Strategically Impacting the Institution's Bottom Line Presented by: Ralph Maier Director of Purchasing eProcurement at the University of Pennsylvania

2 Presentation Agenda About Procurement at Penn eProcurement Business Objectives Purchasing & Fleet Fuel Card Delegated Requisitioning Oracle Financials Requisitioning Workflow The Penn Marketplace Benefits of Online Content Supplier Enablement Document Management Electronic Sourcing Impact on Key Stakeholders Key Accomplishments Critical Success Factors Contact & Related Information

3 About Procurement at Penn Decentralized point-of-demand purchasing environment with purchasing authority, responsibility & accountability delegated to authorized faculty & staff in offices & labs Campus-wide utilization of Oracle Financials (Purchasing, Payables & General Ledger) Purchasing/Fleet Fuel & Travel Management Credit Card Programs Online shopping through the Penn Marketplace hosted by SciQuest Incorporated Annual purchasing department operating budget of $1M Annual purchasing activity: - 300,000 purchase transactions - $675M in purchasing spend

4 eProcurement Business Objectives Provide a seamless online “purchase-to-pay” process that meets business requirements of customers, suppliers & administrative offices Reduce time & effort related to purchasing & payment activities enabling faculty & staff to focus on core competencies Ensure compliance with financials policies, increase adoption & utilization of approved buying methods & key supplier business relationships Utilize purchasing data to leverage the University’s buying power & supplier base to reduce costs Facilitate efficient, timely payment of invoices

5 Purchasing & Fleet Card Program Initial distributed business process initiative designed to change culture across campus Distribution of authority, responsibility & accountability to campus community was initially perceived as central administration shifting workload Authorized cardholders quickly realized benefits of empowerment & self-service procurement Opportunity for Schools & Centers to begin restructuring administrative offices Reduction in transaction volume enabled Purchasing Services & Accounts Payable to restructure & focus on core competencies Program was ultimately viewed as a success by central administration & the Schools & Centers

6 Delegated Requisitioning Automate requisition creation, funds management, document routing, final order approval & invoice payment processes Integrate regulatory & capital equipment requirements in the workflow Utilize technology to enforce compliance with policies & procedures Provide online access to supplier products & services Automate delivery of documents within the institution & to & from suppliers Integrate invoice approval & processing into online system Document PO & invoice work history & approvals for tracking & auditing purposes

7 Oracle Financials Campus-wide implementation of Oracle Financials in July 1996 Delegated shopping and requisition creation to the point- of-demand in labs & offices System user responsibilities include “Requisitioner” for shopping & requisition creation only & “PO Manager” for requisition creation & final order approval for transaction <$5,000 Introduced access to self-hosted online supplier catalog content Approximately 1,800 purchasing system users

8 Requisitioning Workflow Oracle Financials workflow used to route transactions & facilitate final PO approval by authorized users Online purchasing system facilitates real-time budget account validation, funds checking & property management requirements Regulatory requirements are enforced for hazardous & radioactive materials Laboratory animal purchases are processed via the Purchasing Card Program Purchasing data & order action history available for review & audit Electronic order distribution to suppliers via Electronic Data Interchange (EDI) & eDocument auto-fax server

9 The Penn Marketplace The Penn Marketplace, Penn’s private supplier exchange, was launched in January 2002 Replaced self hosted catalog content business model implemented with Oracle Financials Third party content management solution hosted by SciQuest Incorporated since January 2004 Marketplace supports hosted catalog content & is the platform for punchout to Penn specific supplier web sites Provides opportunity for inclusion of diversity suppliers Approximately 5M of the most commonly ordered products & services are available from 116 Penn preferred & contract suppliers (as of March 1, 2005) Penn specific contract pricing for hosted content & Penn specific supplier web sites

10 Benefits of Online Content Online supplier catalog content is a critical success factor Access to online catalog content enhances shopping experience for authorized users & reduces effort Promotes adoption & utilization of participating preferred & contract suppliers Order creation from online content ensures clean purchasing data resulting in a reduction in rework & invoice payment problems Viewed as competitive advantage by participation suppliers Supplier enablement is an opportunity to leverage the “competitive advantage” for significant cost savings

