Blog · Procurement and supply chain · Procurement
How a procurement team counts active suppliers per category from the purchase ledger, values the long tail in transaction cost rather than spend, finds the suppliers with one order a year that a contracted supplier could cover, and separates the tail worth consolidating from the specialist suppliers the tail is hiding.
A category has 312 active suppliers. Eleven of them account for 90 percent of spend. The other 301 account for the other 10 percent and for most of the invoices, the supplier records and the payment runs. Somewhere among them are forty specialists nobody can replace and 260 that a contracted supplier already covers. This guide sets out how the ledger tells them apart.
Per category:
Active suppliers = suppliers with a paid invoice in the trailing twelve months Tail = active suppliers below a stated spend and order count Tail cost = tail suppliers × transaction cost per supplier per year
Per tail supplier:
Overlap = share of its items also supplied by a contracted supplier in the category
Supplier identifiers only.
| Group | Spend | Orders | Overlap | Reading | Action |
|---|---|---|---|---|---|
| Core | High | Many | Contracted or should be | Compliance | |
| Tail, covered | Low | Few | High | Consolidate | Route to the contracted supplier |
| Tail, specialist | Low | Few | None | Keep | Nothing |
| Tail, unclear | Low | Few | Partial | Category manager decides | Review |
One category, trailing twelve months. Transaction cost per supplier per year stated at $900.
| Group | Suppliers | Spend | Invoices | Cost of the tail |
|---|---|---|---|---|
| Core | 11 | $8.4m | 1,900 | |
| Tail, covered | 214 | $610,000 | 2,300 | $193,000 |
| Tail, specialist | 38 | $190,000 | 240 | |
| Tail, unclear | 49 | $140,000 | 410 |
Two hundred and fourteen suppliers whose items the core already sells, generating more invoices than the core does, at a stated cost that the consolidation removes. The thirty-eight specialists stay, named. The forty-nine unclear go to the category manager with the overlap shown.
category spend = Σ core + Σ tail groups
And every active supplier is in exactly one group. A supplier in two categories is in each category's count separately and flagged, because that is often a category coding problem.
Tail valued at spend. Small by definition; the argument fails. Value the transactions.
Specialists consolidated. The one supplier of a critical part is on the list because it is small. The overlap check is what keeps it off.
Inactive suppliers counted. The master has twice the active count. Use the ledger.
One transaction cost for all. A supplier paid by card costs less than one on purchase orders. Two rates, stated, if the difference matters.
Mapped once, the ledger, the contracts and the master produce the groups, the overlap and the tail cost per category every quarter, with the specialists named. Covirage builds this from the exports as they are. The procurement page describes the setup, and the contract compliance guide covers the compliance measure that consolidation improves.
A supplier with at least one paid invoice in the trailing twelve months. Suppliers on the master with no activity are a separate list, for deactivation, and are not in the count.
At the transaction cost per supplier per year: a stated figure for maintaining a supplier record, processing its invoices and making its payments, times the number of tail suppliers that could be consolidated. Not at their spend, which is small by definition and does not go away.
Item overlap: the tail supplier's items, by description or code, matched against the contracted supplier's catalogue or its invoiced items. High overlap is a candidate; none is a specialist. The match is shown and confirmed by the category manager.