So what is the definition of tail spend? Well, tail spend is used when organisations analyse expenditure, such as their business travel spend, within their supply and procurement departments.
Based upon the Pareto Principle – commonly referred to as the 80/20 rule. The theory states that for numerous events approximately 80% of the effects come from 20% of the causes, for example 80% of your suppliers will account for 20% of your total spend.
The 20% of total spend is what is known as the tail spend, which allows companies to focus on how to optimise their supply and procurement departments to achieve process and cost benefits.
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