Spotlight on Procurement
Bill Cooper didn't mince words when Stanford University officials contacted him about coming on board as their director of purchasing. "I said, 'No, I'm not interested in a fragmented function and I'm not interested in an institution that has just a director of purchasing,'" recalls Cooper, who now has an office at ... Stanford.
"When you look at organizational structures, you've got the CEO, who provides the vision, the CFO who heads up the finance operations, the CIO who is your technology head," he says. When Stanford approached him, Cooper was associate vice president of management services for the University of Missouri system. And despite the initial response, they called again, this time with a new open position: associate vice president and chief procurement officer. Now Cooper was ready to talk. "There needs to be at this table a CPO," he says, adding that with the title comes the ability to affect change. "If you're sitting there with CIOs and CFOs but don't have a CPO, I think you're missing the boat."
What he's not missing is the opportunity to point out why procurement is so important today. "I tell the CFO, 'All your accountants can do is count money, but purchasing can make you money. Seventy to 75 percent of operating costs are in personnel, salary, and wages. The rest is in supplies and services, and those are the areas where purchasing can have an impact." At Missouri, there was about $400 million in addressable annual spend. "If you can reduce that by just 1 percent a year, that's $4 million bucks, and I'd say that's doing a lousy job. That's where procurement now is going, that's why we have a seat at the table," Cooper says.
'Creativeness that can come from allowing entrepreneurial thinking is taking hold. A lot more colleges are allowing those conversations to happen.' —Doreen Murner, NAEP
Across all industries, points out Doreen Murner, CEO of the National Association of Educational Procurement, "the role of procurement has grown incredibly to be a more strategic and valued position. ... The limelight is on procurement." And it has been for the past few years. Not so coincidentally, this extra attention has coincided with the economic downturn.
"We are one of the few administrative groups in the position of showing value right now," says Ted Johnson, director and CPO at the University of California, San Diego. In his experience, the economic crisis has been "an opportunity to shift how our department is seen by the university." In the past, administrators may have felt they had to evade the procurement police, out to enforce policy. Now they are realizing that any chance to save money means less department budgets cuts. "When we bring initiatives to the table, they're much more open to sitting down and listening to us," he adds.
These days, the procurement head is also more likely to hear cries for help. As Jack D. Zencheck, who has been at Yeshiva University (N.Y.) for 23 years, the last four as CPO, puts it, "All presidents are panicking and procurement is becoming more and more important." His own president has been known to ease budgetary fears around campus with these soothing words: "Don't worry, Procurement will handle it."
Here's a look at how CPOs and procurement directors are handling their evolving roles and gaining greater respect from colleagues across campus.
Getting to Here
In the not-so-distant past, the same supplier could be seen walking the halls around campus for 20 years or more, presenting their wares, recalls Johnson. Campus staff would place orders and "someone in my role was focused on making sure transactions went through.
"It seemed we were always playing catch up," says Maggie Camstra, who works under the CFO as purchasing and auxiliary service manager at Central Ohio Technical College and The Ohio State University at Newark, which share a campus. "There was a lot of struggle just to push the paper along.
The nature of the academic environment, Johnson adds, "allows a lot of freedom, and that's a good thing. But it can be a painful thing. There are people who resent our function and still think they can do it better than we can." As Zencheck notes, people across campus did not trust procurement. "They were negotiating their own deals and purchasing their own orders." In that environment, the purchasing experts can well be the last to know about purchases.
Johnson, who previously worked for Sony Corp., estimates it was five to 10 years ago that corporate executives "started realizing procurement actually contributed to the bottom line. That transition is happening in higher education right now"—only cost savings aren't about profit, but about saving programs, staff, and research dollars.
When the president calls on purchasing, it's no longer about needing a new cell phone or a better office cleaning service, Zencheck says. Instead, he's being consulted on potential actions such as buying a new building and the costs of making it sustainable. For the past four years, Zencheck has been in a role that fulfills an incoming CFO's vision of procurement services, with the accounts payable, purchasing, e-commerce, and energy and sustainability functions reporting to him.
For the University of Missouri, the evolution to more strategic procurement meant unifying four campuses that previously had independent purchasing offices, creating the CPO position, and negotiating some systemwide contracts, Cooper says, adding that officials "recognized that was where they needed to go."
As for the common belief that procurement is a compliance-only function, with procurement police trying to catch buyers who aren't following the rules, he quips, "to be an effective policeman you've got to be able to arrest somebody." While corporate-style mandates don't work well in the academic environment, procurement leaders can still exert influence and "guide our academic brothers on why it's in their best interest to use this contract," he offers as an example.
One indication of the elevated reputation of procurement can be seen at the University of Colorado. During open town hall meetings, the president now talks about procurement, says Sandy Hicks. She's had her current title—assistant vice president and CPO—since 2008. Initially, she reported to the controller, who reported to a VP, but after that controller left, the VP successfully broached the idea of Hicks reporting directly to her. "When procurement reports to the financial end of things, you can't operate as much as a business," Hicks explains. "We're not just the numbers. We're the contracting, the negotiations, the service."
While Murner says the CPO title is not very common, it is cropping up. "I suspect you'll start to see it more and more as we work our way through the economy of the times and get higher ed back on track." What she is seeing: "Creativeness that can come from allowing entrepreneurial thinking is taking hold. A lot more colleges are allowing those conversations to happen."
A big factor allowing more strategic procurement to happen is technology. Back when Zencheck was handling every transaction, he describes the situation as "everyone running around like maniacs."
