Higher Education Consulting EProcurement Realizing Benefits in Higher

Higher Education Consulting E-Procurement Realizing Benefits in Higher Education EDUCAUSE Conference October 30, 2001

Overview § Higher Education Current Environment � Traditional Procurement Process � Higher Education Characteristics § Components of e-Procurement for Higher Education § Future e-Procurement Process � E-Procurement Benefits § Preparing for your e-Procurement Implementation � Preparing your e-Procurement Strategy � Components of a Business Case ROI Benefits ROI Constraints � § Key Implementation Challenges Questions and Answers 1

Traditional Purchasing Process University Higher Education External Vendors ‘in-line’ Existing Procurement Application Manual / Paper University Buyers 2

Higher Education Characteristics n n n n n Higher Education Unique Business Processes Unique business processes - different from Private Sector Decentralized business practices Diverse procedures - Organizations, Departments, Offices Major focus on vendor community Specific contract rules and regulations Distinct terminology Characteristic accounting regulations & integration needs Unique grant and project tracking / reporting needs Broad commodity mix and requirements Variety of workflow and approval requirements 3

Components of E-Procurement Higher Education Internet-based Procurement Automation 1. VENDOR MANAGEMENT Integrated, Internet-based, self-service Vendor Management System. EXCHANGES, COMMUNITY OR DIGITAL MARKETPLACE 2. BID / QUOTE & AUCTION Integrated, Internet-based Bid/Quote Auction System. 3. E-CATALOGS Graphical Internet-based Electronic Catalog System on every desktop with current, negotiated pricing and approved vendors. Where one or more organizations come together to conduct real-time transactions 4

Vendor Management Higher Education The Internet changes the way Procurement interacts with Vendors. Using the Internet, you can attract new vendors, both large and small, and provide them with a fair and efficient way of doing business with you. Vendors can accomplish the following through a self-service, secure, Internet-based system: n n n Register online to conduct business with your University including vendor registration processing via the web Register online to receive various ‘area of interest’ competitive bids and quotes for commodities without burdensome administrative efforts of Procurement personnel Receive automatic, instant notification of bid / quote opportunities in specific areas of interest via e-mail, fax and the web without Procurement personnel interaction Review and respond to bids and quotes online with little interaction by Procurement personnel while complying with University business rules Communicate online with Procurement Personnel regarding various procurement issues 5

Bid & Quote Automation Higher Education Internet-based competitive bidding and solicitation automation transforms manual, time-intensive, bid/quote creation, distribution, acceptance and evaluation into a streamlined, paperless model with a drastic reduction in administrative work-load and bid-to-award cycle time. Some features of Internet-based Bid & Quote automation include : n n n n Instant, electronic bid/quote and RFP notification based on ‘areas of interest’ Online retrieval and review of bids, quotes and RFP’s Secure, interactive, online bid / quote response form including compliance checking and enforcement of all University competitive-bidding business rules Locked repository for compliance of ‘sealed bid’ requirements Online publication and notification of bid / quote and RFP awards Automatic, online availability of purchase orders for awarded bids and quotes Automatic invoicing from on-line purchase orders Full integration with internal Procurement System or ERP 6

Electronic Catalogs Higher Education Internet-based Electronic Catalogs provide you with a mechanism to make controlled yet non-restrictive term-contract and other catalogs available on every desktop with negotiated pricing from approved vendors. Empowering end users with freedom while providing guidance will result in higher compliance levels. Some features of Internet-based Electronic Catalogs include: n n n n Vendor maintained catalog content and updates with full compliance to negotiated pricing Availability on every desktop and to every user without major infrastructure requirements Enhanced requisitioning and approval process with graphical content and product configuration tools Full central control over catalog content and approved vendors. Enhanced application of University business rules Electronic order generation to selected vendor(s) upon final purchase approval Electronic invoicing from vendor after product / service delivery Full integration with internal Procurement System or ERP 7

Future E-Procurement Example University Procurement Higher Education Vendors Vendor Organizations Procurement Personnel Campus Personnel Inquires Orders Intranet Catalogs Internet Bids Responses FIREWALL Campus Personnel E-Procurement Modules 8

Benefits of E-procurement n Cost Reduction § n Significant cost reduction on externally procured goods and services through increased use of volume buying, better negotiated pricing and reduced off-contract (or maverick) buying Reduced procurement cycle time § § n Higher Education Shorten requisition to order cycle for term-contract purchases Shorten bid-to-award cycle time for competitive bidding process Reduced administrative workload and costs § § § Reduction in vendor management administrative efforts Reduction in competitive bidding administrative efforts Reduction in term-contract creation and distribution administrative efforts 9

