Smart Shoppers
Electronic procurement means quicker purchases, no paperwork and better discounts for colleges.
Instead of trying to solve the mystery of black holes, East Tennessee State University decided to plug them up.
Because the school has a large campus with a detailed paper-intensive requisition process, forms would occasionally get lost as they traveled from department to department for approvals.
“The average time to get from a requisition to a [purchase order] was nine days,” says Kathy Kelley, assistant vice president of procurement and contract services at East Tennessee State in Johnson City, Tenn. “People would call and ask, ‘Don’t you have it yet?’ Sometimes it would get lost in a black hole.”
Since launching its new integrated enterprise resource planning (ERP) and online procurement systems in July, East Tennessee employees have, for the first time, a bird’s-eye view of the procurement process. Paper forms have been replaced by electronic ones that are submitted and signed online, and an electronic log shows the history of each requisition: where it began, who has viewed it, who has signed it, which signatures are still pending and any notes made along the way.
“You could do it in a matter of minutes if all the people were sitting at their desks,” Kelley says. “But, realistically, I’m going to guess that it will take two days, if that.”
Colleges and universities across the country are making the move to paperless procurement systems, thanks to increasingly sophisticated software designed specifically for institutions of higher education. And they’re finding that online procurement can help speed up order times, reduce administrative work, eliminate paperwork and cut costs.
“We’re very excited about it,” says Tom Kaloupek, director of materials management at Virginia Polytechnic Institute and State University (Virginia Tech), in Blacksburg, Va., about the school’s new e-procurement system. He calls it “a good investment.”
The University of Virginia, which plans to go live with its new e-procurement system in December, has plans to cut costs by negotiating new contracts with vendors, says Eric Denby, director of procurement services at the Charlottesville-based campus. By creating an online marketplace, the university will be able to feature preferred vendors and encourage employees to buy more products from them.
“As more spending goes to those vendors, we’re able to say, ‘Look at how much more business we’re giving you. I think we deserve a better discount,’” Denby explains.
Setting Up Shop
Shifting from paper to online procurement systems is far less painful these days than it was years ago, because the systems are more user-friendly, and most people are more comfortable with online shopping.
The University of Virginia’s system looks like any major e-commerce retail site. Users can browse through products online, click a button to add something to their shopping carts and then check out their purchases.
Letting employees shop online will hopefully speed the procurement process since they won’t need to call in or fax orders to vendors, Denby says. In addition to boosting sales at preferred vendors, the University of Virginia expects the e-procurement system to help it meet its goal of increasing business with small companies owned by women and minorities, he adds.
One cost-saving idea is to use electronic invoices with the university’s biggest vendors. Accounts payable specialists at the University of Virginia process about 300,000 invoices a year. Using electronic invoices with just the university’s five biggest vendors could cut that figure by 50,000, Denby says.
The university began implementing the new system in May and had a prototype testing in mid-August. It established an advisory group of about a dozen “power users,” and they’re all excited about the new system, Denby says. He expects that the system will be so easy that most people will be able to figure it out with an online tutorial rather than in-person training.
Training Extremes
The University of Virginia has had the unusual experience of being able to look into its future, thanks to Virginia Tech. While the state offered all agencies the chance to use its centralized e-procurement system, the two universities decided to purchase their own system together, and Virginia Tech has been using it since May.
“It’s gone very well,” says Virginia Tech’s Kaloupek. The university started with a test group last spring and began phasing the system in throughout the campus this fall.
If Virginia Tech’s experience is any indication, Denby’s expectation that users at the University of Virginia will be able to grasp the system with just an online tutorial is likely to be partially correct.
“Some people love it — they get it right away — but others suffer,” Kaloupek says. “They just can’t get it. They need a lot of help.”
Part of the problem is the culture change prompted by the switch from a paper-based to an electronic environment. While the University of Virginia has been using electronic requisitions since 1988, a large percentage of Virginia Tech’s transactions have been paper-based.
“We were passing around lots and lots of paper,” Kaloupek says.
In the past, someone could place an order, and if there weren’t enough funds in a particular account, money could be transferred from another account to cover the purchase. The electronic system, however, has an automated budget check and approval process, so if the money isn’t already in the proper account, the order can’t be placed.
The system is also less forgiving of incomplete forms. Requiring every field to be filled in will improve accuracy and make accounting easier, but some employees may see it as an added burden, Kaloupek says. “Some people will find 80 reasons why the old system was better,” he warns.
