1 Driving Contract Compliance through Strategic Procurement Breakout Session # 405 Name: William M. Cooper, C.P.M. Associate VP & Chief Procurement Officer.

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Driving Contract Compliance through Strategic Procurement

Breakout Session # 405

Name: William M. Cooper, C.P.M.

Associate VP & Chief Procurement Officer

University of Missouri System

Date: April 8, 2009

Time: 9:45 – 11:15 am

A NEW VISION OF PROCUREMENT

• Not merely a back office “order shop” but a Strategic Player essential to the long term success of the University. The “New” Procurement is:– Inextricably linked to the University’s strategic objectives and

core missions of teaching, research, service and economic development

– Employs procurement strategies that are aligned with those of internal customers

– Understands and analyzes supply market dynamics, establishing collaborative supplier relationships that result in maximum added value.

– A major contributor to the financial health of the institution

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Procurement’s Strategic Value Proposition

• Revenue Center vs. Cost Center– How do we do it?

• Materials & Services Cost Reduction – External• Processing Cost Reduction – Internal• Other Money Makers

– P-Card Rebates– Contract Rebates– Surplus Property Sales

Procurement’s Strategic Value Proposition

• Great! But How Does that Make Procurement Strategic?– Reallocation and generation of significant

financial resources affording:• Retention of valuable human resources• Expanded teaching and research programs• Plant improvements• Competitive pay increases for faculty & staff• Minimization of tuition increases

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Procurement’s Strategic Value Proposition

• A New Face for a New Vision– Entrepreneurial rather traditional– Mission oriented rather transaction focused– Proactive rather than reactive– Problem solvers rather than “procurement police”– Committed to results rather than process– Subject matter experts rather than admin support– Understanding & concerned rather than unknown & aloof– Way-makers rather than gatekeepers– Valued partners rather than unwanted intruders

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We Needed A Lot Of ….

CHANGE!!!CHANGE!!!

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The Road From Vision to Reality

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Where We WereWhere We Were

What We Did-Part What We Did-Part II

What We LearnedWhat We Learned

What We Did-Part What We Did-Part IIII

How We Did ItHow We Did It

Where We AreWhere We Are What We GotWhat We Got

Where We Were

• The State of Purchasing at UM in 2000

Four campuses operating independently– Inconsistent policies and procedures– Same legacy system, different versions– No consolidation of requirements– Transaction oriented “order shops”– Acted as “Procurement Police”– Viewed as bureaucratic necessity at best

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What We Did – Part 1

• Review and Analysis – Procurement Review Committee – Independent Supply Chain Consultant– Recommendations

• Eliminate redundant activities

• Restructure organization under central leadership CPO

• Implement a common ERP• Raise P-Card threshold• Investigate eProcurement

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What We Did Part – 1

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--Cut redundant functions--Reorganized under CPO

--Implemented ERP--Raised P-Card threshold--Created system-wide website

What We Learned

• P-Card – “The Dark Side”– Lost spend visibility– Reduced negotiating power– Facilitates “maverick spend”

• ERP – Not a Procurement Solution– Too complex for the “ultimate user”– Inefficient processing – multiple hand-offs – No sourcing/shopping tool for clients

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What We Learned

Consolidated Organization

+Consistent Policies

+Strategic Contracts

+ERP

≠Strategic Procurement

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What We Learned

• We were left with:

– Inadequate spend visibility– Low Contract Compliance– Decreased negotiating power– Diminished strategic relevance because we…

CAN’T SHOW THEM THE MONEY!

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What We Did

• The Core Question:

How do we deliver our strategic contracts to the greatest number of users in a way that will induce their usage; thereby increasing contract compliance, resultant “revenue” generation, and in the process Procurement’s strategic value ?

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What We Did – Part 2• Answer: eProcurement -“The Missing Link”

– Key processing benefits

• One stop shopping

• Simple and familiar purchasing process

• Frees clients to do their real jobs

• Widespread availability of reporting data

• Reduced time for requisition review

• Redirect purchasing focus to high dollar items

• One stop shopping

– Simple and familiar purchasing process

– Free clients to do their real jobs

– Widespread availability of reporting data

– Reduced time for requisition review

– Redirect purchasing focus to high dollar

items

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What We Did – Part 2• E-Procurement – “The Missing Link”

– Key contracting benefits • Greater spend visibility• Metrics and benchmarking tools to enhance

strategic sourcing• Increase on-contract spend• Negotiate better contract pricing resulting in…

Mo Money!

