How long-tail spend can unlock social procurement

With some justification, Procurement pats itself on the back for evolving from a back-office, transactional function into a strategic capability.

You’d be hard-pressed to attend a procurement conference where this transformation isn’t mentioned. CPOs celebrate the fact that their teams have risen above low-value tactical purchasing and now focus on the big-ticket projects. “I’m in strategic procurement” is now heard more often than simply “I work in procurement”.

But this evolution took place at the expense of long-tail spend (typically, spend under the tendering threshold and not actively managed by the procurement team). A neglected spend tail is a risk in terms of lost opportunity, transparency, visibility and (importantly) procurement with any kind of purpose.

What does the spend tail have to do with social procurement?

Put simply, procurement teams who focus exclusively on the highest-value, top-of-the-pyramid spend will struggle to support the social goals of their businesses.

I commonly see procurement teams in telcos and banks, for example, who only get involved in sourcing over $350k. Anything below that is considered ‘low value’, yet it makes up 40–60% of total spend. That’s an enormous opportunity.

Most social and Indigenous businesses are SMEs. They’re simply not bidding for the highest-value strategic projects - their sweet spot is lower down. But those opportunities often can’t be seen as they are lost in the spend tail and invisible to the procurement team. Social suppliers, even at the top end of the market, are looking for bite-sized pieces of work.

Empowering the business

Sub-tender sourcing has largely been neglected in many of the organisations I’ve worked with over my career. Generally, there are policies and procedures in place, but it’s near-impossible to see whether they’ve been followed or not. Without the right tools in place, a buyer (Joe Bloggs in operations) will simply email a supplier they’ve used before rather than actively looking for the best supplier for the job or running a competitive process.

When this happens, social and Indigenous enterprises rarely get a look-in. And even if Joe is told that social procurement is important and that he needs to hunt around online to engage social suppliers, he’ll likely struggle to prioritise that. He needs everything in one place.

With VendorPanel, buyers are empowered to run their own sourcing activities. The social procurement aspect occurs when local suppliers, SMEs, Indigenous suppliers and Social Enterprises appear in the search results. This means social suppliers are finally seen by buyers. Ultimately the buyer will choose the best supplier for the job because this is about sustainable business rather than charity, but we have seen that the best vendor for the task will often be a social supplier. You can see this simple idea at work here.

In other words, social procurement is a subset of good procurement, rather than purely a CSR objective. The data that becomes available by shifting sourcing activity from emails onto a procurement software platform can be game-changing. Users can analyse data to see, for example, which suppliers are not winning work; why social impact suppliers are missing the mark; and what can be done to help them build capability. Improved visibility leads to better business outcomes and greater social impact – a win-win.

Embedding a sense of purpose in procurement

For me, the real measure of success is when you get the average buyer sitting in the business engaging with social impact suppliers. They might not know in detail about the issues, the policies, the RAP or the CSR targets, but they have the option of using those suppliers and will often do so.

The alternative can have less impact. Many companies seem to have a single social procurement / supplier diversity specialist – meaning all the responsibility and knowledge sits with one person. While they do awesome work encouraging staff to consider social suppliers it is not embedding a sense of purpose into procurement; “embedded” means everyone does it as part of their day-to-day work.

Of course, once social procurement is embraced by the business, an indigenous sourcing specialist can focus on strategic initiatives and partnerships - rather than spending time running low-value sourcing events that should be happening continually and at scale all over the organisation.

Interested in learning more about how VendorPanel can empower every buyer in your organisation to make social procurement decisions? Get in touch.