The New Supply Chain
Business guru W. Edwards Deming first proposed his "Production Viewed As a System" while explaining his quality management theories to Japanese and American business leaders in the 1950s. Deming's system was primarily concerned with manufacturing, but it outlined the basic principles of the supply chain as it is defined widely today. As translated by the official Supply Chain Council, a group that represents a broad cross section of industries, including manufacturers, services, distributors, and retailers, these basics principles, are "plan, source, make, and deliver," or the SCOR model.
The Supply Chain Council and the university community are, admittedly, just getting acquainted. The supply chain is presented to industrial and business users by vendors as a Supply Chain Management (SCM) system. It may also have connections to, or partially include, logistics and transportation management depending upon the level of its granularity (processing details).
What does all this mean to colleges and universities? As the argument goes, universities make scholars, not widgets, and this does not make for an exact fit with the SCOR model, or any supply chain model. But IHEs are prodigious purchasers of goods and services, and, among the many departments and facilities located on the modern campus, finding those goods and services at the best price and tracking shipments--and then tying it all together in an efficient manner--is still a challenge.
However, an effective tool for better managing the supply chain is available. It has enormous impact on college and university business operations, and that is e-procurement.
Procurement plays an important part of so many university operations that the benefits of streamlining and automating the process can't be overstated. As university purchasing transitions from the paper-based, clerical activities of the past to the time- and cost-efficient, automated, self-service environment offered by e-procurement, a growing number of vendors have populated the field in recent years. Everything from computers, lab equipment, and multimedia products to food services, health products, athletic equipment, office supplies, and furniture--even office personnel--can be acquired through the various procurement products that dot the landscape. Among them are established players such as Oracle/PeopleSoft, SciQuest, SAP, AcquireX, the Educational & Institutional Cooperative Service, and OrgSupply, all of whom claim higher education institutions as clients.
AcquireX, for example, has worked with such schools as University of California-Irvine, American University, and Cal State Fullerton. In 2003, the University of Chicago chose AcquireX as the e-procurement provider for the university's Campus Computer Stores. The university wanted to enable students and faculty to purchase goods on and off campus, 24 hours a day, without the costs and risks associated with buying, implementing and maintaining order entry software. In just two years, the university has procured over $20 million of goods using AcquireX's ASP software application.
In May, the Berklee College of Music (Mass.), the world's largest independent music college, chose OrgSupply's Online Purchasing Management solution to manage online buying from preferred suppliers across their organization. The school wanted to control off-contract or "maverick" buying by encouraging purchases from vendors with whom it had negotiated favorable contracts. It could also negotiate better terms with suppliers by incorporating a more efficient means of electronic payment. OrgSupply provides an e-procurement solution for the Boston Consortium, which comprises 11 Boston area colleges and universities.
SciQuest accelerated into the higher education market after acquiring HigherMarkets, an e-procurement solution provider for higher education, in 2002. Since then, SciQuest has added over 20 higher education customers, including the University of Pennsylvania, University of New Mexico, Yale University (Conn.), Massachusetts Institute of Technology, and New Mexico State University.
SciQuest's supplier enablement model quickly enables an institution's supplier base to work directly with the company's solution, automating the requisition/purchasing process through the settlement process, according to Susan Miglucci, vice president of marketing and strategic alliances. By enabling these suppliers, the institution gains greater visibility into their spending, and can monitor on-contract pricing, to realize greater savings.
Because SciQuest is a hosted, web-based solution, any maintenance or upgrades are made across all uses. All customers are always on the same software version, making support more efficient. The easy-to-use interface drives user adoption, which drives more transactions through the system, allowing for greater spend analysis and tracking.
For example, the University of Pennsylvania integrated SciQuest's Spend Director with Oracle iProcurement software, and enabled approximately 1,800 users to access the University's strategic contract supplier's online catalogs in key commodity groups and saved $2.1 million in product savings alone. Using Spend Director, the university expects to direct at least 60 percent of campus purchase transactions through participating Penn Marketplace contract suppliers.
Alice Seifer, purchasing director at Pace University (N.Y.) says the school wanted to introduce a more efficient and effective way of procuring goods and services from start to finish. Pace has seven campuses, including downtown and midtown New York City, Pleasantville, Briarcliff, White Plains (a graduate center and the law school), and a Hudson Valley Center at Stewart International Airport. There are approximately 14,000 students enrolled in undergraduate, graduate, and professional degree programs in the Dyson College of Arts and Sciences, Lubin School of Business, School of Computer Science and Information Systems, School of Education, Lienhard School of Nursing and Pace Law School.