Mo Money!

Mo Money!

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What We Did – Part 2

• The Procure– On-line supplier catalog and electronic

order distribution management modules integrated with our ERP

– Managed Services delivery that affords supplier enablement and electronic order distribution to a critical mass of suppliers necessary to drive significant increase in contract compliance and resultant savings

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What We Did – Part 2

• The Pay– “Virtual” Credit Card Solution

• Integrated with our ERP• Eliminate individual P-Card without increasing

AP work• Maintain prompt vendor pay• Increased P-Card volume = increased rebate =

Mo Money! Mo Money! Mo Money!

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What We Did – Part 2

Procure to Pay

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Create Shopping Cart using SciQuest Spend Director

Create Shopping Cart using SciQuest Spend Director

Initiate requisition in PeopleSoft eProcurement

Initiate requisition in PeopleSoft eProcurement

Requisition Approval in PeopleSoft eProcurement

Requisition Approval in PeopleSoft eProcurement

PO Created in PeopleSoft PO Created in

PeopleSoft

PO assigned a virtual one-time use credit card number by PaymentNet/ExacTrac

PO assigned a virtual one-time use credit card number by PaymentNet/ExacTrac

PO sent to Supplier using SciQuest Order Manager

PO sent to Supplier using SciQuest Order Manager

Supplier charges credit card after shipmentSupplier charges credit

card after shipment

Bank sends monthly Central Bill for Payment

Bank sends monthly Central Bill for Payment

How We Did It

• Design and Implement – “It takes a Village”– Core Project

• Executive Sponsors• CPO• Full Time Project Manager• IT Lead(s)• Supplier Enablement Team• Change Management Team• Training and Communications Team• Client Advisory Leads

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How We Did It• Campus Advisory Group

– Second level representative of all major departments– Well respected and trusted to vocalize departmental needs/desires– Involved throughout design and development – assume ownership

– First line communicators, “Champions”• Pilot Test

– Different types of user departments – academic, administrative, facilities; large, small, etc.– Frequent users/infrequent users

* Well respected and trusted to vocalize

departmental needs/desires

* Involved throughout the design and development

– assume ownership

* First line communicators, campus “Champions”

• First level– Second level

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How We Did It

• Marketing– Created and maintained a “buzz” ; spread the value

proposition/built support• Name the marketplace contest

– Kept everyone “plugged in”; regularly communicating via:

• E-Mail announcements direct to primary users

• Forums/demos targeted to primary users

• Forums/demos targeted to influential constituencies

• Auditorium assemblies/demos targeted to general population

• On-line employee newsletter

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How We Did It• Marketing (cont’d)

– Web site updates – progress & savings– Regular departmental “Client Outreach Meetings”– Student campus newspapers– Vendor Fairs– Board Meetings

• Iterate , reiterate, and re-re-iterate the 3 E’s

Easy to learn

Easy to use

Empowering!!

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How We Did It

• Training– Targeted classroom training

• Requisitioners, Approvers, “Shoppers”• Frequent requisitioners vs. infrequent

– Targeted on-line training tutorials• Requisitioners, Approvers, “Shoppers”

– On demand, one on one, client desktop

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Where We Are

• Live and Running at all campuses– All previous ERP requisitioners trained– Targeting new requisitioners/P-Card users

• First wave of 18 suppliers loaded Oct ‘07– Negotiated $6.7M in annualized cost savings

• Second wave of 22 suppliers up by July ‘09– Negotiations project an additional $4M per year in

annualized contract cost savings

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Where We Are

• Contract Compliance rate has risen from 30% -40%; ultimate goal 80-90%

• As a result strategic contracts now delivered through ePro have produced an additional $7M in revenue

• P-Card rebate increased by $91.3K over last year for a total of $1.1M

• Projected minimum savings over 5 years is $24.9M for a $3.0M investment; an ROI of 8-1

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What We Got

• Happier administrative support – less work• Happier faculty/researchers – greater sourcing and

ordering power with less hassle• Happier strategic suppliers – more business• Happier Procurement staff – less tedium/more value

added; national recognition as a “best practices organization.”

• Happier leadership because their “Strategic” Procurement Organization has brought them….

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MO MONEY!MO MONEY!

MO MONEY!!MO MONEY!!

MO MONEY!!!MO MONEY!!!