- By Amy Milshtein
- November 1st, 2008
Procuring things the old way takes time and patience. Fill out forms, wait for approval, send out the purchase order, and then wait again for the item. But what if there were a more efficient way? It turns out there is, and it’s very similar to the online retail you’re doing right now in your off time (or while you’re reading this article). E-procurement promises to save time, streamline buying, and put hard dollars back in a school’s budget.
“We used to have these yellow requisition forms that people would fill out,” remembered Bill Lyle, purchasing director, Delaware Valley College in Doylestown, PA. “Routing for approval would be haphazard at best. The process could take weeks and the outcome not always guaranteed. Sometimes people would wait for their requested item only to find out there’s no money in the budget.”
E-procurement changes all of that. Now, with a few clicks of the mouse, products can be researched, requisitioned, approved, purchased, and delivered — sometimes within 24 hours. Larger orders speed up, too. “We just bought two trucks for a total of $66,000,” related Lyle. “The purchase order was created and released in three working days.”
Even more impressive, shopping data remains captured and can be tracked and analyzed with ease. Purchasing departments, once filled with bureaucrats pushing paper, now become powerful profit centers poised to save their schools real money. “From 1996 to 2006, we saved our school $89 million in hard, documented dollars,” said Ralph Maier, chief procurement officer, University of Pennsylvania in Philadelphia. “We are on track now to save another $50 million from 2006 to 2009.”
Saving the Big Bucks
How can Maier and other e-procurement users manage to save so much? “This system benefits each stake holder,” explained Maier. “Our customers enjoy an easy way to order goods, our management gets a great return on investment, and our suppliers grow market share with a larger volume of orders.” It’s that volume that allows Maier and other procurement officers to negotiate better prices. “In four years, we have quadruped our orders to Fisher Scientific,” explained Maier as an example. “That gives us lots of bargaining power.”
This new negotiating power changes the nature of the procurement department. “Systems like this free people from boring jobs,” said Dave Stevens, CEO and co-founder, Coupa. “Instead of inputting data all day long, purchasing employees can perform more tactical duties like generating spending reports, sourcing new suppliers, and negotiating better deals.”
Setting It Up
Another advantage: today’s e-procurement systems don’t put a heavy burden on a school’s IT department. “With our system, there is nothing to install behind a firewall, and there are no new servers to buy,” explained Dan Traub, lead solutions engineer, SciQuest. “It’s software as a service (SaaS), and our company does all of the heavy technical lifting.”
Even with its small IT footprint, e-procurement still manages to capture large amounts of information. “All of the organization’s rules and budgets are right there on the user’s desktop,” said Harry Goldberg, vice president of marketing and business development, Mercury Commerce Solutions. It also keeps end users from bucking the system, purchasing something that isn’t authorized and then asking for forgiveness instead of permission. “It’s taken us 12 years to get here, but we are at zero percent non-compliance of our purchasing rules,” said Maier.
However, the best systems still have some flexibility built into them. “If you don’t make it easy for the end user, people will get into their cars, drive to the nearest Staples, and pay retail for an item that you have negotiated a better price for,” continued Goldberg.
Instead, with an e-procurement tool, people can now open a browser and go directly to a company’s catalog. “It’s great to be able to take advantage of a vendor’s Website,” said Goldberg. “But instead of the pricing that the general public sees, a user sees pricing available to their university.”
Once an order is placed it’s then routed to the correct people for approval via e-mail. The end user can track the order easily and know when it will arrive. If the order is denied, that information is readily available, as well.
Shopping like this allows a school close containment of costs. Especially in the case of grant money, where rules and audits are particularly strict, e-procurement can make the process painless. “The Marine Science Institute at the University of California in Santa Barbara found that procurement was getting in the way of research,” reported Stevens, “and they had to generate three to four labor-intensive audits a year. Web-based purchasing took away all of those pain points.”
E-procurement can also help a school stay true to its ideals. “If a school wants to buy from a certified green vendor, for instance, Web-based purchasing can help with that,” related Traub. “They can also help end users find minority- or woman-owned business to patronize as well.” He also points to making other purchases easier. “Hazardous or radioactive materials that might be needed for research are harder to procure now, thanks to regulations tightened by Homeland Security,” he explained. “An e-procurement system will route those purchases to the right people for approval and simplify the process.”
Even with all of its advantages, e-procurement remains somewhat rare on college campuses. “I would be surprised if there were more than 20 to 30 percent of schools using some kind on system,” said Stevens. Traub puts that number even lower, at five to 10 percent. “It will grow,” he said. “The return on investment is potentially huge. No one wants leave that low-hanging fruit untouched.”