11 Supplier Enablement 116 suppliers available in the Penn Marketplace Penn Marketplace suppliers received 65% of all purchase order transactions in 2004 (>26,000 suppliers in the approved supplier database) YTD marketplace supplier transaction volume is 67% of all purchase order transactions Over 240 approved suppliers deactivated and market share shifted to marketplace participating suppliers Suppliers are now approaching purchasing for enablement in response to pressure from customers Goal of 130 marketplace suppliers by end of 2005 Supplier enablement savings of $7.4M since 2001

12 Document Management PO supporting documentation, competitive bids or bid waiver information, instructions to approver & suppliers are transmitted electronically as attachments or in “Notes To” fields in online purchasing system All POs are transmitted electronically to suppliers via Electronic Data Interchange (EDI) or eDocument auto-fax (Global Exchange Services & Captaris Incorporated) EDI used for inbound supplier invoices (41% in 2004) Document imaging system used for invoice management & approval workflow (170 Systems) Replacing checks with electronic payment is CY2005 business objective

13 Electronic Sourcing Reverse auction or online bidding automates existing competitive bidding business process Creates increased competition due to opportunity to “bid” on requirements instead of submitting single offer Results in higher quality events due to need to develop clear & concise product & service requirements Can be used for institution specific requirements & collaborative buying opportunities Used at Penn for office supplies, copiers & fax equipment, copier paper, air filters, window washing services & cylinder gas Pilot program consisted of 6 events for $10.1M of purchase volume; yielded 1 st year cost savings of $2.8M

14 Impact on Purchasing Services Campus-wide adoption & utilization of eProcurement technologies at Penn has resulted in: - transition from tactical to strategic purchasing - change in customer & management perception from “necessary bureaucracy” to “value added service provider” - reallocation of resources resulting in initial downsizing but enhanced professional purchasing opportunities for new staff - proactive involvement with customers, management, & external professional purchasing organizations - increased job satisfaction & staff compensation - recognition as one of the leading purchasing organizations in higher education

15 Impact on Faculty & Staff Campus-wide adoption & utilization of eProcurement technologies at Penn has resulted in: - an easy, efficient & user friendly purchasing process - less time & effort required to purchase products & services - more time to devote to core competencies such as research & education - suppliers delivering products when required - availability of purchasing staff to assist with complex & high dollar volume requirements - increased buying power for every dollar of funding - increased support from key strategic suppliers - key supplier collaborative initiatives &shared opportunities

16 Impact on Strategic Suppliers Campus-wide adoption & utilization of eProcurement technologies at Penn has resulted in: - a competitive business advantage - online product exposure & internal marketing opportunities to all Penn customers - opportunities for collaboration & strategic initiatives - increased market share above annual industry average - new business opportunities with Penn’s eProcurement business partners

17 Impact on Senior Management Campus-wide adoption & utilization of eProcurement technologies at Penn has resulted in: - administrative excellence across campus & in central administration - process efficiencies & opportunities to further leverage investment in technology - opportunities for consolidation of operations, strategic outsourcing & process savings - reduced cost of required products & services - a competitive advantage when recruiting faculty & researchers

18 Key Accomplishments $75M in documented hard dollar product & service cost savings since 1996 Annual 9:1 Return-on-Investment (ROI) for past 8 years Reduced average order cycle time from 18 days to less than 1 day Spend through authorized purchasing system increased by 95% over last 5 years Spend with contract suppliers increased by 85% over last 5 years Maverick buying reduced by 78% over last 5 years Customer & senior management satisfaction with Purchasing Services is at an all time high

19 Critical Success Factors Strategic vision that is shared by the Schools, Centers & central administration Validation of business requirements with a focus on “must have” versus “nice to have” Change management strategy to promote new purchasing environment & address impact on faculty & staff On-going senior management support for project teams Consistent communications & message across institution Promote “what’s in it for me?” to key stakeholders Identify “advocates” from the Schools & Centers Support from key suppliers Deliver what was promised to the community

20 Contact & Related Information Ralph Maier Director of Purchasing Services Purchasing Services Web Site Copy of Presentation (Purchasing Presentation Section) The Penn Marketplace Purchasing Performance Metrics