“Effective tail spend management is an ongoing discipline,” says Arnaud Malardé, Director at Ivalua

With procurement teams under growing pressure from tariffs, geopolitical instability in the Middle East, and ongoing cost inflation, many organisations are tightening budgets wherever they can. Yet one of the biggest opportunities to improve resilience and unlock savings continues to fly under the radar: tail spend. Arnaud Malardé, Director at Ivalua, explains why.

OVERCOMING CHALLENGES

Businesses have faced unprecedented challenges over the past year. The war in the Middle East and rising costs driven by US tariffs have intensified pressure on global markets. These events increased procurement and transportation costs, fuelled inflationary pressures, and thrust geopolitics back to the forefront of CPO risk priorities.

Against this backdrop, organisations are being forced to scrutinise spending more closely as funding tightens. In response, many look to reduce costs by cutting budgets for recruitment, travel, and discretionary operational spending.

However, one category of spend is frequently overlooked: tail spend – the low-value, high-volume purchases that sit outside strategically managed procurement processes. While often fragmented and difficult to control, tail spend can account for up to 20% of an organisation’s total outgoings.

For organisations under financial strain, effective tail spend management is a significant opportunity to reduce waste, improve procurement efficiency, and strengthen financial resilience.

UNDERSTANDING TAIL SPEND

In procurement, tail spend refers to the large number of low-value purchases that collectively account for a relatively small proportion of total spend, but a significant share of suppliers and transactions.

These purchases are often considered low-risk and low-priority, meaning they receive less attention and oversight than higher-value procurement activities.

A subset of tail spend includes maverick spend, which refers to purchases made outside of approved procurement processes or negotiated supplier agreements.

Maverick spending usually arises unintentionally because of employees bypassing approved channels that are too slow, too complex, or fail to offer the right buying options when urgency is a factor.

Unmanaged tail spend can lead to a lack of visibility into expenses, missed opportunities for cost savings, and fragmented supplier bases. McKinsey & Company argue 5-15% savings are achievable with better management of tail spend. Across different industries, tail spend can look different.

For example, in the manufacturing industry, tail spend is often embedded in direct materials such as low-value components, spare parts, and emergency buys, where production continuity takes precedence over sourcing discipline.

Whereas in retail, tail spend can include anything from ad-hoc maintenance purchases for individual stores and display materials, to emergency buys from local suppliers when stock runs out.

WHY ORGANISATIONS STILL STRUGGLE TO CONTROL THE TAIL

A common misconception is that ‘tail spend’ itself is the problem. Every organisation will naturally have a long tail of low-value, high-volume purchases. The challenge is the extent to which this spend remains unmanaged, uncontrolled or routed outside of formal procurement processes.

Many organisations struggle to control tail spend because of operational inefficiency. When internal teams need to quickly book venues, organise events, or pay suppliers at pace, traditional procurement and account payable processes often cannot respond quickly enough. As a result, employees prioritise business continuity and convenience over strict adherence to procurement protocols.

In addition, process complexity and inconsistent or poor user experience also exacerbate enlarged tail spend. Procurement journeys often vary significantly across categories, systems, and business units, creating confusion and friction for the end users. When approved routes are difficult to navigate or remember, or when the options available to the buyer feel inadequate, the path of least resistance becomes off-contract purchasing.

A lack of visibility is also to blame. Fragmented data across suppliers, platforms, and departments makes it difficult for organisations to get a clear view of tail spend. It also limits their ability to identify recurring patterns or consolidate fragmented purchasing volumes into more strategic and manageable categories.

As a result, organisations often miss opportunities to obtain better prices, apply favourable contractual terms, and drive greater efficiency through more coordinated procurement practices.

SHIFTING TO SMARTER TAIL SPEND CONTROL WITH AI AND AUTOMATION

As organisations face increasing financial pressure, improving spend management and bringing tail spend under control must become a business priority. Research shows that 91% of procurement and supply chain professionals see maverick spend as a major challenge and are actively looking to address it.

The first step is gaining greater visibility. Organisations need a clear understanding of where tail spend exists, distinguishing how much is driven by maverick buying outside approved channels versus how much sits in addressable categories yet to be managed by procurement.

By consolidating and classifying spend data, businesses can identify patterns of unmanaged and maverick spend that would otherwise remain hidden. This is where AI and automation can transform spend management. By automating spend classifications, supplier rationalisation, purchase orders, and invoice processes, organisations can reduce manual effort while improving compliance and control.

Another key priority is mitigating maverick behaviour. AI-powered tools also help simplify the processes for employees by allowing them to submit requests in natural language. From this, AI can automatically route requests through the correct procurement workflows and approval paths.

Users don’t need to know the process; they just need to express what they want. This removes the burden on employees to navigate complex procurement processes and helps drive greater adoption of approved purchasing channels. Procurement teams can then move beyond reactive spend control and take a more proactive approach to identify saving opportunities and reduce risk.

AI and automation can help gain better control over spend by providing greater visibility into purchasing activity across suppliers, categories, and business units. This can help organisations to identify patterns in spending data and flag non-compliant purchases.

At the same time, by consolidating suppliers across tail spend categories, AI can help organisations to negotiate better discounts and strengthen supplier relationships. By reducing supplier fragmentation and building more strategic partnerships, organisations can unlock additional cost savings while reducing the maintenance of supplier records.

TAKING BACK CONTROL OF TAIL SPEND

Tail spend may sit at the periphery of organisational expenditure, but in today’s economic climate it can no longer sit at the margins of procurement strategy. As cost pressures intensify, improving visibility and control over low-value, high-volume spend is becoming a critical lever for financial resilience and operational efficiency.

Effective tail spend management is not a one-off initiative, but an ongoing discipline that combines governance, technology, data visibility, and procurement strategy.

Organisations that modernise their approach to tail spend with AI and automation will be better positioned to protect margins, improve efficiency, and navigate continued economic uncertainty.