SAVING TIME CAN SAVE YOU MONEY Some Tips for Improving the Efficiency & Effectiveness of Procurement

October 27, 2011 VAGP SymposiumKeith K. Glatz CPPO, FCPM

THE PROBLEM. . .

Spending a lot of time, and getting NOWHERE!

Reduced resources and heavier workload

Procedures and available technology hinder ability to get quality work done fast

OBJECTIVES

Problem/Solution Categories Identify what needs to be looked at

internally Identify available tools to help move forward Leveraging technology Using a common sense approach to

accomplish the above objectives

SOME THINGS YOU NEED TO REMEMBER. . .

Before you can SAVE time, you need to SPEND some time studying where you are and where you need to be

Often, we save money on the back-end by making an investment at the front-end

There is NO silver bullet!

TIME & COST ISSUE CATEGORIZATION

Time and Cost Issues can be normally categorized AND addressed as follows:

Staffing Process Technology

STAFFING

Most difficult solution to justify Difficult to obtain new staffing

resources in today’s environment and economy

May be able to justify additional staffing IF that addition will SAVE you or your entity money in the long-run

May need to consider outsourcing

PROCESS

The “most likely culprit”. You need to know what’s actually going on! Map the process out! Find the steps that add NO Value! Find benchmarks for comparison Determine the gap Correct the issue

TECHNOLOGY

What existing technology do you have? Review current technology available Determine if you technology is current Can technology fix the process? (It may be the

solution to process problems!) What can I get for little or no cost? Is new technology cost effective? Will new technology blend into my culture?

AT THE END OF THE DAY . . .

You should be able to save time and money by. . .

The most effective leveraging of staff resources Identifying and correcting inefficiencies in your

processes Having a greater awareness of your obstacles

to progress Identifying and implementing cost-effective

technology solutions that reduce redundant process steps and avoid errors

STAFFING – PRACTICAL TIPS

Make sure your job descriptions are clear and as flexible as possible

Make sure your staff has the proper training (including professional certifications)

Develop a cross-training program Make sure your organization structure fits the

job If it’s cheaper for somebody else to do it better,

seriously consider outsourcing it

PROCESS – THE PROBLEM

What problem am I trying to solve? Process takes too much time? Process is too expensive? IS the process even necessary? Are there steps in the process that add

no value? Define the problem

PROCESS PROBLEM STATEMENT

PROBLEM STATEMENTThe purchase order development process currently takes an average of 10 days to complete. Using Departments constantly complain to Purchasing and upper level City Management about the process. The current process for ordering and payment for goods and services is not efficient or cost effective with the advancement of technology and current procurement best practices.

PROCESS -- PROBLEM DEFINITION

PROJECT DEFINED

Implementation of streamlined process to shorten the overall processing time of purchasing requisitions. The goal is to shorten the time from an average of 10 days to an average of 3 days to complete. Review committee will include representatives from Purchasing, IT, Finance and two (2) large using departments.

PROCESS – PROJECT PROCESS MATRIX

Purchase Order Processing TimeCurrent Desired Best In Class

10 Days Average

3 Days Average 1 Day Average

HOW DO WE MEASURE SUCCESS?

Benchmarking against Other Entities and Standards Collection of your own past data Surveys of agencies in your area Surveys conducted by your chapter Established Best Practice Guidelines

Award programs Benchmarking programs

Perform a GAP Analysis The “GAP” between your process and established Best

Practices

SOME RESOURCES FOR BEST PRACTICES Review Requirements found in Agency Award Applications

Achievement of Excellence in Procurement (AEP) Award issued by the National Procurement Institute (NPI) https://www.npiconnection.org/aep/instructions.asp

Florida Association of Public Procurement Officials (FAPPO) Agency Achievement Award www.fappo.org

NIGP Outstanding Agency / Accreditation Award (OAP) and Pareto Award http://www.nigp.org/eweb/StartPage.aspx?Site=NIGP&webcode=cps_ps_acc

Other Best Practice Resources NIGP Research – “The Vault” by the Aberdeen Group http://

www.nigp.org/eweb/StartPage.aspx?Site=NIGP&webcode=ResLibSearch Public Procurement Research Center (PPRC) at Florida Atlantic University

Journal of Public Procurement Other scholarly publications http://www.fau.edu/pprc/publications/JoPP.html

BENCHMARKING RESOURCES

Benchmarking Take part in a Benchmarking Survey (or try to obtain

results) ICMA Purchasing Measures CAPS Research http://www.capsresearch.org/ The NIGP “VAULT” www.nigp.org Other NIGP special surveys Florida Benchmarking Consortium

http://www.flbenchmark.org/ Various Industry Surveys

OUTSIDE ASSISTANCE

NIGP Consultancy Program http://www.nigp.org/eweb/StartPage.aspx?Site=NIGP&webcode=cps_con

Procurement Agency Satisfaction Survey – Customers & Suppliers

Policies and Procedures Review

GAP analysis

Academic groups Other outside consulting firms

THE ACTUAL PROCESS REVIEW

Map the process out so stakeholders can see it

Bring the stakeholders into one place Use sticky notes on the wall, or a similar

method to map the process. (Allows you easily add and remove steps)

Identify steps that duplicate effort Document the “before” and the “after”

DESIRED RESULTS OF A REVIEW

Agreement from stakeholders to eliminate steps that add no value to the process

Remove unnecessary review steps

A person should only have to review something one time in the process

Identification of opportunities for single-point data entry, and for methods to pull data from pre-established data bases to avoid error, and to reduce review time

Identification of technology or software that can resolve issues Calculation of the time and cost savings by eliminating steps

in a process, or an entire process

PROCESS MAP (FLOWCHART) ANALYSIS

PROCESS FISHBONE ANALYSIS

AFTER THE PROCESS REVIEW IS DONE

Use PDCA (Plan – Do – Check – Act) to implement new processesPlan

Develop a plan to implement the new or revised process

Do Execute the plan and begin using the process

Check Analyze feedback, determine if the new process works Determine lessons learned from implementing the process

ACT Make adjustments as necessary Document your time and cost savings Share your success!

