Viewpoint: Unleash the wisdom of money managers
By Eric Zoetmulder
This fall, the Herndon, Va.-based National Institute of Governmental Purchasing (NIGP) and Deltek announced surprising results of a survey that revealed insights into the state of procurement organizations in the public sector. The survey targeted the heads of procurement in city, county and state governments, as well as public universities and K-12 district schools, and found that 22 percent of those surveyed (including larger entities) do not use procurement software of any kind.
In today’s economic climate it is not surprising that many public organizations have not made investments in information technology. Still, the survey indicates that many entities are planning to invest soon, and about one-third of the entities surveyed are looking to invest in procurement technology right now. The reasons for that are simple: without automation, procurement remains a purely tactical rather than a strategic function. By making procurement strategic, public organizations are placing procurement in a leading role as they work to solve budget challenges and support public institutions and communities.
The vast majority of procurement professionals in the public sector are spending their time processing purchase orders, executing RFPs (typically manually) and implementing policy changes. Those are important functions, but they are mostly tactical. The goal of more advanced organizations is to have procurement professionals focused on strategic tasks that will save money. By automating the tactical tasks, they free procurement to become a knowledgeable partner, helping the communities they serve by uncovering opportunities to save money.
Once freed from manual tasks, procurement professionals can use their time for spend analytics, specialty projects, planning, training and education, all of which help procurement to function more strategically. The drive toward implementing eProcurement technology makes sense because it enables procurement professionals to quickly identify savings opportunities they may otherwise have missed and improve contract management, contract compliance and supplier management.
Tulsa Community College, the largest two-year college in Oklahoma, serves as a great example. The college, which operates four campuses in the Tulsa area, was facing increasing enrollment and state budget cuts. To maintain the college’s high quality of programs and services, the purchasing department was tasked with delivering hard dollar savings. The department was on the frontlines with an operating budget of more than $74 million and a purchasing system that required 64 linear feet of filing cabinets to hold purchase order records.
Terry Lastinger, assistant director of purchasing, described the college’s procurement system as a “never-ending cycle of waste and inefficiency.” Lastinger’s purchasing team knew they needed to find the right solution to solve a variety of woes and set out to re-vamp the procurement processes. Overall, there was a lack of transparency in the purchasing system that created an environment of distrust as well as a number of tactical issues, such as disparate ERP systems.
As a result of those issues, the college decided to implement an eProcurement system that now processes 100 percent of spend, 35 percent of which is directed to preferred suppliers. The system yielded an average discount of 19 percent in 2010 and enabled the college to save nearly $100,000 on freight costs for catalog purchases. In addition to saving money, the college is saving time by eliminating paper and manual processes and enabling purchasing staff to focus on finding new savings.
Strategic procurement departments in the public sector are helping their communities to weather the economic downturn, and today’s eProcurement technology is providing an opportunity to further the goals of public institutions. The results of the NIGP survey may encourage public sector entities to improve their technology solutions and cause political leaders to understand the benefits of investing in procurement. Lower revenue sources, complicated political conditions, workforce reductions and the increasing focus on local and sustainable purchasing all indicate that the time is now for new technology solutions. The NIGP survey, which will be repeated in the future, provides a benchmark for measuring changes and growth in the adoption of procurement software.
Eric Zoetmulder is director of product marketing for the public sector at Cary, N.C.-based SciQuest, Inc. More information is available at www.sciquest.com.