Re-imagine the long tail

In this article we cover:
  1. How do you solve a problem like the long tail?
  2. Segmenting the long tail
  3. Building better processes
  4. Creating opportunities for procurement teams
  5. The icing on the long tail cake

How Do You Solve a Problem Like the Long Tail?

There was a time when the accepted strategies for managing your long tail of suppliers were simply to reduce it, outsource it or, most commonly, just ignore it and hope it went away. All of these approaches had some justification, but ultimately, there was no changing the fact that organisations need to buy from smaller suppliers. Not taking much notice of the tail was exposing companies to a whole host of issues.

Today, thanks to a combination of technology, supply chain upheaval and shifted priorities, CPOs are in a position to develop a new approach to the long tail that supports their strategic initiatives, rather than one that gets in the way of them.

Segmenting the Long Tail

So when we talk about the long tail, what do we actually mean? Traditionally, companies have a cut-off point where anything below a certain value, or purchased below a certain volume is considered “long tail.” But in practice, it is always more complicated. A one-off purchase of £15,000 might leave a supplier in the long tail, where 30 transactions of £500 might leave them outside the long tail.

At Paid, we think there’s an additional factor that’s just as important as spend and volume when it comes to defining and segmenting tail spend… RISK!

We’ve demonstrated this below, by performing an additional segmentation of the bottom left hand quadrant of a standard Kraljic supplier segmentation exercise (where all of the long tail sits). Doing this unearths long tail suppliers whose spend profile might still be low, but whose risk profile might be high. It can also be used to identify suppliers whose spend is rising and where opportunities to make savings exist.

Long Tail risk/value matrix

Building Better Processes

Most procurement set-ups are optimised for strategic suppliers, with tail spend largely forced to conform to those norms, rather than having a proportionate process for lower spend and lower risk suppliers.

A short evaluation of these processes, shows how easily they could be improved to make procurement teams’ lives easier when it comes to the long tail. Streamlining the onboarding process, matching payment process to spend and standardising contracts are all small adjustments which can lead to more efficient and cost-effective processes.

Creating Opportunities for Procurement Teams

In re-imagining the long tail, we should also look at the different roles and responsibilities of procurement teams. Could category managers become responsible for all processes within their category? By automating the administrative process, can we free up the time of those doing the more repetitive tasks to contribute elsewhere? Is there an opportunity to claw back the time spent on the long tail to save more with strategic suppliers?

Changing approaches to processes, people and systems mean you can re-imagine how the long tail can work for you. Where once there was only pain and hassle, opportunities can now be identified.

The Icing on the Long Tail Cake

Companies such as BT and ISS, who’ve already changed their approach to the long tail, are now reaping the benefits. Implementing processes that can deal with higher volumes enables increased competition on spend, while digitisation ensures higher quality data for spend and supplier insights. But the biggest impact is in time regained. The automation of administrative tasks frees up resources to focus on the more strategic objectives such as contract negotiation and benchmark analysis.

Sketch of person looking at data

Re-imagining the long tail in this way changes it from being a costly and administrative burden into an opportunity to drive better services for the business and improve compliance while simultaneously reducing costs.

At Paid, we’re on a mission to make it easier for businesses of all sizes to work together, changing the way procurement teams see the long tail. Use Paid to onboard small suppliers in as little as 6 minutes, ensure compliance with mandatory supplier surveys, automate invoicing and payments, and see inside your long tail like never before, thanks to our detailed analytics function.

Our platform is completely configurable and allows procurement teams to better manage their long tail by automating processes which frees up the procurement team’s time to focus on the things that matter most.

Learn more about how Paid can work for you today