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1 Driving Contract Compliance through Strategic Procurement Breakout Session # 405 Name: William M. Cooper, C.P.M. Associate VP & Chief Procurement Officer.

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Presentation on theme: "1 Driving Contract Compliance through Strategic Procurement Breakout Session # 405 Name: William M. Cooper, C.P.M. Associate VP & Chief Procurement Officer."— Presentation transcript:

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2 1 Driving Contract Compliance through Strategic Procurement Breakout Session # 405 Name: William M. Cooper, C.P.M. Associate VP & Chief Procurement Officer University of Missouri System Date: April 8, 2009 Time: 9:45 – 11:15 am

3 A NEW VISION OF PROCUREMENT Not merely a back office “order shop” but a Strategic Player essential to the long term success of the University. The “New” Procurement is: –Inextricably linked to the University’s strategic objectives and core missions of teaching, research, service and economic development –Employs procurement strategies that are aligned with those of internal customers –Understands and analyzes supply market dynamics, establishing collaborative supplier relationships that result in maximum added value. –A major contributor to the financial health of the institution 2

4 3 Procurement’s Strategic Value Proposition Revenue Center vs. Cost Center –How do we do it? Materials & Services Cost Reduction – External Processing Cost Reduction – Internal Other Money Makers –P-Card Rebates –Contract Rebates –Surplus Property Sales

5 Procurement’s Strategic Value Proposition Great! But How Does that Make Procurement Strategic? –Reallocation and generation of significant financial resources affording: Retention of valuable human resources Expanded teaching and research programs Plant improvements Competitive pay increases for faculty & staff Minimization of tuition increases 4

6 Procurement’s Strategic Value Proposition A New Face for a New Vision –Entrepreneurial rather traditional –Mission oriented rather transaction focused –Proactive rather than reactive –Problem solvers rather than “procurement police” –Committed to results rather than process –Subject matter experts rather than admin support –Understanding & concerned rather than unknown & aloof –Way-makers rather than gatekeepers –Valued partners rather than unwanted intruders 5

7 We Needed A Lot Of …. CHANGE!!! 6

8 The Road From Vision to Reality 7 Where We Were What We Did-Part I What We Learned What We Did-Part II How We Did It Where We Are What We Got

9 Where We Were The State of Purchasing at UM in 2000 Four campuses operating independently –Inconsistent policies and procedures –Same legacy system, different versions –No consolidation of requirements –Transaction oriented “order shops” –Acted as “Procurement Police” –Viewed as bureaucratic necessity at best 8

10 What We Did – Part 1 Review and Analysis –Procurement Review Committee –Independent Supply Chain Consultant –Recommendations Eliminate redundant activities Restructure organization under central leadership CPO Implement a common ERP Raise P-Card threshold Investigate eProcurement 9

11 What We Did Part – Cut redundant functions --Reorganized under CPO --Implemented ERP --Raised P-Card threshold --Created system-wide website

12 What We Learned P-Card – “The Dark Side” –Lost spend visibility –Reduced negotiating power –Facilitates “maverick spend” ERP – Not a Procurement Solution –Too complex for the “ultimate user” –Inefficient processing – multiple hand-offs –No sourcing/shopping tool for clients 11

13 What We Learned Consolidated Organization + Consistent Policies + Strategic Contracts + ERP ≠ Strategic Procurement 12

14 What We Learned We were left with: –I–Inadequate spend visibility –L–Low Contract Compliance –D–Decreased negotiating power –D–Diminished strategic relevance because we… CAN’T SHOW THEM THE MONEY! 13

15 What We Did The Core Question: How do we deliver our strategic contracts to the greatest number of users in a way that will induce their usage; thereby increasing contract compliance, resultant “revenue” generation, and in the process Procurement’s strategic value ? 14

16 What We Did – Part 2 Answer: eProcurement -“The Missing Link” –Key processing benefits One stop shopping Simple and familiar purchasing process Frees clients to do their real jobs Widespread availability of reporting data Reduced time for requisition review Redirect purchasing focus to high dollar items One stop shopping – Simple and familiar purchasing process – Free clients to do their real jobs – Widespread availability of reporting data – Reduced time for requisition review – Redirect purchasing focus to high dollar items 15