To help ease the transition to the new system, Virginia Tech is offering classroom training, online user guides and a help desk. The campus has also recommended that each department designate a lead person who truly understands the system and can help their peers navigate it. So far, about 900 people from 16 departments have been trained.
“It’s not like we’re going to flip the switch on Monday and everybody’s got to do it,” Kaloupek says. “Our culture is not to create enemies. We don’t want to cause disruption.”
Melissa Solomon is a technology writer based in New York.
ONLINE PROCUREMENT TIPS
• Look for a system that easily integrates with your existing infrastructure.
• Don’t use e-procurement only for external transactions. Like most campuses, Virginia Tech offers a variety of services, such as a copy center, catering and lab work. Those transactions are now included in the same system as external transactions, making for a more complete, balanced accounting process, says Tom Kaloupek, director of materials management at Virginia Tech.
• Take advantage of e-procurement’s improved reporting. Since all orders go through East Tennessee State University’s new e-procurement system, the school can show vendors exactly how much business it sends their way and negotiate better discounts.
• Don’t underestimate the time and resources needed to implement an e-procurement system. “It’s a couple of years of solid work,” Kaloupek says. The fiscal, procurement and IT departments need to work together to design and implement the system.
• Make sure executives appreciate and communicate the value of e-procurement. “That opens a lot of doors,” Kaloupek says. Deans and other leaders also need to be told what the system will eventually look like, and they should be prepared to handle criticism.
• Make sure the e-procurement system is simple and user-friendly. If you create extra work, people won’t want to use it, says Jane Pleasants, assistant vice president of e-procurement and supply chain management at Duke University.
• Negotiate discounts and contracts with preferred vendors before you go live with the system. If employees see a variety of products with low prices, they’ll want to shop on the site, Pleasants adds.
• To offset the costs of a new e-procurement system, universities can charge annual fees to vendors in exchange for running their logos on their e-marketplaces. Not only does it get vendors’ products in front of thousands of potential current customers, but it can also result in scores of future customers once students graduate.
• If your e-procurement system is being implemented in conjunction with another system, spread out the launch dates. Kathy Kelley, assistant vice president of procurement and contract services at East Tennessee State University, says learning a new e-procurement and ERP system simultaneously, as well as the interface that connected the two, was a “monster undertaking.”
THE WIDE WORLD OF E-PROCUREMENT
Before making the move to higher education 13 years ago, Kathy Kelley worked at a hospital that had been using electronic procurement for years. So it was something of a shock when she started at East Tennessee State University, which still used paper to record its transactions.
“From the very beginning, my eyes were open to what could be,” Kelley says.
That vision finally became reality last summer when the Johnson City, Tenn.-based university flipped the switch on its new e-procurement system.
Institutions of higher education are all over the map when it comes to implementing electronic procurement. Some, like East Tennessee, are just now transitioning from largely paper-based environments, while others, like Duke University, in Durham, N.C., have been using e-procurement for eight years.
But electronic procurement means different things to different people, says Jane Pleasants, assistant vice president of procurement and supply chain management at Duke. “When you talk about e-commerce, it’s so vast,” she points out.
Duke has been using online procurement since 1999. The system was launched on Pleasants’ first day of work. But that was only with specific vendors that already had online ordering systems.
For the last year and a half, Duke has been a member of the Global Healthcare Exchange, a privately held company that lets the university conduct online transactions with a variety of vendors through one central system.
About 80 percent of Duke’s transactions are handled electronically. Employees can place orders and receive bills electronically, but not all areas of the campus use electronic requisitions.
Duke’s next step in the world of e-procurement is to enhance the university’s purchasing system so that employees can log onto the internal system, punch out to external sites and have their transactions at those sites automatically recorded by the university’s internal system. Duke plans to launch that capability next spring, according to Pleasants.
East Tennessee State’s new system already provides access to “punch out” catalogs, in addition to the university’s hosted online catalog. The hosted catalogs are regularly updated, and users can create lists of favorites so that each time they shop, they can pick from that list rather than looking up items from scratch each time.
“The biggest advantage is going to be the efficiency that we get from it,” Kelley says. For instance, as the system was designed, East Tennessee found and eliminated some extraneous approvals in the requisition process. “It’s a real opportunity to do a re-engineering of your processes,” she says.