LEVERAGING TECHNOLOGY

What problems and bottlenecks can be resolved through the introduction of technology?

Do you have hardware or software that can be utilized now?

Can you get what you need by installing off-the-shelf software?

Do you have staff capable of programming software to meet your needs?

Do you have an ERP system that can be interfaced with other software?

SOME EXAMPLES OF LEVERAGING

TECHNOLOGY

On-line Supplier Registration -- Saves paper & process time & reduces errors

On-line Solicitation Posting & Download Capability – Saves paper, staff time and postage. Can shorten solicitation cycle

On-line Plan holder Lists -- Saves process time with automatic updates & provides transparency

On-line posting of statutes, policies, procedures, vendor guides and standard bid and RFP terms & conditions on your web-site – allows 24/7/365 access

SOME EXAMPLES OF LEVERAGING TECHNOLOGY -- CONTINUED

Electronic Catalogs – Internal and External Use (Web-based ordering) improves accuracy of pricing and promotes standardization

EFT/ACH Electronic Direct Deposit for suppliers – improves payment cycle time, saves paper, postage and staff time.

Spend Management Software – Helps you identify spend patterns, and concentrate on the most important commodities and services

SOME EXAMPLES OF LEVERAGING TECHNOLOGY – CONTINUED

On-line Insurance Database – Saves cumbersome manual tracking & eliminates duplication of effort

On-line Surplus Auctions – Saves staff time, increases visibility & avoids live auction costs

Procurement Cards – Saves staff and process time. May also be used to pay invoices

WHAT BENEFITS DO THESE EXAMPLES HAVE IN COMMON?

Can often upload and download data directly from ERP or other data bases

Single point entry of information avoids errors in other points of the process

Provides for the use of drop-down menus instead of requiring manual data entry – less potential for errors

Many processes now “manage themselves”, allowing staff to concentrate on more important issues. Allows you to provide the same level of service when faced with staffing cuts with fewer errors

The same “message” can now be communicated to more people even quicker

POTENTIAL IMPEDIMENTS TO TECHNOLOGY

New equipment may be required – initial acquisition costs Software costs may be prohibitive May be difficult to interface with ERP, or ERP provider may

require you to pay for expensive upgrades or extra programming costs

Costs of maintenance and ability to maintain software or hardware (Can you internally support a new application?)

Onerous software licensing agreements Internal cultural issues (Are you a “tech-savvy” organization

or not?) Technology may become obsolete Need to use “common sense” when implementing technology

SO, HOW SHOULD WE LEVERAGE TECHNOLOGY?

Prioritize your needs – What should be addressed to save the most time and money?

Reach for the “low-hanging fruit” – what can be done quickly with existing resources?

Look at best practices in other locations – what kinds of technology are being commonly used by your colleagues?

Check with your colleagues – are there software applications that they may have developed that they are willing to share at a relatively low cost with you?

NIGP for free resources – NIGP “Measure” helps you document savings http://www.nigp.org/eweb/StartPage.aspx?Site=NIGP&webcode=cps-meas_prog

WHAT IF YOU NEED A “MAJOR OVERHAUL”?

Conditions Requiring a Major Overhaul You have very little automation Your current technology is seriously outdated You are unable to interface with your ERP,

and require some level of “stand-alone” capability

STARTING THE OVERHAUL PROCESS

Steps to TakeDevelop a Needs Assessment -- engage your stakeholders!Build your business case and justificationProvide management with the potential for process improvement, including projected time and process cost savingsExplore the marketplace – just as you would for any other major acquisitionDevelop your initial action and task planDevelop your budgetSeek competition – prepare solicitation based on your needs assessment.

STARTING THE OVERHAUL – CONTINUED

Steps to Take – Continued Evaluate solicitations – include your stakeholders Negotiate Agreements – may require special legal

assistance with firm familiar with software licensing Install the technology Test the technology – tie your payments to the success

of the testing! Train your users Move forward!

PROCUREMENT CARDS

Consider using Procurement Cards instead of purchase orders or blanket requisitions

Eliminates staff time to prepare purchase orders and blankets and significantly cuts administrative costs

Eliminates the need to set-up special accounts and billing with suppliers

Empowers employees at lower levels of the organization to purchase items with fairly low dollar costs

Allows for greater transparency Requires pro-active administration, well-written procedures, and good

follow-up May also be able to use procurement cards as PAYMENT CARDS to

improve efficiency and speed-up the payment cycle

SOME FINAL THOUGHTS. . .

Be sure you engage all of your stakeholders both inside and outside your organization

Be aware of your organizational culture If the culture NEEDS to be changed, you need to

subtly work from within to get buy-in -- don’t force a culture change without it!

Think before you act – Use your common sense!!!

GOOD LUCK!!!

QUESTIONS & COMMENTS?

THANK YOU!!!

Keith K. Glatz, CPPO, FCPM

Purchasing & Contracts Manager

City of Tamarac, FL 33321

(954) 597-3567

Keith.glatz@tamarac.org