Taking the Pain Out of Purchasing
Taking the Pain Out of Purchasing
University Officials Grade e-Procurment
E-procurement has come full circle in a few short years. There was, of course, the well-publicized failure of several e-procurement firms during the dot-com bust that left both users and suppliers more than a little cautious. But the shakeout has left a number of strong e-procurement platforms bursting with innovative features and enhancements that are again catching the interest of Web-wary vendors. The focus now is on making the end-user experience far easier and, as one university administrator notes, “far less painful.”
The ASP Model
Still, as e-procurement platforms become more user-friendly, they have, conversely, become far more difficult to administer. The cost of implementation, as well as the time commitment for updating catalog content and maintaining hardware, is beyond the ability of most schools. That’s why many schools are looking at the ASP (Application Service Provider) model when considering an eprocurement implementation.
Cal State Fullerton, for example, launched its own hosted e-procurement site several years ago, notes Greg Meeks, director of Business Development at AcquireX (www.acquirex.com). “They had the hardware and the administrators to run it; they just didn’t realize what a big job it is and how much time it would take to implement a fully hosted system.” Last June, the school chose AcquireX to host the e-procurement system, as well as provide the content and updates. The school’s overarching goal was to reduce purchasing costs from $125 per transaction, to just $10 to $15 each. Now, nearing its first year of implementation, the numbers are looking good, he says. “Cal State Fullerton has been able to reap the benefits of us doing all the work for them.”
The ASP approach also made sense for the University of Pennsylvania, whose e-procurement system serves nearly 2,000 users. “We know our core competencies are in purchasing, supplier management, and customer service. They are not in content management or hosting different applications,” says Ralph Maier, associate director of Purchasing Services at the school. UPenn launched Oracle Financials (www.oracle.com) to handle its procurement back in 1996, and last year introduced that company’s iProcurement online requisition product. “It’s time-consuming, and we knew we couldn’t do it ourselves. We chose an ASP because we realized e-procurement is an effective tool for our customers and suppliers alike.”
Benefits of E-procurement
Besides alleviating the headaches of hosting an e-procurement system, the ASP models allow new features and functionality that weren’t possible before.
Outside the system:
Most e-procurement systems feature a hosted Web catalog that contains a school’s most commonly ordered products and services. UPenn’s Penn Marketplace, for example, features 31 online supplier catalogs and nearly 600,000 products; more than half of the school’s purchases are made through those suppliers. “Al-though the content we have in the Penn Marketplace is fairly robust, one of the downsides is not being able to see information from a supplier site, such as supporting documentation and technical information,” notes Maier. To remedy that, UPenn has chosen SciQuest (www.sciquest.com) to develop a supplier promotion module to enhance its existing e-procurement system. The module, called the Supplier Showcase, will enable the university’s contract suppliers to manage and publish content highlighting new products and sales promotions to users of the campus-wide e-procurement application.
With Supplier Showcase, users can now go outside the system to a contracted vendor, to find exactly what they need. They can, for example, choose a product from Office Depot’s online catalog, which is immediately transferred to the home site requisition form, along with any special offers or discounts tied to the product.
“Users can get all the up-to-date information, white papers, in-depth specifications, and material-safety data sheets for a product,” Maier says.
“One mark of the value of an e-procurement program is its ability to corral purchases to a core group of contracted vendors, saving the school money,” says Maier. “When you consider that we have 25,000 suppliers in our database, the fact that we’ve been able to shift purchasing activity and use supply-chain management initiatives to focus our transaction activity on our 31 core suppliers, is a significant accomplishment.”
“What people need to realize is that purchasing can have a direct impact on the bottom line,” says Tim Gibney, assistant vice president for Procurement Services at the University of Notre Dame.
Tim Gibney, assistant vice president for Procurement Services at the University of Notre Dame, agrees. “Faculty could go wherever they wanted and order something with the school’s Pro Card, or pay for items with a check requisition. We wanted compliance throughout the purchasing system so that Procurement Services could do the sourcing and buying for the benefit of the institution,” says Gibney. The school chose SciQuest (which acquired HigherMarkets last June) to provide a comprehensive eprocurement solution. “Now anyone in the system can log on and search through catalogs to find what they want and send a requisition.”
E-procurement works to the benefit of suppliers as well as customers, because they can market more effectively and efficiently. With nearly 1,000 labs in 38 research buildings, and more than 1,400 delivery locations, UPenn’s vendors face a difficult challenge. “When a supplier is running a promotion, the sales reps typically spend days and weeks running around the campus distributing fliers to get information out to the labs,” says Maier. “Now they can post the information on our marketing Web site. We can very quickly and effectively get the information down to the people who need to know it.”
Many e-procurement platforms now include electronic workflow capabilities to track the status of an order throughout the process. Because of the nature of some items such as hazardous materials, some requisitions have to pass through Fund Accounting and Risk Management for review before the order can be fulfilled. The electronic workflow process dramatically reduces the time involved in such reviews. “We recently processed a requisition from our engineering department that went from requisition to Risk Management to Fund Accounting to Purchasing all in a half hour,” notes Gibney. “That used to take days.”
It’s not just for ordering paper any-more. As higher education becomes more accepting of online procurement, there is a tendency to see what else can be done with it. Now some schools are beginning to look at adding services that are not traditionally associated with e-procurement— including temporary staffing. “We typically spend almost $6 million in temporary staffing a year,” notes Maier. “We estimate that we’ll now be able to run nearly $5 million in temporary staffing through e-procurement.”