"This was not just for the final purchase but also the appropriate price negotiations and vendor selections that are of prime importance in the procurement process," says Seifer. "We believe that direct buying--that is, end user involvement--goes a long way to reaching our goals."
Pace knew that getting buy-in from all constituents would be a key to making the e-procurement launch successful, and so the institution was pleased to find that SciQuest and SunGard helped prepare and train the university community on the use of the application. "Both SunGard SCT and SciQuest were very involved in the development and integration of the combined e-procurement solution. The vendors offered Pace guidance in establishing controls and workflow that ensured that the process of procurement was seamless to the end user," says Seifer. "Integration was a bumpy road as the technology was new to Pace, however by introducing both systems at the same time, users were able to adapt to the change at a faster pace."
Another important part of Pace's decision was SciQuest's integration with SunGard SCT Banner Finance software. SciQuest can integrate with any major ERP/financial system, including Oracle, Ariba, SAP, PeopleSoft, and others.
"Pace University is in the process of implementing the ERP suite of applications by SunGard SCT Banner (Finance, Student, Human Resources, and Advancement). The implementation is a multi-year project with the Finance system being the first to go live in July of 2004," says Nicole Thompson-Williams, director of financial information systems. "The university has implemented most of the finance modules at this point and is slated to begin work on the grants and endowments modules in the fall of 2005. With the Banner Finance implementation, Pace integrated the SciQuest Higher Markets solution with a unique scenario in which all purchase orders are electronically issued by the SciQuest software. In addition, effective front-end controls are in place to ensure that budget verification is established prior to an order being processed."
The university's procurement history is available in the Banner application for the purposes of reporting, with specific details of transactions being housed in the SciQuest product.
"Each application has its strengths and weaknesses," says Thompson-Williams. "Combined, however, Pace has managed to create a solution with the best standard practices across the board. The end-user interface of the SciQuest software is friendly and the university has adapted quickly to its use."
E-procurement often allows an institution to negotiate better prices because users are encouraged to do business with an approved list of vendors. The idea is simple: The more business directed to vendors, the better the prices will be for the end user. Negotiated vendor rates allow an institution to procure the best products or services from the best vendors at the best price.
"The Pace University Purchasing and Contracts department has determined much of the current selection of suppliers," notes Ronald Nahum, associate vice president for finance. "The initial goal was to set up supplier contracts that were either negotiated by Pace University or negotiated by the Educational and Institutional Cooperative in order to realize savings from pre-negotiated rates for the purchase of everyday goods. SciQuest's role is to assist in the technical aspect of supplier enablement."
The SciQuest Higher Markets suite will also soon include a bidding module, and Pace will review the benefits that the solution offers and determine whether it is appropriate for the school.
But just because the e-procurement set-up has made dealing with vendors around the country--or around the world--far easier, that doesn't mean Pace can't maintain its dealings with local vendors. "Pace still does use its traditional suppliers," notes Seifer. "Although many traditional suppliers, such as your mom and pop shops, do not have the technical capability of having a large electronic punch-out catalog. They still have the option of establishing a hosted catalog through a content management tool that SciQuest has created for e-procurement and for those suppliers who have still not embraced the world of technology. Pace still has the ability to order from them through e-procurement without the supplier having an established online catalog. We are constantly looking to add to our vendor list, especially with those who are technologically capable of interfacing with the SciQuest product."
Perhaps even more important than efficiency, the e-procurement system has resulted in significant savings for the school. "We are recognizing savings not only on our product prices but also process re-engineering and the saving associated with eliminating inefficient manual tasks," Seifer says.
Obviously, with advancements in technology that tie procurement to reporting and financial systems, e-procurement stands to become the true one-stop shopping experience for college and universities.
Even if it helps streamline just a portion of the complete supply chain, e-procurement can make overall business processes far easier. There is room for far more scope in any existing university program and it would benefit hundreds, if not thousands, of universities and colleges to take advantage of at least a sliver of the supply chain experience and get their exchanges and transactions electronic and within a shareable database.
There might well be an effort to either transform the supply chain as it exists in business or to create a new university supply chain system. It would be a system that uses elements of ERP and supply chain management to bind together all the financial and procurement needs, as well as returns and other bothersome processes. And that's a bargain that's hard to ignore.
Robert Malone is a New York-based freelancer who often writes about supply chain management.