What is tail spend, with examples and types?
Short answer
Tail spend is the many small, often one-off purchases from suppliers that procurement does not manage directly: a small share of the money, but most of the suppliers.
Key takeaways
- Tail spend is the bottom of the spend ranking: many suppliers, small and often one-off purchases, few contracts and little procurement involvement.
- The usual rule of thumb, from the CIPS glossary, is the bottom 20% of spend spread across about 80% of suppliers. It is a pattern to check in your own data, not a measurement.
- Tail spend exists in indirect and direct spend. Direct tail spend is low-value production inputs: small components, spare parts and emergency buys.
- Tail spend is about size and management; maverick spend is about breaking a rule. A purchase can be one, the other or both.
- The cost of the tail is mostly process and risk, not price: each small supplier still needs a record, checks, invoices and payments.
What is tail spend?
Tail spend is the part of an organisation’s spend made up of many low-value purchases from many suppliers, usually without a contract and outside procurement’s direct management. The CIPS glossary describes it as the bottom 20% of spend, which usually accounts for 80% of suppliers: often one-off purchases, not always made under contract.
The name comes from a chart. Rank your suppliers by annual spend, from largest to smallest, and draw a bar for each. A few tall bars on the left take most of the money; then comes a long, thin “tail” of hundreds or thousands of small suppliers. Tail spend is everything in that tail.
There is no universal threshold. Each organisation draws its own line, by supplier value, by cumulative share of spend, or by whether a category has an owner and a contract. How to choose and write down that rule, and the framework that follows, is explained in tail spend management. This page explains what the tail is made of.
What are examples of tail spend?
Tail spend examples are purchases that are small on their own, bought rarely or from suppliers used once, and often paid by invoice from a supplier that had to be created just for them. The table shows common cases and why each one lands in the tail.
| Purchase | Why it is tail spend | Indirect or direct |
|---|---|---|
| A €90 technical book ordered by an engineer from a specialist bookshop | One-off, low value, new supplier created for one invoice | Indirect |
| A locksmith called to a regional office | Local, urgent, no contract, used once or twice a year | Indirect |
| Registration for a trade conference | One-off fee to an organiser paid only once | Indirect |
| Nitrile gloves bought by six sites from six different distributors | Small orders, but together a recurring need with no contract | Indirect |
| A translation of one contract into Spanish | Specialist service bought once | Indirect |
| A replacement sensor for a packaging line, bought from a distributor at list price | Low-value spare part, bought urgently to keep production running | Direct |
| A small batch of fasteners from a new supplier because the usual one ran out | Emergency spot buy of a production input | Direct |
Most single tail purchases are harmless; the cost comes from their number, and from recurring needs, like the gloves, that look small only because they are split across sites.
What types of tail spend are there?
Tail spend can be sorted by what is bought and by why it ended up in the tail. Sorting by why is the more useful of the two, because each cause has a different fix.
- Indirect tail spend
- Small purchases of goods and services that keep the organisation running but do not go into its products: office items, small IT accessories, local repairs, events, books, subscriptions. Most tail spend is indirect.
- Direct tail spend
- Small purchases of inputs that go into the product or the service delivered: low-value components, spare parts for production equipment, and emergency or spot buys when the usual supplier cannot deliver. Keeping production running comes before sourcing discipline, so these buys often skip the normal route.
- One-off purchases
- Needs that genuinely happen once. They do not justify a contract, only a cheap and safe way to buy.
- Fragmented recurring needs
- The same need bought by many people from many suppliers. Grouped together, it is often a category worth a contract.
- Off-contract purchases
- Items covered by an existing contract but bought elsewhere. This part of the tail is also maverick spend.
- Urgent and specialist buys
- Emergency repairs, niche experts, rare parts. Speed matters more than price, so a list of pre-checked suppliers helps more than a tender.
The CIPS glossary defines direct spend as purchases of raw materials, goods and services that go directly into a product or into the services delivered, and indirect spend as goods and services that help the organisation function. “Direct tail spend” has no standard definition of its own; procurement software guides use it for the low-value components, spot buys and emergency materials described above. For the large direct suppliers at the head of the ranking, see direct spend analysis; for spare parts and consumables, see MRO spend analysis.
How is tail spend different from maverick, indirect and unmanaged spend?
Tail spend describes the size and management of purchases; the other terms describe a rule broken, a type of purchase, or a level of management. They overlap, which is why they are often mixed up.
| Term | What it describes | Example | Overlap with tail spend |
|---|---|---|---|
| Tail spend | Many small purchases from many suppliers, little procurement involvement | Hundreds of suppliers paid under €10,000 a year each | — |
| Maverick spend | Buying outside the agreed contracts or process; CIPS: unauthorised spend often with non-approved suppliers | A manager buys a laptop online although an IT catalogue exists | Partial: off-contract tail purchases are both |
| Indirect spend | Goods and services that run the organisation, whatever their size | A large facilities contract is indirect but not tail | Most tail spend is indirect, but not all |
| Unmanaged spend | Spend not covered by a category strategy or a managed contract | OMB’s tier 0 in US federal buying: spend bought in a decentralised way | Most tail spend is unmanaged; some large spend is too |
Use “tail” for the shape of the spend and “maverick” for behaviour: a one-off purchase with no contract to break is tail spend but not maverick spend.
