The impact of tail spend for procurement in travel and hospitality

With the distributed nature of hospitality locations and franchises come various procurement challenges, such as differing requirements, delivery complexities, and communication hurdles.

These challenges can lead to a hospitality organization’s distributed workforce taking matters into their own hands to procure supplies when they need them, with their own means and expensing against their companies.

When left unchecked, this tail spend, defined as 20% of an organization’s total procurement spend with 80% of its vendors, can undermine operational efficiency and inflate costs.

An inefficient experience for all

Tail spend can lead to a disjointed purchasing process for hospitality employees and buyers in different locations, properties, or franchises. While individual employees search for and purchase necessary supplies on their own, procurement teams have to process hundreds or even thousands of monthly expense reports. This can lead to a time-consuming and inefficient experience for both administrators and buyers.

With each location making its own purchasing decisions, this lack of cohesion can result in increased costs, as the organization is unable to take advantage of bulk buying discounts or strategic sourcing opportunities.

By encouraging employees to purchase from a single, one-stop-shop, such as Amazon Business, hospitality organizations can streamline the procurement process for administrators and buyers. They can also consolidate orders and suppliers to get bulk buying discounts.

Increased risk

Tail spend can expose hospitality organizations to various risks, including compliance issues, inconsistent quality of products, and lower service quality. Buyers may not adhere to company policies and purchase from suppliers with varying standards, directly impacting the hospitality experience provided to guests and customers.

Using a preferred partner can mitigate some of these risks by standardizing procurement practices across distributed locations, maintaining compliance with purchasing policies, and ensuring consistent product quality.

With Amazon Business, hospitality procurement administrators can set buying policies highlighting preferred products and suppliers. This ensures that buyers, regardless of location, procure supplies with consistent quality, enabling them to meet customer expectations of their hospitality brand.

Lack of visibility and control

Tail spend often escapes procurement’s visibility, especially for travel and hospitality organizations across distributed locations. This lack of data on spending patterns hampers budgeting as well as demand forecasting and inventory management – critical considerations in the travel and hospitality industry.

By adopting Amazon Business as their preferred procurement partner, hospitality organizations can regain control and visibility over tail spend. They can use tools like Amazon Business Analytics to gain purchasing insights, improve operational efficiencies, optimize inventory, and make smarter business buying decisions.

Embark on the journey to effective tail spend management

The impact of tail spend can be profound, especially in an industry as distributed as travel and hospitality. By taking a strategic approach to tail spend management, organizations can not only overcome these challenges, but also optimize their broader procurement strategies.

With smart business buying, travel and hospitality organizations can achieve the operational efficiencies and cost savings needed to thrive in an increasingly competitive and demanding landscape.