Every business experiences long tail spend in facilities management, but it can be effectively managed. Management of long tail spend begins with understanding the top factors impacting it, including limited sourcing, as well as varying agreements between suppliers and service providers and physical location. To help your facility gain control over its expenses, you need to understand a few things about long tail spend in facilities management.
What Are the Causes of Long Tail Spend in Facilities Management?
Long tail spend is traditionally associated with non-contracted services, costs resulting from typical facilities management operations, reports Accenture. Unfortunately, long tail spend in facilities management also derives directly from poor insight and visibility into its exact costs. Inefficient procurement practices, malfunctioning systems, and limited vendor availability can effectively charge your business for extraneous work and supplies because it is simply overlooked.
Why Is It Important to Avoid Long Tail Spend?
Long tail spend in facilities management effectively contributes to over-budgeting problems and the potential for greater use of deferred maintenance practices. For example, a facility experiencing increased long tail spend may unknowingly put problems that need correction on the proverbial backburner to gain better control over costs. Yet, moving the majority of long tail spend into strategically managed Spend can actually improve profitability and help ease stakeholders’ woes.
How Much Money Is Lost Due to Long Tail Spend?
It is difficult to determine the exact cost of unchecked long tail spend. Multi-site portfolio management can lead to minor causes of poor visibility, but these minor costs add up to major expenses. As explained by Accenture, one case study of implementing better long tail spend management and facilities management through procurement lead to savings in excess of $3,000.
Long Tail Spend Is Preventable
Long tail spend might seem impossible to avoid, but that is not true. The head of the tail reflects spending areas that are relatively easy to identify, but the middle and tip of the tail may require the creation of a devoted task force to identify costs of long tail spend. In addition, the lackluster paper trail in the tail spend itself may require additional resources to become part of a strategically-managed spend. As a result, automated systems, including those using analytics to track facilities management costs and performance, can help your company get a handle on long tail spend.
Understanding Long Tail Spend in Facilities Management Is Key to Reducing Total Cost Ownership in Your Company
In addition to reducing total cost ownership, effective control through tail spend management has the added benefits of reducing costs and increasing strategic spend, efficiency, compliance and customer service. If your organization has not previously considered existing long tail spend, you are likely losing money.