Transcript Avoid Holding Patterns: Hold Resolution Utilizing Imaging

Strategic Purchasing
at Penn
Impacting the Institution's Bottom Line
October 21, 2005
Presented by: Ralph Maier
Director of Purchasing Services
Presentation Agenda
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Procurement Overview
Strategic Purchasing at Penn
• Business Objective
• Performance Metrics
• Return-on-Investment
• Core Business Initiatives
• Customer Relationship Management
• Compliance
• Sourcing
• The Buying Process
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Key Accomplishments
Promoting the Organization
Critical Success Factors
Contact Information
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Procurement Overview
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Decentralized purchasing environment
• Point-of-demand requisitioning
• Delegated purchase order approval for transactions <$5,000
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Campus–wide electronic purchase-to-payment
system
• Oracle Financials (Purchasing, iProcurement, Payables, &
General Ledger)
• Penn Marketplace hosted by SciQuest Incorporated
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FY 2005 Statistics
• Annual operating budget: $4.25B
• Total purchasing disbursements: $1.1B
• Total dollars through Purchasing Services: $775M
• Total dollars delegated purchasing organizations: $325M3
Business Objective
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Provide value, opportunity and financial
return-on-investment (ROI) to key stakeholders
• Customers
• Provide an efficient ordering process, exceptional
customer service and support, best-in-class pricing, and
a strategic supplier base that meets the product and
service requirements of the institution
• Suppliers
• Establish mutually beneficial business relationships that
meet customer product and service requirements and
provide an opportunity for increased market share
• Senior Management
• Leverage the institution's buying power to deliver
documented financial ROI through administrative
efficiencies, increased compliance, risk management,4
and product and service cost savings
Performance Metrics
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Maintain 3 year Strategic Business Plan in response
to changing senior management expectations,
market conditions, and new business opportunities
Establish annual business goals and objectives in
response to the Strategic Plan
• Goals and objectives validated by senior management and
communicated to the campus
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Establish individual staff member goals and
objectives in response to department objectives
Develop performance metrics to measure staff
performance against plan during the fiscal year
Promote quarterly performance updates
Utilize Balanced Scorecard performance
management software to enable senior management
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to view performance against plan
Return-on-Investment
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Business goal is to achieve an annual financial ROI
ratio of at least 5:1
• Based on annual operating budget of $1M
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Internal “stretch goals” are established to exceed
expectations
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Formal cost savings criteria is established to
standardize reported savings
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Annual cost savings goal is incorporated into each
Sourcing Manager’s individual goals and objectives
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All documented cost savings are tracked and
reported on a monthly basis
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Core Business Initiatives
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Customer
• Engage in customer relationship management activities to
validate customer expectations and satisfaction
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Compliance
• Increase customer compliance with policies, procedures,
authorized buying methods, and strategic contract suppliers
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Technology
• Enhance existing and implement new cutting edge
purchasing technologies to increase administrative
efficiencies, reduce cycle time and cost of goods
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Financial
• Utilize strategic sourcing initiatives to rationalize supplier
base and leverage buying power to produce significant ROI
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Customer Relationship Management
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Engage customer base to identify business
requirements, expectations, challenges, and
satisfaction levels
• Satisfaction surveys
• Focus groups (Penn Purchasing and supplier hosted)
• Commodity teams
• Advisory groups
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Solicit input on new purchasing programs, technology
initiatives, and potential supplier relationships
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Communicate purchasing project objectives,
timelines, updates, and potential deliverables to the
campus community
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Provide opportunity for customer feedback
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Compliance
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Promote compliance with financial polices, internal
procedures, use of approved buying methods, and
utilization of preferred contract suppliers
• Respond to “What’s in it for me?”
• Better service and support
• Reduced order cycle time time and effort
• Higher quality suppliers
• Access to new products and innovative technologies
• Reduced risk
• Lower costs for products and services
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Identify non-compliance, determine reasons, and take
corrective action
• Internal
• Schools & Centers
• Suppliers
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Sourcing
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Formal contracting initiatives by commodity and supplier
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School and Center contracting for specific commodities
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Collaborative buying to compliment Penn contracting
Strategic business relationships with highest volume
suppliers
Online competitive bidding (reverse auction) to maximize
savings opportunities
• Educational & Institutional Cooperative (E&I) for national and
regional contracts
• Philadelphia Area Collegiate Cooperative (PACC) for regional
contracts
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Purchasing involvement in indirect commodities
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The Buying Process
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Oracle Financials
• Campus wide electronic purchasing system provides
point-of-demand requisitioning in offices and laboratories
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The Penn Marketplace
• Penn’s private supplier exchange hosted by SciQuest Inc.
• Combination of hosted content and punch-out suppliers
• 134 preferred supplier online catalogs
• Access to over 5M of the most commonly ordered products
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Electronic document management
• Electronic data interchange (EDI) for outbound purchase
orders and inbound invoices (Global Exchange Services)
• Integrated document invoice imaging and approval workflow
(170 Systems)
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JP Morgan Purchasing & Fleet Fuel Card Program
Key Accomplishments
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Customer satisfaction rating of 90% in FY 2005
Over $81M in documented cost savings since FY
1997 (an average annual ROI ratio of 9:1)
Penn Marketplace suppliers received 68% of all
purchase orders in FY 2005 (134 or 29,000+
suppliers)
Purchase order transactions increased by 30%
since FY 2000
Purchase order dollars increased by 61% since
FY 2000
Purchase order dollars with contract suppliers
increased by 118% since FY 2000
Maverick buying has been reduced by 78% since
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FY 2000
Promoting the Organization
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Purchasing Services web site provides internal and
external marketing opportunities
• Central repository for all purchasing related
information
• Opportunity to promote changes to policies and
procedures, new purchasing projects, commodity and
technology initiatives, new supplier relationships, and
key accomplishments
• Opportunity to promote key accomplishments to
senior management and our trustees
• Updated weekly with announcements and new
information
• “Web Site Update Announcement” listserv targets
over 2,000 faculty and staff (eliminates “I didn’t know”
as an acceptable excuse for non-compliance
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Over 350 visitors to the site per day (15% are
external)
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Critical Success Factors
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Strategic vision validated by senior management
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Marketing
Focus on core competencies
Investment in technology
Collaboration with Schools and Centers
Collaboration with suppliers
Staff skill sets
Consistent and on-going support from senior
management
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Contact Information
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Ralph Maier
Director of Purchasing Services
E-Mail: [email protected]
Internet: www.purchasing.upenn.edu
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A copy of this NAEB New England presentation
is available in the “Purchasing Presentations”
section of the Purchasing in the News web site at:
www.purchasing.upenn.edu/about/in_news.php
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