St. Petersburg purchasing department doesn’t sweat the small stuff

The Purchasing and Materials Management Department for the city of St. Petersburg, Fla., spent two and a half years making sure that its systems and processes met the rigorous award criteria for the prestigious Pareto Award of Excellence in Public Procurement (which the department received earlier this year). The department’s 90-plus-page application details the exhaustive measures it has taken to transform itself from “a tactical and transaction-oriented department” to a strategic organization “that emphasizes value-added activities, total cost and increased use of technology.”

“The department has worked to eliminate low-value tasks, concentrate on high-value strategies and embrace technology,” the application explains. “The professional purchasing staff has been transformed from clerks and order takers to project managers, team players, team leaders and business consultants to their internal customers.”

The application adds:

• “New skill sets have been encouraged and developed.
• The professional purchasing staff possesses sound business, technical and interpersonal skills that promote strong customer and supplier relationships.
• The staff is technology-savvy and knows how the city operates.”

Of all those points, Director Louis Moore, CPPO, CPPB, is perhaps most proud of the way that the department has employed technology to meet its objectives. In a conversation with Go Pro, Moore talked at length about how the department has used technology to improve visibility, efficiency and accountability, both internally and externally.

“I think that’s a big part of the success of our department,” Moore said. “We have a very computer-literate group that embraces technology.”

Moore also is quick to credit Purchasing Manager Barbara Grilli, CPPB, FCCM, for being a “catalyst” for the department’s implementation and utilization of technology.

Requisitioning system implemented

The city of St. Petersburg has provided a solid technology foundation for the department to build on: In 2004, the city implemented the Oracle E-Business Suite, a fully integrated enterprise resource planning (ERP) system that operates on an IBM UNIX mainframe computer. The ERP system integrates all of the city’s business functions, including procurement, payroll, finance, inventory and human resources.

The Purchasing and Materials Management Department has implemented several modules from the system, including:

• Public Sector Purchasing, which streamlines purchase-order processing and strengthens policy compliance.
• iSupplier, which gives suppliers the ability to directly access information and enter business transactions across the procure-to-pay life cycle, using a secure, Internet-based portal.
• Inventory Management, which increases inventory visibility, reduces inventory levels and controls inventory operations.

Another module, called iProcurement, has enabled the department to create a self-service internal requisitioning system for purchases under $10,000. Thanks to the iProcurement system, authorized city employees can shop for needed items using an electronic catalog that resembles popular consumer Web sites such as Amazon.com. Once a purchase request gets the necessary approvals, the system auto-creates a purchase order within seconds.

Moore explained that the internal requisitioning system not only has improved visibility — Moore can view each and every requisition from his desk — but it also has made the purchasing process exponentially faster.

“In the ’80s, it took us 21 days to process a requisition,” Moore said. “By the ’90s, we were processing requisitions in seven days. Today, we process the average requisition in less than two days. That’s one of the things we’re most proud of.”

A recent study conducted by an independent consultant found that the city has realized an estimated $4.9 million in annual savings by having departments take advantage of the pre-negotiated prices available on the internal requisitioning system. The study also concluded that the procurement modules used by the department are providing the city with “insights into spending patterns, helping it better align purchasing policies with city goals,” according to a press release from the city.

“Already, the city is bundling purchases for certain items and targeting vendors to stimulate economic development in specific neighborhoods,” the release points out.

The vital few

According to Moore, about 70 percent of the transactions made by the city are under $10,000, falling into the category of what he called “the trivial many” (a reference to Vilfredo Pareto and his 80/20 rule). To maximize its value to the city, the purchasing department focuses its efforts on “the vital few.”

By empowering its customer departments to purchase supplies and services up to $10,000 (except those available on blanket purchase agreements and items stocked in the city’s warehouse), and by encouraging its nearly 600 P-card users to use their P-cards for purchases under $3,000, the purchasing department has delegated responsibility for tasks “where purchasing adds little or no value,” according to its award application.

“By us delegating the large number of transactions where we don’t spend as much money, we’re able to really focus on big-ticket items such as construction, professional services and consulting services,” Moore told Go Pro. “ … Anybody can buy a chair. But it takes a certain amount of skill to evaluate a management agreement or select a consultant or buy the right software to monitor a wastewater treatment plant.”

The department’s adherence to the 80/20 rule also has produced successful results in its cycle counting program.

