often inefficient, and shows how companies can sustainably optimize their processes through a centralized procurement approach.

What is tail spend and why is it problematic?

Tail spend refers to the part of procurement that lies outside a company’s core contracts. It involves rare, one-off, or low-value purchases—such as C-parts, consumables, or services—that are not strategically managed. Although the monetary share of these purchases is often small, they trigger complex and costly processes. Every new supplier account requires master-data maintenance, credit checks, contract reviews, and the management of payment terms and invoices.

An analysis at Witzenmann, a global family-owned company with over 4,500 employees, showed a similar distribution: more than 300 single orders per year led to significant manual effort, even though the average order value was only €260. Process costs amounted to around €140 per order—a clear mismatch between effort and benefit.

‍

Challenges in indirect procurement

Indirect procurement is particularly prone to typical tail-spend issues. It is characterized by:

• a high number of suppliers that are only needed sporadically,
• a heterogeneous range of needs that is hard to standardize, and
• a strong reliance on manual processes that are error-prone and time-consuming.

In addition, many organizations experience so-called maverick buying: employees place orders outside the defined procurement processes, leading to a lack of transparency, higher risk, and uncontrolled spending. These factors not only impair efficiency but also data quality, and they complicate adherence to compliance requirements.

The single-vendor model — a path to higher efficiency

An innovative solution to these challenges is the single-vendor (1-vendor) model. Instead of creating a new supplier in the system for each order, a central service provider acts as the consolidator for all one-off needs and suppliers.

The company maintains only this one vendor of record in its systems, while the service provider manages all subsequent processes. Orders, deliveries, and invoicing run through a single interface, conserving internal resources and lowering process costs.

That the model works in practice is demonstrated by its successful implementation at Witzenmann. Through its collaboration with Pedlar, the company reduced process costs for one-off needs by 85% and saved more than €35,000 per year (see case study).

The benefits at a glance

• Reduction in the number of vendors and the associated administrative workload
• Lower process costs through automation and standardization
• Increased transparency in indirect procurement
• Better compliance thanks to clear responsibilities and uniform processes
• Relief for procurement and accounting so they can focus on strategic tasks

Recommendations for companies

Companies that want to handle one-off purchases more efficiently can consider the following steps:

1. Analyze the existing vendor structure to identify tail-spend potential.
2. Define clear criteria for one-off needs and indirect procurement to standardize processes.
3. Select a suitable partner to act as the central vendor of record and manage the entire transaction flow.
4. Run a pilot in one business area to evaluate the benefits and impact.
5. Plan and roll out the single-vendor model with all relevant departments involved.

Conclusion: Getting a grip on tail spend — less effort, more efficiency

Managing tail spend is a powerful lever for improving efficiency and cost transparency in procurement. With a centralized approach like the single-vendor model, companies can drastically reduce administrative effort, cut process costs, and ensure compliance.

This strategic step not only relieves procurement and accounting but also frees up capacity for value-adding activities and contributes to the sustainable optimization of end-to-end procurement processes.

‍