2. BENCHMARKING An Essential Reporting Tool Presented By: Nancy Brooks 2008 NAEP Annual Meeting

4. Dreaded Question #1 or Opportunity #1 How is Purchasing doing? (“What is purchasing contributing to the university?”)

5. The Answer : Last FY, we managed $240 millions of spend, which represents 71% of the institutional spend. We documented cost savings and added revenue generation of $8.9 million, which translates to a 711% return on investment. We continue to promote social responsibility and add value to the campus community.

6. Dreaded Question #2 or Opportunity #2 “So, how does that compare with our peers?”

7. Benchmarking o Originated as a surveying term A distinguishable mark placed on a wall, building, or rock that is used as a reference point to determine elevation & position in topography surveys A distinguishable mark placed on a wall, building, or rock that is used as a reference point to determine elevation & position in topography surveys Nancy was here What is Benchmarking ?

8. Benchmarking In business, benchmarking is used in a similar way to select reference points to make measurements. In business, benchmarking is used in a similar way to select reference points to make measurements. It becomes a standard to measure performance to.

9. Who Benchmarks? Organizations who want to IMPROVE PERFORMANCE IMPROVE PERFORMANCE

10. benchmarks of olde Outputs Outputs # of purchase orders # of quotes issued # of purchase orders per buying FTE # of days to process a requisition Cost to process a purchase order

11. . Old benchmarks were measuring the outputs of a process….. Old benchmarks were measuring the outputs of a process….. But, what are the outcomes of the efforts? What is the value of the process?

12. Old Benchmark Analysis Is it better to have the # of purchase orders increase or decrease? Is it better to have the # of purchase orders increase or decrease? Strategic sourcing would lead us to believe that the numbers should decrease. But what is you campus is expanding or significantly increasing sponsored funding?

13. Old Benchmark Analysis Is it better to issue lots of quotes or very few? Too many solicitations could indicate a lack of strategic sourcing or inefficient bid thresholds. Too few quotes could indicate too many sole source procurements.

14. Old Benchmark Analysis Is a higher number of purchase orders processed per buying FTE better than a lower number? Measuring the number of purchase order per buying FTE measures the productivity of a process not the value added by the process.

15. Benchmarks of olde The outputs we used to measure are actually counter to the business efficiency and effectiveness we seek to achieve.

16. New Benchmarks What do we benchmark? What do we benchmark? What we measure should be strategically aligned with organizational goals.

17. Performance Metrics Translate to the value that procurement has within the organization Translate to the value that procurement has within the organization Be understandable by, and meaningful to, senior administration Be understandable by, and meaningful to, senior administration Be verifiable Be verifiable

18. Key Performance Indicators Percentage of total spend under management Percentage of total spend under management Procurement ROI (savings/operating costs) Procurement ROI (savings/operating costs) Contract compliance Contract compliance Subjective feedback (structured, survey-based) Subjective feedback (structured, survey-based) Source: Aberdeen Group, November 2007

19. Key Performance Indicators/Benchmarks in Higher Education % of total spend under management % of total spend under management Cost to process $1 of spend Cost to process $1 of spend Cost savings Cost savings Average spend per procurement professional Average spend per procurement professional Procurement’s return on investment (ROI) Procurement’s return on investment (ROI) # Hours of professional development per procurement professional # Hours of professional development per procurement professional

20. Where do we start? Collecting the pertinent data Collecting the pertinent data 1. Institutional Profile: a) Number of Students (headcount vs FTE) b) University operating budget less salaries only 2. Procurement Organizational Structure a) Titles of procurement staff b) Who does procurement report to?

21. Collecting data 3. Procurement’s functions & responsibilities a) functions performed by procurement a) functions performed by procurement b) responsibilities of procurement professionals b) responsibilities of procurement professionals 4. Operating budget of Purchasing department

22. Collecting Data 5. Delegated Authority a) P-card a) P-card # of active cards # of transactions Net Expenditures Transaction limit b) Other forms of delegated authority b) Other forms of delegated authority

23. Collecting Data 6. Central Procurement Activity a) Purchase Orders a) Purchase Orders # of purchase orders # of purchase orders Dollars spent on purchase orders Dollars spent on purchase orders b) Expenditures not captured on purchase orders b) Expenditures not captured on purchase orders # of contracts # of contracts Dollar value of contracts Dollar value of contracts

24. Collecting Data Hours of professional development Hours of professional development (hours of coursework in obtaining degree, hours of workshops at regional and annual NAEP meetings, other formalized training opportunities) (hours of coursework in obtaining degree, hours of workshops at regional and annual NAEP meetings, other formalized training opportunities)

25. Benchmark Outcomes Total spend managed by procurement (Delegated & central activity if managed by procurement) Total spend managed by procurement (Delegated & central activity if managed by procurement) % of total university spend managed by procurement ( Total spend managed/Univ. budget less salaries) % of total university spend managed by procurement ( Total spend managed/Univ. budget less salaries) Average spend responsibility per procurement professional (Total spend less p-card/number of buying staff) Average spend responsibility per procurement professional (Total spend less p-card/number of buying staff)

26. Benchmark Outcomes Efficiency: Cost to process $1 of spend (Operating budget/total spend managed) Efficiency: Cost to process $1 of spend (Operating budget/total spend managed) Cost Savings or Increase in Revenue Generated Cost Savings or Increase in Revenue Generated Return on Investment (ROI) Return on Investment (ROI) (Savings + increase in revenue/purchasing operating budget) (Savings + increase in revenue/purchasing operating budget) Investment in Professional Development Investment in Professional Development (Total hours of professional development completed)

27. Best-In-Class Cost Savings on total spend> 5% Cost Savings on total spend> 5% Return on Investment > 700% Return on Investment > 700% % of spend under management> 70% % of spend under management> 70% Source: “The CPO’s Strategic Agenda-Managing Performance, Reporting to the CF” Aberdeen Group, 2007

28. The Value of Benchmarking The institution must be introduced to the “radical” concept that procurement can do more than manage the order and delivery of goods and services; that it can deliver strategic value to its internal customers and to the institution at large. The institution must be introduced to the “radical” concept that procurement can do more than manage the order and delivery of goods and services; that it can deliver strategic value to its internal customers and to the institution at large. Benchmarking the appropriate key indicators of performance will help procurement articulate its value. Benchmarking the appropriate key indicators of performance will help procurement articulate its value.

29. Thank You! Questions?