Benefits of E-procurement n Increased control with simultaneous end-user freedom § § § n Tighten control over off-contract or maverick purchasing by empowering end users with desktop goods/services catalogs and using technology to simplify the procurement process Establish a controlled yet non-restrictive procurement process Ability of users to easily comparison shop online in a controlled environment Enhanced negotiation of reduced goods and services costs § n Higher Education Improved data gathering and reporting on all procurement processes More efficient business model § Re-assign procurement professional from administrative to strategic 10

What we are hearing … n It’s not only about cost § § n Supplier willingness and ability to participate - “No suppliers; no e-procurement system” Realization of benefits - Balancing institutional culture with contract compliance End User acceptance – e-Procurement may be viewed as restrictive Ability to negotiate an appropriate funding model – major budgetary implications “Timing is Everything” § § n Higher Education Market stability – the e-procurement software and services vendors appear vulnerable Immaturity of the current e-procurement solutions Higher Education is Unique § § Catalog strategies – One size does not fit all Integration to ERP and legacy systems – Funds Checking, Encumbrance Accounting Supplier Diversity Programs - Balancing strategic sourcing with expanded (nonrestrictive) vendor participation Sponsored Programs – Allowability of Costs and Reporting Requirements 11

What we are seeing … n Content Management Strategy § n P-Card EFT Make vs. Buy § n Full Organizational Roll-Out Focused Strategic Sourcing Efforts Pilot Suppliers Settlement Strategy § § n Distributed Seller (“Punch-out”) External Marketplace Internal Marketplace (typically for multiple campuses) Deployment Strategy § § § n Supplier Managed – Buyer Approved Catalog Management Strategy § § § n Higher Education Buy – Leverage existing Solutions Integration Efforts § § ERP Legacy Financial Systems 12

Preparing Your E-Procurement Strategy n Current State Assessment § § n Develop a business case that outlines major advantages Identify major investment estimates Provide funding alternatives and final recommendation E-Procurement Solution and Architecture § § n Document general business and technical requirements Access change readiness Value Proposition - ROI § § § n Higher Education Solution alternatives Catalog content management strategy Architecture components and blueprint Catalog hosting alternatives E-Procurement Implementation Considerations § § Address major implementation considerations Provide implementation recommendations 13

Components of a Business Case Higher Education Strategic Increase focus and Decrease risk Operational Process improvements, customer satisfaction Financial Reduce costs and improve cash flow (ROI) Technical Self-service infrastructure, low cost of ownership The Business Case is More Than Cost Justification! 14

Return on Investment n Forecast Reduction in Costs of Goods and Services § § n Analyze goods and services by commodity category Identify key commodity groups Identify future relationship with key suppliers Determine strategic sourcing goals and objectives Forecast Reduction in Processing Costs § § n Higher Education Analyze transaction trends and practices Benchmark current transaction costs Quantify reduction of processing costs Quantify increase in productivity due to re-focused staff Identify Potential Opportunities for Revenue Generation § Increased P-Card rebates 15

Return on Investment - Constraints n Total Cost of Ownership § § § n Time to Benefit § § n Software costs Hardware costs Implementation costs Customization costs Maintenance fees and upgrade costs Time to deploy solution Time for strategic sourcing activities Potential Risk § § § Solution Fit/Gap analysis Implementation methodology Change Management efforts (“user buy-in”) Higher Education “In November 1998, Aberdeen undertook research focused on the experiences of early adopters of Internet-based Procurement Automation…. . Our analysis of the results indicates that the benefits of Internet Procurement Automation are very real - with early users realizing reduced prices for goods and services; shorter transaction and fulfillment cycles; lower administrative costs; and, improved control over offcontract purchases. ” Aberdeen Group 16

Keys to Project Success n Higher Education Create clear and realistic goals based on organizational objectives n Know your scope n Develop metrics to evaluate project goals n Measure post-implementation results n Focus on end-user satisfaction 17

Scope Definition Higher Education § Business process scope § Deployment scope § Target suppliers/catalogs § Functionality to be implemented § Major product gaps and potential solutions § Interfaces and potential adapters scope § Reporting strategy/scope § Technical infrastructure scope § Change management and business process reengineering 18

Your Future n n Higher Education You can do it. You have a tremendous opportunity in front of you that may change the future of your organization. n Create an environment for success by planning! n Have fun !!! 19

Questions / Discussion Higher Education Alicia Karam Managing Director akaram@kpmg. com Susan Bsharah Manager sbsharah@kpmg. com Copyright KPMG Consulting, Inc. , 2001. This work is the intellectual property of the author. Permission is granted for this material to be shared for non-commercial, educational purposes, provided that this copyright statement appears on the reproduced materials and notice is given that the copying is by permission of the author. To disseminate otherwise or to republish requires written permission from the author. 20