US federal buying gives a public view of the unmanaged part. OMB memorandum M-19-13 (2019) sorted common spending into tiers of spend under management, and reported that at the end of fiscal year 2018, 56% of addressable common spending was unaligned, tier 0, bought in a decentralised way. That is not the same thing as the tail, since large purchases can be unmanaged too, but it shows how much buying can happen outside managed contracts.
How do you tell which of your purchases are tail spend?
You tell by ranking suppliers by annual spend, applying your written threshold, and then sorting the purchases below it by cause. A short list from one month already shows the pattern. The fictional example below sorts ten purchases made by one site.
| Purchase | Amount (€) | Supplier used before? | Type |
|---|---|---|---|
| Safety gloves | 420 | Yes, but other sites use other suppliers | Fragmented recurring need |
| Replacement sensor for line 2 | 380 | No, urgent buy from a distributor | Direct tail, urgent |
| Training course fee | 950 | No | One-off |
| Printer toner | 160 | No, although a catalogue contract exists | Off-contract (also maverick) |
| Local electrician | 640 | Yes, twice a year | Urgent and specialist |
| Safety gloves, second order | 390 | Yes | Fragmented recurring need |
| Conference stand rental | 1,800 | No | One-off |
| Fasteners, spot buy | 520 | No, usual supplier out of stock | Direct tail, urgent |
| Office chairs | 1,200 | No, although a framework agreement exists | Off-contract (also maverick) |
| Cleaning products | 290 | Yes, but other sites use other suppliers | Fragmented recurring need |
In this fictional month, €6,750 went through ten purchases, six of them with suppliers new to the site; only the two one-off purchases (€2,750) clearly needed a new supplier, the urgent buys point to a preferred list, and the rest to a contract or a catalogue.
The total checks: 420 + 380 + 950 + 160 + 640 + 390 + 1,800 + 520 + 1,200 + 290 = €6,750. Repeat the sort on a full year of data and the causes, not the amounts, tell you where to act.
Why does tail spend matter?
Tail spend matters because each small supplier costs nearly as much to handle as a large one. It needs a supplier record, tax and bank checks, a purchase order or an approval, an invoice to match and a payment to make. A thousand suppliers in the tail means a thousand sets of that work for a small share of the money.
- Process cost. The work of accounts payable and supplier data teams is driven by the number of suppliers and invoices, not by their value.
- Price. Without a contract or a comparison, small purchases are made at list price, and the same item is bought at different prices across sites.
- Risk. One-off suppliers are often created in a hurry, with fewer checks, which makes them a common route for fake suppliers and bank detail fraud.
- Rules. Public buyers must add up repeated purchases of the same kind. In the EU, Article 5(3) of Directive 2014/24/EU forbids splitting a procurement to keep it below the thresholds unless objective reasons justify it.
Some tail spend is normal and does not need fixing. A genuine one-off purchase, paid by card within a limit, is cheap and safe. The US federal rules treat micro-purchases this way: FAR 13.201(b) makes the government purchase card the preferred method to buy and pay for them, and FAR 13.203 lets them be awarded without competitive quotes when the price is reasonable, up to a micro-purchase threshold of $15,000 under FAR 2.101.
Where does managing tail spend start?
Managing tail spend starts with three moves: write down your definition of the tail, sort the tail by cause, and give each cause one easy way to buy. Recurring needs move into contracts; one-off needs go to a card or a quick quote; off-contract purchases are redirected to the contract that already exists.
Large organisations now automate part of this. Harvard Business Review described in 2022 how Walmart automated negotiations with tail-end suppliers, because hiring enough buyers to negotiate with each of them would have cost more than it returned. The full method, with the buying channels, the controls, the measures and the software, is in tail spend management. Card rules are covered in purchasing cards, and quick quotes in what is an RFQ.
Questions
What is the 80/20 rule in tail spend?
It is the Pareto pattern applied to suppliers: about 80% of suppliers share about 20% of spend. The CIPS glossary uses it to describe the tail. It is a rule of thumb; the split in your own data may be quite different, so measure it before setting targets.
Is tail spend the same as indirect spend?
No. Indirect spend is a type of purchase, goods and services that run the organisation, and it includes large contracts such as facilities or IT. Most tail spend is indirect, but direct tail spend exists too: small components, spare parts and emergency buys of production inputs.
Is tail spend always a problem?
No. Genuine one-off purchases will always exist and do not justify a contract. The problem is tail spend that hides a recurring need, bypasses an existing contract, or creates suppliers without checks. Those parts are worth moving into a contract, a catalogue or a card.
Who owns tail spend in an organisation?
Usually nobody, which is why it becomes a tail. Procurement normally takes ownership of the rules: the definition, the buying channels and their limits. Requesters keep the buying itself, through those channels, and accounts payable sees the result in invoice and supplier counts.
New guides on the strategic sourcing line
One short email when a guide on this line is added or revised. Nothing else.
Coming soon: sign-up opens with the first email.