Many of today's tools, including online requisitions and approvals, procurement cards, and data extraction and analysis software, have allowed "purchasing agents to spend more time doing strategic sourcing as opposed to line-item data entry," says Camstra, who recently purchased Unimarket's eBid package, which allows sister institutions to input information specific to them into the bid. The collaborative effort ultimately allows for better pricing, she explains. The tool will eventually integrate into her institution's Datatel ERP system in conjunction with the Unimarket eProcurement system COTC and OSU Newark intend to move forward with in the next fiscal year. The technology will save time by allowing savvy administrators in other departments the ability to get some of their own quotes, give her office more spend information, and identify areas needing attention, she says.
During the past year, COTC has worked with Spikes Cavell and its data extraction and analysis software, Camstra shares. Once data is transferred to Spikes, it is "cleaned" and fed into a database with similar entities (such as other colleges). "The analysis tool then allows you to look at your data in different scenarios," she says. For example, an administrator could recognize the institution is using a dozen different suppliers for a given commodity, identify it as a bid opportunity, and ultimately garner better pricing. "Take that same information and apply it to several institutions in the database, and the collaborative opportunities are huge," adds Camstra.
Johnson has collaboration on his mind, as well. Prior to implementing the SciQuest eProcurement system, which places all UC San Diego suppliers in a single repository, he would have been trying to gather data from multiple campus systems, and generating cost savings data was a manual process. Any buyer meeting with a department should be able to give a real-time savings number by the quarter. Johnson can easily identify and question the value buyers whose sales to the campus are stagnant bring to campus.
His team worked to bring eProcurement to a higher level by collaborating with SciQuest and forming a UC-systemwide consortium. The initiative puts UC Berkeley, UC Riverside, UC San Francisco, and UC Santa Cruz, in addition to Johnson's campus, under a single contract administration tool. Immediate access to relevant spend data is leading to more effective contract negotiation and has resulted in $2.2 million in savings to UC San Diego—plus a 2011 Award for Excellence in Procurement from NAEP.
Invite to the Party
Procurement leaders who have successfully transitioned from transactional to strategic have likely struggled at least a bit to gain the respect of other administrators on campus. Stanley Behnken, former director of business support services at Anne Arundel Community College (Md.), recalls being told early on by a vice president there that credibility must be built from the base. "He said, 'You're at a negative. You've got to climb out of the hole.' Based on the people who came to my retirement party, I'd say I did OK—or they just wanted some free food."
A big factor in getting to that point was customer service, which meant getting departments what they needed, not just going with the lowest price. "I purchase by quality, service, and then price," says Behnken, who came out of retirement to become purchasing manager at Carroll Community College, also in Maryland. By sitting down with department members to better understand their needs and by explaining the procurement process, "they feel they're a part of it, rather than being told what to do. I think, in a majority of cases, I got cooperation." Before long, he was getting calls from across campus asking what he thought they should do about a particular situation.
Yet laying the groundwork for trust doesn't mean there isn't a need to still prove yourself. "In some cases, people did fight me. I'm not going to say it was all hunky dory, kumbaya," he shares. But he did keep in mind the importance of working together.
Hicks found herself in a position of starting from scratch when CU's four campus procurement offices were consolidated and the Procurement Service Center was established at the medical campus. "People were very much used to dropping by, dropping stuff off," she says. At the new location, 30 miles away, "nobody was going to come see us. We had to flip our thinking from inward to outward customer service."
Currently located with the Office of the President, the center's outreach continues. It includes department visits, during which procurement officers share their roles; annual supplier showcases on each campus, which attract about 1,400 people per year; annual procurement office open houses, also for each campus, where people can explain their procurement issues; a twice monthly newsletter; and invitations to the procurement office for specific departmental presentations.
While events such as the supplier showcases are a lot of work, "I'd say we get way more value back," Hicks says. "Also, your relationship [with other departments] has changed forever. I think there's this great appreciation for our department that we took the time to do this for them."
For Cooper, relationship building has involved sitting down to create a face-to-face dialogue, actively listening to people's pain points. "A lot of good people on campus are working in ways that they believe are good, but they're not necessarily working smartly," he says. "By going out and sitting with them, you change the dynamic. ... You hear things they need, respond to those, get a little credibility, build up some trust. Then you bring up major initiatives, because they hear you care about their business."
Top-down support for procurement certainly doesn't hurt. "When we introduced eProcurement at Missouri, we got the blessing of the board and the president. The announcement about eProcurement came from the president," Cooper says. "It does me no good to do it. Then you're pushing that boulder uphill." Starting from the explanation of why key leadership is firmly behind the effort, it's more difficult for people to say they don't want to participate.
At UC San Diego, it was the vice chancellor of business affairs who provided the boost that Johnson's team needed to gain support. "I think having that executive-level support was very key in getting us an audience," Johnson says. "After that it was having the data to compel them. Nothing, for sure, has been automatic."
This, however, does seem sure: Procurement is getting noticed on campuses. Murner's advice to procurement professionals: "You've got the light on you. Now you need to know what your dance is."
Resources Mentioned in This Article
- E&I Cooperative Purchasing
- National Association of Educational Procurement
- National Joint Powers Alliance
- Spikes Cavell
- The Cooperative Purchasing Network
- U.S. Communities
Bill Cooper of Stanford University and Jack D. Zencheck of Yeshiva University (N.Y.), who serve on E&I Cooperative Purchasing's strategic sourcing committee, offer examples of how strategic ideas and actions pay off for their institutions here.
Click here for 10 ways institutions can be more strategic about procurement.