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Higher Education Consulting
E-ProcurementRealizing Benefits in Higher Education
EDUCAUSE ConferenceOctober 30, 2001
Page 2
Higher EducationOverview
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 CaseROI BenefitsROI Constraints
Key Implementation Challenges
Questions and Answers
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Higher Education
Existing Procurement Application
University Buyers
University External Vendors
Manual /Paper
Manual /Paper
Manual /Paper
Vendors ‘in-line’
Traditional Purchasing Process
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Higher Education
Unique Business Processes
Higher Education Characteristics
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
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Higher Education
EXCHANGES, COMMUNITY OR
DIGITAL MARKETPLACE
Where one or more
organizations come together to conduct real-time
transactions
Components of E-Procurement
Internet-based Procurement Automation
Integrated, Internet-based Bid/Quote Auction System.
Graphical Internet-based Electronic Catalog System on every desktop with current, negotiated pricing and approved vendors.
Integrated, Internet-based, self-service Vendor Management System.
1. VENDOR MANAGEMENT
2. BID / QUOTE & AUCTION
3. E-CATALOGS
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Higher Education
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
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:
Vendor Management
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Higher Education
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
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:
Bid & Quote Automation
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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:
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
Electronic Catalogs
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Higher Education
E-Procurement Modules
University Procurement VendorsProcurement
Personnel
FIR
EW
AL
LBids
Responses
Campus Personnel
InternetIntranet
Vendor Organizations
Future E-Procurement Example
Campus Personnel
Catalogs
Orders
Inquires
Page 10
Higher EducationBenefits of E-procurement
Cost Reduction 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 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
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Higher EducationBenefits of E-procurement
Increased control with simultaneous end-user freedom 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 Improved data gathering and reporting on all procurement processes
More efficient business model Re-assign procurement professional from administrative to strategic
Page 12
Higher EducationWhat we are hearing …
It’s not only about cost 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” 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 (non-
restrictive) vendor participation Sponsored Programs – Allowability of Costs and Reporting Requirements
Page 13
Higher EducationWhat we are seeing …
Content Management Strategy Supplier Managed – Buyer Approved
Catalog Management Strategy Distributed Seller (“Punch-out”) External Marketplace Internal Marketplace (typically for multiple campuses)
Deployment Strategy Full Organizational Roll-Out Focused Strategic Sourcing Efforts Pilot Suppliers
Settlement Strategy P-Card EFT
Make vs. Buy Buy – Leverage existing Solutions
Integration Efforts ERP Legacy Financial Systems
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Higher Education
Preparing Your E-Procurement Strategy Current State Assessment
Document general business and technical requirements Access change readiness
Value Proposition - ROI Develop a business case that outlines major advantages Identify major investment estimates Provide funding alternatives and final recommendation
E-Procurement Solution and Architecture Solution alternatives Catalog content management strategy Architecture components and blueprint Catalog hosting alternatives
E-Procurement Implementation Considerations
Address major implementation considerations Provide implementation recommendations
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Higher Education
TechnicalSelf-service infrastructure,
low cost of ownership
FinancialReduce costs and
improve cash flow (ROI)
Strategic Increase focus and Decrease risk
Operational
The Business Case is More Than Cost Justification!
Process improvements, customer satisfaction
Components of a Business Case
Page 16
Higher EducationReturn on Investment
Forecast Reduction in Costs of Goods and Services 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 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
Page 17
Higher EducationReturn on Investment - Constraints
Total Cost of Ownership Software costs Hardware costs Implementation costs Customization costs Maintenance fees and upgrade costs
Time to Benefit Time to deploy solution Time for strategic sourcing activities
Potential Risk Solution Fit/Gap analysis Implementation methodology Change Management efforts (“user buy-in”)
“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 off-contract purchases.”
- Aberdeen Group
Page 18
Higher EducationKeys to Project Success
Create clear and realistic goals based on organizational objectives
Know your scope
Develop metrics to evaluate project goals
Measure post-implementation results
Focus on end-user satisfaction
Page 19
Higher EducationScope Definition
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
Page 20
Higher EducationYour Future
You can do it.
You have a tremendous opportunity in front of you that may change the future of your organization.
Create an environment for success by planning!
Have fun !!!
Page 21
Higher EducationQuestions / Discussion
Alicia KaramManaging Director
akaram@kpmg.com
Susan BsharahManager
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.
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