In Ohio, institutions turn to e-procurement to realize major cost savings and produce better data on purchasing power.
Ohio higher education officials have long understood what it means to cooperate, especially when it comes to buying products. Since 1963, when the Ohio Inter-University Council established its Purchasing Group (the IUCPG), the state's 14 public colleges and universities have worked closely together to aggregate their spend numbers and negotiate discounts from manufacturers on common goods and services, including office supplies, research equipment, dormitory mattresses and pharmaceuticals.
Recently, IUCPG members decided to step up their efforts by adding automation to their procurement process. In 2006, some of the institutions began implementing SciQuest, a cloud-based e-procurement system that automates purchasing, enables more transparency and enforces contract compliance – all while eliminating paperwork and streamlining administration.
SciQuest is in place at seven universities – Ohio University, Bowling Green State, Miami, Kent State, Youngstown State, Shawnee State and Wright State – while the other seven schools are still deciding if the investment will provide a successful ROI.
The colleges using SciQuest are already realizing significant monetary savings individually, but all 14 IUCPG members also stand to benefit. All the electronically generated data will automatically feed into a centralized web-based system that is also hosted at SciQuest but coordinated by Ohio University. This individual school data can then be quickly aggregated by the central system and processed for very granular reports and numbers on statewide purchasing patterns.
Laura Nowicki, OU's chief procurement officer, says the automation will allow for cost savings well beyond anything that IUCPG members could realize under its more manual reporting system.
"The technology is going to afford us just unbelievable opportunities to enhance the effectiveness of consortium buying," she states. "And that's because we're collecting data that we probably never had before and never had the ability to share in the way that we can now and as the program progresses."
Gene Stephens, director of strategic procurement for the IUCPG, says that having specific, hard spending numbers gives consortium officials a much stronger hand when negotiating volume-based pricing with potential vendors.
"Knowledge really is power in negotiations," he explains. "Before we had this, we knew we had a lot of purchasing volume. But we had no way to prove it to potential manufacturers because not all schools were able to pull their data together easily or with much accuracy. Now, we can show exactly what we're doing with confidence year after year and leverage that knowledge to get really deep pricing discounts for our membership."
Even without the promise of better cooperative pricing down the road, Bowling Green State University was committed to investing in e-procurement. For Andy Grant, the university's director of business operations, the decision was all about improving efficiency, since purchasing had long been predominantly decentralized and lacking structure.
"We didn't have the ability to be proactive," he recalls. "Everything that came in kind of took us by surprise, and we had to scramble."
With SciQuest, the BGSU purchasing department migrated to a single, centralized tool. For the bulk of university shoppers, the system is not unlike Amazon.com or other e-commerce sites. Buyers go online to access the purchasing system, known as "Falcon's Purch" (a nod to the school's mascot), browse individual catalogs or search for products across university-specific or IUCPG-negotiated contracts, place their items in their online shopping basket, and check out. On the back end, the funds are taken out of the appropriate budget and any purchases that require approvals are automatically routed and signed off on electronically.
"The best part is that we see all the data now," Grant says. "I can not only tell you how much the Arts and Sciences Department is spending on office supplies, but I can tell you how many No. 2 pencils they bought. We never had that kind of visibility before, and we can definitely use that to our advantage when we go to negotiate better pricing."
Grant says his school is projecting a 10 to 15 percent savings on overall procurement costs in the first year. By its very nature, the system significantly reduces or eliminates all wasteful steps and spending. "You have your efficiencies between accounts payable and the purchasing offices with e-invoicing and everything else going to the electronic methods," he says. "There's less time spent touching every piece of paper."
For OU, the addition of SciQuest has allowed the school to leapfrog into 21st-century procurement methods. "A year ago, we were doing paper requisitions," Nowicki states, noting that her university's purchasing department was the last of the seven schools to go live with its individual e-procurement system, known as Bobcat Buy.
For OU, e-procurement is not only cutting the time and costs associated with requisitions and invoicing, but it is also discouraging what Nowicki terms "maverick spend" – when buyers choose other, more expensive buying options, such as using their purchasing card to run out and pick up a few items at an off-contract supplier.
Another advantage, she says, is transparency at all levels in the process, "from the shopper to the requester to the approver to grants to legal to environmental health to IT," Nowicki says. "Anyone with a need to know can see what's being bought and where it is in the workflow process."
Taking It to the Limit
It's not just procurement and finance officers touting consortium buying. The leadership in the state of Ohio is so convinced of the value of e-procurement that it has tied the system's performance to a larger goal: attracting the best and brightest students and keeping them in Ohio. The Lumina Foundation, which is tasked with increasing higher education among Americans to meet future economic demand, awarded the state of Ohio a grant in late 2009 to test the concept at several levels. This gave Ohio the funds it needed to develop the SciQuest central system and operate it for the next four years.
"It might seem like a stretch, but the premise is that if you're able to reduce supply and service costs, and you're able to do it as a state, both institutionally first and then in collaboration with your peers, you can divert those monies back into the core missions of the institutions," explains Nowicki, adding that procurement is typically the second largest budget item for higher education institutions, after payroll. "So every dime and dollar we save will be diverted to keeping tuition costs affordable, providing a better-quality education, providing more career paths and mentoring and internship opportunities, and hopefully investing in a way that makes the students' experience here so meaningful that they'll want to stay in the state of Ohio."
Enabling those kinds of major savings will require an even larger percentage of Ohio's higher education community to act in concert. This means not just the 14 public institutions, but also the state's 51 private colleges and universities and its 23 community colleges.
Unfortunately, at this point, colleges can't rely on existing e-procurement systems or manual processes to automatically feed their procurement data into the central system. Because the central system uses SciQuest, the institutions also have to implement the software.
"You have to have a common system, whether that's SciQuest or a competitor," explains Nowicki. "If not the ordering system, you at least need a warehouse solution so that you can share the data in a way that's meaningful and standardized. Without that, your results can get really skewed."
For smaller, resource-strapped institutions, this can be a difficult proposition, according to Stephens. "It's a large commitment that a school has to make, and it's an ongoing commitment," he says. "We feel that there are many benefits that are generated from it, but individual schools have to weigh their own needs, finances and staffing and determine what they can do. That's a decision each school will have to make."
Tips for Going Live
Andy Grant, director of business operations for Bowling Green State University, describes the steps that his school took to go live with SciQuest in June 2010, achieving almost immediate process efficiencies and significant cost savings:
- Involve your customers. Before planning the deployment, Grant worked with a strategic focal group of departments with "high volume," some of whom typically bought off-contract. He asked for their requirements in a procurement solution and also ran reports to determine exactly what products and services each department purchased on a regular basis. This not only informed the planning process, but also started to prepare buyers and approvers for change.
- Map the purchasing process. "We went back and started at the beginning with Purchasing 101," Grant explains. That meant performing a manufacturer cleanup in the existing enterprise resource planning system; detailing all manual workflow and approval steps and determining how purchases should be routed within the electronic system; and resolving what the SciQuest system should handle versus the ERP system.
- Develop an effective training strategy. BGSU required in-person training for all 450 requesters and approvers over a six-week period. For shoppers, BGSU provided online documentation in a step-by-step process. The toughest part? Convincing people to stop relying on their purchasing card. "In their mind, it's just a lot easier to use that, and they're right – it is easier," Grant says. "But you end up skipping the approval process and have to do reconciliation. We had to show them why using the new system would ultimately be better for everyone – including them."