‘Take care of the pennies and the pounds will take care of themselves.’
A fintech startup is putting this old English proverb into practice by using AI to help companies cut their tail spend – the relatively small payments accounting for 20% of a company’s spend but involving 80 per cent of suppliers.
Fairmarkit’s tail spend management platform uses machine learning to increase procurement control, yielding greater efficiencies and savings of 6-12%.
Why is tail spend a problem?
Tail spend tends to go untracked and analyzed by the majority of companies because the purchases are often too small to go through procurement and are not frequent enough to be included in catalogued systems. But of course, all these transactions add up. As well as missing out on cost savings, companies that do not have a handle on their tail spend can also incur operational risks by not noticing unknown vendors and risky transactions. This area is the easiest to hide maverick purchasing, wasteful buying and even fraud.
Fairmarkit was founded in 2017 and uses machine learning technology to automate the process of analyzing tail spend. It is currently the only tool focused exclusively on this area of the payment process.
How AI is solving the problem
The opaque nature of tail spend makes analyzing it a daunting task for businesses. While technology exists to tackle the momentous task, it is not perfect, and problems can go undetected.
Fairmarkit streamlines and optimizes sourcing and payment processes for goods and services by identifying and recommending suppliers from a company’s pre-approved vendors to participate in sourcing events, using its machine learning technology. While it first suggests known vendors, it later begins inviting vetted outside vendors to bid for business to drive extra value, and provides data to show companies top performing and most trustworthy vendors (as well as others that should be excluded from future opportunities). Fairmarkit also manages payments to tail spend suppliers and service providers to save the accounts department’s time.
“By automating tail spend sourcing and vendor management tasks with Fairmarkit, a team can focus on critical strategic activities instead of manual tasks, ultimately increasing spend under management,” says Fairmarkit’s COO and Founder, Tarek Alaruri.
The technology is currently being used in a wide range of sectors, including public transportation and telecoms. The company says its customers experience savings of 32% on average and a 60% reduction in the time it takes to source a purchase. Each of its customers has seen a return on its investment in just one month of use, which the company determined from the savings in spend that goes through Fairmarkit’s system.
For example, the Massachusetts Bay Transportation Authority, (MBTA) which operates in the company’s home city of Boston, saved more than $100,000 every month, because the system allowed it to collect more bids than before.
If financial and time savings aren’t enough, Fairmarkit says one ‘unexpected’ benefit of its tool is creating positive press for MBTA, because the public sees that the company and local government is doing its best to save taxpayer money, as well as supporting local startups.
Fairmarkit and Oracle
Fairmarkit uses Oracle’s sandboxes to test and build out integrations, but Aluri says the biggest benefit to being part of the Oracle for Startups program is networking.
“One big perk has been that the Oracle team has introduced us to many Fortune 500 companies, including inviting us to exclusive events to meet prospective customers,” he explains.
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