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Strategic Purchasing at Penn Impacting the Institution's Bottom Line October 21, 2005 Presented by: Ralph Maier Director of Purchasing Services.

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Presentation on theme: "Strategic Purchasing at Penn Impacting the Institution's Bottom Line October 21, 2005 Presented by: Ralph Maier Director of Purchasing Services."— Presentation transcript:

1 Strategic Purchasing at Penn Impacting the Institution's Bottom Line October 21, 2005 Presented by: Ralph Maier Director of Purchasing Services

2 2 Presentation Agenda Procurement Overview Strategic Purchasing at Penn Business Objective Performance Metrics Return-on-Investment Core Business Initiatives Customer Relationship Management Compliance Sourcing The Buying Process Key Accomplishments Promoting the Organization Critical Success Factors Contact Information

3 3 Procurement Overview Decentralized purchasing environment Point-of-demand requisitioning Delegated purchase order approval for transactions <$5,000 Campus–wide electronic purchase-to-payment system Oracle Financials (Purchasing, iProcurement, Payables, & General Ledger) Penn Marketplace hosted by SciQuest Incorporated FY 2005 Statistics Annual operating budget: $4.25B Total purchasing disbursements: $1.1B Total dollars through Purchasing Services: $775M Total dollars delegated purchasing organizations: $325M

4 4 Business Objective 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, and product and service cost savings

5 5 Performance Metrics 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 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 to view performance against plan

6 6 Return-on-Investment Business goal is to achieve an annual financial ROI ratio of at least 5:1 Based on annual operating budget of $1M Internal “stretch goals” are established to exceed expectations Formal cost savings criteria is established to standardize reported savings Annual cost savings goal is incorporated into each Sourcing Manager’s individual goals and objectives All documented cost savings are tracked and reported on a monthly basis

7 7 Core Business Initiatives Customer Engage in customer relationship management activities to validate customer expectations and satisfaction Compliance Increase customer compliance with policies, procedures, authorized buying methods, and strategic contract suppliers Technology Enhance existing and implement new cutting edge purchasing technologies to increase administrative efficiencies, reduce cycle time and cost of goods Financial Utilize strategic sourcing initiatives to rationalize supplier base and leverage buying power to produce significant ROI

8 8 Customer Relationship Management 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 Solicit input on new purchasing programs, technology initiatives, and potential supplier relationships Communicate purchasing project objectives, timelines, updates, and potential deliverables to the campus community Provide opportunity for customer feedback

9 9 Compliance 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 Identify non-compliance, determine reasons, and take corrective action Internal Schools & Centers Suppliers

10 10 Sourcing Formal contracting initiatives by commodity and supplier Strategic business relationships with highest volume suppliers School and Center contracting for specific commodities Online competitive bidding (reverse auction) to maximize savings opportunities Collaborative buying to compliment Penn contracting Educational & Institutional Cooperative (E&I) for national and regional contracts Philadelphia Area Collegiate Cooperative (PACC) for regional contracts Purchasing involvement in indirect commodities

11 11 The Buying Process Oracle Financials Campus wide electronic purchasing system provides point-of-demand requisitioning in offices and laboratories 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 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) JP Morgan Purchasing & Fleet Fuel Card Program

12 12 Key Accomplishments 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 FY 2000

13 13 Promoting the Organization 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 Over 350 visitors to the site per day (15% are external)

14 14 Critical Success Factors Strategic vision validated by senior management 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 Marketing

15 15 Contact Information Ralph Maier Director of Purchasing Services E-Mail: Internet: A copy of this NAEB New England presentation is available in the “Purchasing Presentations” section of the Purchasing in the News web site at:

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