The Purchasing and Materials Management Department manages a warehouse with approximately 3,330 line items and $2 million of inventory, for functions ranging from public safety to building maintenance. To improve the accuracy of its inventory management, the department recently implemented a cycle counting program based on Pareto’s 80/20 principle, with frequencies of counts based on the items’ value. High-value items are counted more often than lower-value items.

“We categorize our inventory based on the items’ value into what we call an ABC analysis,” Moore said. “We count the ‘A’ items, which would be the more expensive, more valuable items, between six and 12 times a year. The ‘B’ items, which are in the middle, we count maybe four times a year. The ‘C’ items, which they call the trivial many, we count twice a year.”

Before implementing the cycle count about a year ago, the department averaged about 66 percent accuracy in its inventory counts, according to Moore. Now, the accuracy level is above 96 percent.

Face time

Because it delegates thousands of smaller transactions to its customer departments, the Purchasing and Materials Management Department has been able to focus not only on big-ticket transactions but also on other important issues, such as supplier and customer relations.

Internally, the purchasing staff has received high marks for its performance in several areas, including staff responsiveness, expertise, purchase-order turnaround time, professionalism, training, P-cards and IT applications. In a recent online survey of city employees, 66 percent of respondents indicated that they were satisfied or very satisfied with the purchasing department in these areas.

The purchasing department attributes its success to a number of initiatives, including:

• Feedback mechanisms — Purchasing periodically conducts surveys to assess customer satisfaction, particularly with new or existing contracts. Purchasing also obtains feedback through face-to-face meetings with internal customers.

• Training — Over the past four years, the purchasing department has conducted more than 40 formal training sessions on purchasing policies and processes, including how to use the iProcurement self-service requisitioning system. New P-card users are required to attend training classes on how to use and protect their cards.

• Face time — As part of a continuous visitation program, purchasing management meets with internal customers to discuss upcoming projects or customer needs and to receive feedback about the quality of purchasing services. Meanwhile, buyers — known as “procurement analysts” — serve as team leaders on interdepartmental evaluation committees that work together to make major purchases. In addition, the purchasing staff is trained to return phone calls and e-mails the same day and to schedule meetings at their customers’ locations.

Moore asserted that the department’s efforts to strengthen relationships with its internal customers have helped the department transform its image within the city.

“I believe there’s a lot of respect for the procurement analysts in our city, because they do go out there and have a lot of face time with the departments and really find out what’s going on in the departments,” Moore said.

Thanks to the department’s efforts to make the purchasing process as open, transparent and collaborative as possible — for example, purchasing staff members conduct debriefings with vendors to explain why the city didn’t select their bids — suppliers have praised the department’s service. In a March online survey of key suppliers, 86 percent of respondents reported that their experience in doing business with the purchasing department was good or excellent.

Not surprisingly, the purchasing department has relied on technology to help bolster supplier relations.

The department has simplified its supplier registration process by allowing prospective suppliers to register online via the department’s Web site (registration is required before a supplier can do business with the city). When prospective suppliers submit their registration application, they receive an e-mail notification of registration, with a user ID, a password and a link to the city’s iSupplier portal.

The department publicizes current solicitation opportunities on its Web site, and potential bidders are notified by e-mail and directed to the site, which lists currents bids and proposals as well as bid results. The city plans to implement Oracle Sourcing, which enables online bidding, by April 2009.

With the department’s focus changing to a more strategic orientation, and with technology playing such a big role in its processes, Moore said that new hires are expected to be technology-savvy as well as “the kind of people who can be team players, group leaders and business consultants for their customers.”

Moore concluded that the Purchasing and Materials Management Department has come a long way since he started working for the city 23 years ago.

“When I came to the city, buyers were considered clerks and paper pushers; you sent us a requisition, we got three bids and it went to the low bidder,” Moore said. “We have turned that corner. That tactical, transaction-oriented department is no longer here in St. Petersburg.”

Meet the Pareto Award winner

Purchasing and Materials Management Department, St. Petersburg, Fla.

Total employees: 19 (13 in purchasing, six in materials management)

Operating budget: $1.6 million

Purchase orders: 45,000 per year

P-card users: 550

St. Petersburg Population: 248,232

Total employees: 3,741

Annual budget: $589 million

Annual spend: $250 million