The Future of Procurement: Why a Single-Vendor Approach Is Gaining Importance in Tail Spend Management
Tail spend management is underestimated in many companies. In practice, however, a high number of suppliers in indirect procurement leads to significant process costs, administrative complexity, and a lack of transparency.
Against this backdrop, one approach is becoming increasingly important: the strategic consolidation of purchasing needs through a central supplier — a single-vendor or aggregator model. Procurement expert and Provendor CEO Stefan Knorsch explains in an expert discussion the structural challenges of traditional multi-supplier models and why new approaches are especially needed in tail spend management.
1. Procurement Designed from Real-World Practice
The idea behind Provendor emerged from the operational realities of procurement organizations. Stefan Knorsch previously worked as a Head of Procurement himself and understands the challenges of complex supplier structures firsthand.
“In many organizations, procurement spends a significant portion of its time on administrative activities related to supplier management, order processing, and invoice verification. These resources are then unavailable for strategic tasks such as price negotiations, supplier development, or risk management.”
Particularly in indirect procurement, a large number of small suppliers creates a substantial administrative burden that is often underestimated.
2. Tail Spend Management: Hidden Process Costs in the Long Tail
A typical pattern can be observed across many procurement organizations: a large proportion of suppliers account for only a very small share of total purchasing volume.
This so-called tail spend phenomenon has been documented in numerous studies:
- Around 70–80% of suppliers generate less than 20% of total purchasing volume
- At the same time, these suppliers account for the majority of administrative process costs
Typical cost drivers include:
- Master Data and Supplier Management
Every supplier must be created, reviewed, managed, and regularly updated.
- Order and Approval Processes
Numerous small purchase orders increase internal coordination and approval efforts.
- Invoice Processing
A high number of individual invoices puts pressure on accounting and controlling departments.
- Lack of Bundling Effects
Small purchasing volumes reduce negotiation leverage with individual suppliers.
As a result, substantial indirect costs arise that often remain invisible in traditional savings analyses.
3. Multi-Supplier Models in Indirect Procurement
The traditional multi-supplier model continues to make sense in many strategic categories. Competition among suppliers can foster innovation and reduce pricing risks.
However, in indirect procurement — particularly for C-parts, MRO materials, or spot-buy requirements — the situation is often different. Here, the focus is less on strategic partnerships and more on operational efficiency.
This is precisely where highly fragmented supplier structures can lead to issues such as:
- High process costs per purchase order
- Limited transparency over purchasing demands
- Increasing supplier management effort
- Uncontrolled maverick spend
As a result, many companies are seeking ways to better structure these unmanaged spend areas.
4. The Single-Vendor Approach as a Structural Model
One possible solution is to consolidate specific product categories or purchasing requirements through a central provider.
In this model, the provider acts as an aggregator or central contractual partner for a large number of individual suppliers. For the company, this significantly reduces operational complexity.
Such a model is commonly referred to as a single-vendor or one-creditor model.
The key effects include:
- Reduction in Supplier Base
Multiple suppliers are consolidated under one central contractual partner.
- Simplified Invoicing
Instead of handling numerous separate invoices, billing is centralized through a single creditor.
- Demand Consolidation
Larger purchasing volumes enable improved commercial conditions.
- Reduced Workload for Procurement Organizations
Operational procurement processes can be managed more efficiently.
5. Typical Areas of Application
In practice, these models are particularly common in areas that generate high administrative costs, such as:
In these areas, the focus is less on strategic sourcing and more on process optimization and efficiency gains.
6. Economic Impact: The Business Case
The financial evaluation of such models is typically based on a combination of pricing and process-cost effects.
One consulting case illustrates the potential impact:
A mid-sized industrial company reduced its active supplier base by approximately 50% as part of a tail spend program.
The results:
- Annual total savings: approximately 425.000 €
- Ongoing model costs: approximately 150.000 € per year
The positive impact was driven not only by improved purchasing prices, but above all by reduced process costs and stronger demand consolidation.
“In many projects, savings are already generated through the professionalization of procurement processes — even before strategic price negotiations begin.”
7. Organizational Impact
Beyond direct cost effects, these models also transform the role of procurement.
Operational purchasing activities can be increasingly standardized or outsourced, allowing procurement teams to focus more strongly on strategic responsibilities such as:
- Supplier development
- Risk management
- Category strategies
- Innovation partnerships
As a result, procurement shifts from operational transaction handling toward value-creating strategic functions.
8. Conclusion: Efficiency as a Key Competitive Factor
Effective tail spend management represents an underestimated competitive advantage for many companies.
The increasing complexity of global supply chains is forcing organizations to continuously reassess their procurement structures.
Particularly in indirect procurement and tail spend management, traditional multi-supplier models often generate high hidden costs.
Structured consolidation approaches such as single-vendor models can provide a valuable complement by simplifying processes, increasing transparency, and enabling procurement teams to focus more strongly on strategic priorities.
For many companies, the greatest leverage lies not primarily in purchasing prices themselves, but in reducing complexity throughout the procurement process.
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