17 What We Did – Part 2 E-Procurement – “The Missing Link” –K–Key contracting benefits Greater spend visibility Metrics and benchmarking tools to enhance strategic sourcing Increase on-contract spend Negotiate better contract pricing resulting in… Mo Money! Mo Money! Mo Money! 16

18 What We Did – Part 2 The Procure –On-line supplier catalog and electronic order distribution management modules integrated with our ERP –Managed Services delivery that affords supplier enablement and electronic order distribution to a critical mass of suppliers necessary to drive significant increase in contract compliance and resultant savings 17

19 What We Did – Part 2 The Pay –“–“Virtual” Credit Card Solution Integrated with our ERP Eliminate individual P-Card without increasing AP work Maintain prompt vendor pay Increased P-Card volume = increased rebate = Mo Money! Mo Money! Mo Money! 18

20 What We Did – Part 2 Procure to Pay 19 Create Shopping Cart using SciQuest Spend Director Initiate requisition in PeopleSoft eProcurement Requisition Approval in PeopleSoft eProcurement PO Created in PeopleSoft PO assigned a virtual one-time use credit card number by PaymentNet/ExacTrac PO sent to Supplier using SciQuest Order Manager Supplier charges credit card after shipment Bank sends monthly Central Bill for Payment

21 How We Did It Design and Implement – “It takes a Village” –Core Project Executive Sponsors CPO Full Time Project Manager IT Lead(s) Supplier Enablement Team Change Management Team Training and Communications Team Client Advisory Leads 20

22 How We Did It Campus Advisory Group –Second level representative of all major departments –Well respected and trusted to vocalize departmental needs/desires –Involved throughout design and development – assume ownership –First line communicators, “Champions” Pilot Test –Different types of user departments – academic, administrative, facilities; large, small, etc. –Frequent users/infrequent users * Well respected and trusted to vocalize departmental needs/desires * Involved throughout the design and development – assume ownership * First line communicators, campus “Champions ” First level –Second level 21

23 How We Did It Marketing –Created and maintained a “buzz” ; spread the value proposition/built support Name the marketplace contest –Kept everyone “plugged in”; regularly communicating via: announcements direct to primary users Forums/demos targeted to primary users Forums/demos targeted to influential constituencies Auditorium assemblies/demos targeted to general population On-line employee newsletter 22

24 How We Did It Marketing (cont’d) –W–Web site updates – progress & savings –R–Regular departmental “Client Outreach Meetings” –S–Student campus newspapers –V–Vendor Fairs –B–Board Meetings Iterate, reiterate, and re-re-iterate the 3 E’s Easy to learn Easy to use Empowering!! 23

25 How We Did It Training –Targeted classroom training Requisitioners, Approvers, “Shoppers” Frequent requisitioners vs. infrequent –Targeted on-line training tutorials Requisitioners, Approvers, “Shoppers” –On demand, one on one, client desktop 24

26 Where We Are Live and Running at all campuses –All previous ERP requisitioners trained –Targeting new requisitioners/P-Card users First wave of 18 suppliers loaded Oct ‘07 –Negotiated $6.7M in annualized cost savings Second wave of 22 suppliers up by July ‘09 –Negotiations project an additional $4M per year in annualized contract cost savings 25

27 Where We Are Contract Compliance rate has risen from 30% - 40%; ultimate goal 80-90% As a result strategic contracts now delivered through ePro have produced an additional $7M in revenue P-Card rebate increased by $91.3K over last year for a total of $1.1M Projected minimum savings over 5 years is $24.9M for a $3.0M investment; an ROI of

28 What We Got Happier administrative support – less work Happier faculty/researchers – greater sourcing and ordering power with less hassle Happier strategic suppliers – more business Happier Procurement staff – less tedium/more value added; national recognition as a “best practices organization.” Happier leadership because their “Strategic” Procurement Organization has brought them…. 27

29 28 MO MONEY! MO MONEY!! MO MONEY!!!


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