The school is also planning to use the system to help with internal relocations. “Like most universities, we are always moving labs and offices from one building to another,” he explains, “so we are working with our movers to catalog the requirements for facilitating a laboratory move.” All aspects of a move, such as finding and hiring supervisors, packers, handlers, and drivers, can be cataloged and accessed through the system, guaranteeing a consistent pricing structure for the entire university. “We are blending all these non-traditional views of eprocurement into one easily accessible application for our user community.”
Power in numbers:
Still another recent trend, says Meeks at AcquireX, is a move toward consortia buying for even greater savings. While the process allows community college systems and universities to collaborate on their purchases through a single solution, it also gives suppliers and vendors the ability to reach out to customers at multiple locations simultaneously. “In the past, schools have been criticized for not pooling their volume and not taking advantage of the savings, even within certain statewide systems. Now with an e-procurement tool, sharing contracts and sharing information between schools is a lot easier. In fact, e-procurement is actually a great tool for schools to work on together, and share the contract.”
The Bottom line
Return on investment is difficult to pin down in e-procurement systems, but “ideally, you will see a lot more benefits,” says Meeks. “Schools save money on the products they buy as well as on the administrative costs. These systems allow purchasing departments to do away with much of the paperwork involved in procurement, and are making the purchasing process far more efficient.”
Because of this, “A purchasing department staff can focus its efforts on providing better service to customers and vendors,” says Maier at UPenn. “E-procurement, in conjunction with improved efficiencies and better buying strategies, does help us realize savings. Our purchasing staff can now devote its energies to managing sup-pliers, negotiating more and better contracts, spending more time with customers in the field, and providing a higher level of service than they have ever been able to provide in the past,” he says.
And, when end users are aware of—and take advantage of—the discounts or free products that are tied into various promotions, the result is savings to the school. “Last year, in the limited-interest promotions programs we ran, we were able to realize about $75,000 in savings simply because we could get information out to end users that they could take advantage of,” says Maier. “And we’ve just scratched the surface.”
“What people need to realize is that purchasing can have a direct impact on the bottom line,” says Gibney at Notre Dame. “The economy is very bad, the state institutions are not getting funded, and there are cutbacks. But there’s a multiplier effect through smart purchasing: Every dollar we save though smart purchasing translates to $10 or $15 that’s not needed in revenue. You really can’t afford not to pursue an e-procurement initiative.”
Editor’s Note: First appeared in University Business, April 2003—used with permission.
e-Lessons Learned: Advancing e-Government Initiatives
The federal government’s mandate to move to a more robust electronic environment for business processes is designed to provide better service to taxpayers, improve efficiency, and save millions of dollars. An estimated $45 million earmarked for these initiatives combined with the looming October deadline for the Government Paperwork Elimination Act make 2003 the year for egovernment implementations. The good news is that some agencies have already embarked on these programs, and there are lessons to be shared that can speed the success for others.
One example is the e-Approval program at the National Institute of Standards and Technology (NIST). Launched in 2000, e-Approval’s mandate was to create a system for NIST employees to access, complete, and submit agency forms online. NIST is charged with strengthening the U.S. economy and improving the quality of life by working with industry to develop and apply technology measurements and standards, making e-Approval a blueprint for other agencies as they go paperless.
As federal agencies expand their e-government offerings, applying the lessons learned at NIST can speed the time to implementation and ensure that objectives are metcost effectively.
One Small Step, One Giant Leap
A phased approach to implementation was the foundation for the success of the project. NIST’s competitive performance-based procurement process included an on-site demonstration of capabilities as part of the evaluation process. Following the contract award to systems integrator MATCOM of Alexandria, VA., a pilot program of a cross-section of NIST staff was conducted to obtain insight into NIST-specific implementation issue. After the successful pilot, the full roll out of the secure, electronic system for reporting, tracking, and storing of more than 250 forms was completed.
The ultimate goal is to use the implemented infrastructure to define and build automated, structured workflows. This approach allows multiple departments (Purchasing, HR, Accounts Payable, Budget) to concurrently automate and standardize their business processes using the core software deployed to all users.
Build or Buy?
While a ‘do-it-yourself’ approach may be tempting when faced with a reduced budget and a tight deadline, the reality is that solutions are available that can save significant time and money by speeding the development cycle of the system. By using commercial off-the-shelf solutions as the foundation for public key infrastructure (PKI) and business process management software, NIST was able to offer to its employees a secure automated forms and routing solution for immediate use. At the same time, NIST implemented components (workflow, PKI, forms) that can be used and customized to meet additional business processes.
Change is a constant, and it is still against human nature to embrace it. Part of any technology rollout must include time and strategies for helping employees learn and adjust to the new system. This is especially true of e-government initiatives, based on the increased risks related to privacy and security.
NIST and MATCOM worked together to provide training courses and manuals for employees, troubleshooting software assistance and an on-site technical team that helps employees navigate the system.
Meeting Digital Needs Now
E-government is a permanent and growing part of the federal landscape, and those agencies which best meet digital needs now will serve as the benchmarks for others to follow for decades. Building the next-generation of e-government initiatives by applying the lessons from those who have gone before is one way to ensure success.
Editor’s Note: Lori Renner is the NIST project coordinator for MATCOM, a systems integrator based in Alexandria, Va. She can be reached at [email protected]