US Telecom Industry Overview
With the advent of new technologies, the variety and quality of services from companies in the US telecom industry are increasing. However, the increasing financial overhead due to complex operational support services, operational and technical innovations, and decreasing profit margins are compelling companies to reduce costs and analyze the efficiency of their tail spend management processes. Here’s an example of one of our clients that leveraged our services to segregate tail spend and achieve significant savings.
Business Challenges Faced
With a keen eye to define the tail spend, the client-one of the leading telecom companies in the US with over 50,000+ suppliers collaborated with SpendEdge to leverage tail spend management services to reduce their transaction costs. The low value of spend under management and poor spend visibility was not only increasing spend and supply exposure for the client but also increasing business risks. Non-standard processes, low process compliance, and high off-contract spend due to poor archival of existing contracts was making it difficult for the company to effectively manage their spend. Moreover, poor data quality and lack of vendor hierarchy was further adding on to the woes of the client.
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Our Research Approach
To address the requirements of the telecom company, SpendEdge deployed a team of spend management experts to evaluate opportunities. They carried out repeated cleansing and classification of transaction data to improve spend visibility. Refreshed data helped the experts to get accurate data for further analysis and helped the client to identify opportunities areas such as spend fragmentation, spot buying, and off contract. This paved the way for the client to implement category commodity-specific sourcing levers involving contracts, rapid RFx, spend aggregation, vendor rationalization, and consortium buying for over 30 projects. The procurement strategies developed increased contract coverage on high-end suppliers (spend of the US $1 million) and move low value spend to contracted suppliers. This increased the compliance and efficiency of the procurement process and reduced procurement costs by 15%.
Moreover, the tail spend management methodologies enabled the client to consolidate the number of suppliers to negotiate better prices, simplify supplier management, and recognize savings of $27 million in their tail-spend.
The improved tail spend management process helped the client to gain additional volume discounts possible from contracted suppliers while moving non-contracted items to contract. This reduced spend leakages and helped the client to achieve savings of $27 million.
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Benefits of Tail Spend Management
- Reduces maverick spend for companies and results in positive ROI.
- Increases the percentage of contracted spend and reduces the possibility of frauds.
- Enhances efficiency and minimizes the cost of procurement functions.
- Standardizes processes across business units and improves supplier relationship management score.