Procurement
What Procurement Specialists Focus On
Introduction
This report focuses on what procurement teams are most often measured against: value creation, with cost savings being one — but not the only — outcome. While procurement is frequently perceived as a function that primarily spends money, its true purpose extends well beyond purchasing within a set budget.A simple definition of procurement can give the impression that approvals, budgets, and requirements are already determined by other departments, leaving procurement to merely source goods or services within predefined constraints. This raises a common question: why dedicate a team to purchasing decisions if they are not the end users of what is being procured?
The answer lies in procurement’s role as a strategic management function. Much like a professional sports coach who may not actively compete at the highest level but deeply understands the game, procurement specialists are trained to manage supplier relationships, optimise spend, mitigate risk, and improve outcomes across the organisation. Their expertise allows them to unlock efficiencies and value that operational teams — focused on delivery — may not have the time or visibility to identify.
Strong procurement teams do not simply buy goods and services; they analyse spend patterns, manage supplier risk, ensure continuity of supply, and balance cost, quality, and governance requirements. This report explores key areas of procurement focus — tail spend, indirect spend, and value creation — to provide a clearer understanding of how procurement contributes to sustainable business performance. For organisations without dedicated procurement specialists, this overview aims to support better-informed spending decisions across the business.
Tail Spend
Tail spend (also referred to as tail-end spend) describes the portion of organisational expenditure that is typically low in individual value, high in transaction volume, and limited in visibility or active management. While each transaction may appear insignificant, collectively these costs can represent a substantial portion of total spend and supplier complexity. Industry research, including guidance from Deloitte, commonly highlights the following characteristics of tail spend:
The 80/20 principle: Approximately 20% of total spend can account for up to 80% of suppliers and transactions. This spend is often fragmented, decentralised, and difficult to control
Off-contract spend: Purchases made outside of preferred supplier agreements or procurement frameworks, often to meet short-term operational needs or project timelines.
High-volume, low-value transactions: Individual purchases made by staff that appear minor but, when aggregated, can exceed budget expectations.
The ‘leaky tap’ effect: Small, recurring expenses that quietly erode budgets over time due to limited scrutiny or ownership.
Tail spend is not necessarily the result of poor decision-making or a lack of budgeting. Even well-managed organisations experience tail spend due to the operational realities of doing business. The challenge lies in improving visibility and governance without creating unnecessary administrative burden.
Managing Tail Spend
There is no single solution applicable to all organisations. However, applying similar controls to tail spend as those used for strategic spend categories can generate meaningful savings and operational improvements. Examples include:
Implementing automated reordering systems for consumables
Rationalising supplier lists
Establishing clear purchasing guidelines
Leveraging data to identify recurring low-value transactions
While this approach may initially feel like micro-management, it often provides greater support to department leaders by reducing administrative effort and ensuring ongoing operational needs are met efficiently.
Indirect Spend
Indirect spend refers to goods and services required to support business operations but which do not directly contribute to the final product or service delivered to customers. This includes categories such as facilities, utilities, IT services, marketing, maintenance, and professional services. These costs are often described as the ‘cost of doing business’. Unlike tail spend, indirect spend is not inherently wasteful. However, it presents significant opportunities for optimisation through strategic sourcing, demand management, and contract standardisation.
Strategic Management of Indirect Spend
Procurement specialists add value to indirect spend management by identifying opportunities to reduce total cost of ownership rather than simply cutting expenditure. A practical example is the increased adoption of flexible work arrangements. While decisions such as remote or hybrid work models are typically driven by executive leadership, procurement plays a key role in enabling these strategies by renegotiating office leases, utilities contracts, IT services, and related supplier agreements.
Similarly, industries such as mining have increasingly explored local workforce engagement as an alternative to FIFO arrangements where operationally viable. While workforce strategy is led by HR and operations, procurement supports these initiatives by managing travel, accommodation, labour hire, and service contracts; helping reduce costs, improve workforce stability, and align with sustainability objectives.
Governance and Visibility
Indirect spend can receive less strategic scrutiny than major capital or direct material expenditure, particularly in large or geographically dispersed organisations. While finance teams typically have visibility over total spend, procurement provides insight into the underlying cost drivers, supplier performance, and opportunities for consolidation.
Maintenance, repairs, and operating expenses (MRO) are common examples. Even in office-based environments, reactive maintenance is unavoidable. Well-managed organisations anticipate these costs and mitigate them through preventative maintenance, supplier agreements, and technology adoption. For example, reducing reliance on physical printing through digital document management can lower repair costs, improve efficiency, and reduce unplanned expenditure.
Conclusion: How Procurement Teams Create Value
Procurement teams do more than manage expenditure — they enable organisations to allocate resources more effectively while balancing cost, risk, quality, and continuity of supply. Achieving this requires visibility across spend categories and strong collaboration with department leaders who provide operational insight into indirect and recurring costs. Value creation often begins with automating recurring purchases and analysing spend data to identify patterns across departments. As visibility improves, further efficiencies can be achieved through aggregated demand, reduced order frequency, and strategic tender agreements — not only for consumables but across a wide range of services.
Effective procurement operates cross-functionally, bridging finance, operations, HR, and leadership teams. While smaller organisations may benefit from clearer visibility across all activities, larger or globally structured businesses face additional complexity due to regional regulations, workforce arrangements, and cost variations. By aligning procurement strategy with business objectives and fostering collaboration across departments, organisations can reduce cost leakage, strengthen governance, and reinvest savings into sustainable growth initiatives.
