IHEs Find E-Commerce Pays Off
Whether it's ordering supplies, paying bills, or selling merchandise, many IHEs are embracing web-based, e-commerce as a fast, efficient, and economical means to conduct business.
For example, the not-for-profit Educational & Institutional Cooperative Services, Inc. (E&I) uses pre-negotiated contracts to win discounts for schools that do volume purchasing. The contracts are implemented on a "plug and play" model, which allows the schools to control purchasing decisions so more of the purchasing takes place online through vendor-sponsored catalog content at discounted prices. More recently, E&I and SciQuest have been experimenting with jointly sponsored "reverse auctions" and electronic requests-for-proposals (RFPs) which realize even more dramatic savings.
"While we count virtually every school in the country among our members, there are a number of small colleges we haven't reached out to, but we're getting to them," says Amyn Thawer, director of e-business for E&I.
to buy light bulbs, we noticed
a $10 per item discount."
-Frances Feicht, Univ. of the Pacific
While E&I has had an internet presence since at least 2000, last year the organization started working with SciQuest, which offers on-demand applications that automate the source-to-settle process. "We took their platform, Select Site Spend Director, and created a platform that could be accessible by our entire membership," Thawer says. "The schools don't really communicate with each other yet; for example, if you're at Harvard, you can't see what MIT is doing. But it allows all universities to connect into one portal, and they all have access to E&I price catalogs."
Says E&I CEO Tom Fitzgerald, "The idea of plug-and-play is that if an individual wants to enable one of its contracts to go online, it's a costly and time-consuming process. They have to automate those contracts so they're suitable for that school's technological platform. We do it just once so that it's available for all of our members."
Take chairs for example. There is no such thing as a standard chair. There are chairs with or without arms, high back and low back, coasters, and so on. "We asked Steelcase, our furniture supplier, 'What are the most commonly ordered products?' and then we put together a catalog of those designs so that you could essentially point and plug," Fitzgerald says.
Frances Feicht, director of Purchasing for the University of the Pacific (Calif.), says the school has recorded significant savings through online purchasing with E&I. "Before, people were purchasing from Granger, one of our web-enabled vendors, without going through E&I, until we noticed we could get in Granger's top tier for purchasing because of the volume associated with all of our three campuses," Feicht says. "Now, with E&I, when we go online to buy light bulbs from Granger we get a $10 per item discount."
In addition to Feicht, the university, which was an E&I beta test site, employs five other procurement staff members. "Some contracts feature better discounts than others, but we've always gotten a savings," says Feicht. "Because we're members of E&I, at the end of the year, we get a rebate. We've had the system for about a year, and last year's rebate was over several thousand dollars," she says.
Feicht adds that one of the attractions of the E&I utility was its affordability for smaller schools. "When I went looking at them a year or two ago at the National Association of Educational Buyers trade show, these systems were around $2,000 a month. We can't afford these systems, because they're very costly. And, several that I looked at have since gone out of business. On the other hand, E&I is free, so what have you got to lose?" she asks.
electronic billing because
it's very complex."
-Dan Toughey, president, Touchnet
Feicht points out that one of the things her institution would like to see would be more vendors available through the online products. "Right now E&I does not have a lot of vendors, though they are constantly negotiating new contracts. We would like to see a dental product vendor on there," she says.
Feicht says that one drawback to the system is the somewhat smaller number of vendors available to order from. But that concern is offset by the price. "Other systems have tons of vendors; SciQuest's HigherMarkets was an e-procurement system we looked at over a year ago. It had more vendors than E&I, but it was not free," she says.
E&I's Fitzgerald explains that getting more of the cooperative's standard contracts enabled online is a project for the future. "We have roughly 100 suppliers available in the traditional format, but only about 10 percent of those are plug and play. We're hoping to bring that substantially up in the next 18 months," he says.
In addition to the plug and play offering, E&I and SciQuest have combined to initiate reverse auctions. "A group of 15 schools in the Philadelphia area (the Philadelphia Area Collegiate Consortium) conducted a reverse auction to purchase gas cylinders," says Fitzgerald. "The auction lasted about 65 minutes, and we saw prices drop by as much as $16,000 per minute at one point," he says. E&I also planned a reverse auction on truckloads full of recycled paper last month.
Ralph Maier, interim director of purchasing services for the University of Pennsylvania, was one of those who participated in the reverse auction for gas cylinders. "We've had the Penn marketplace online for several years. It had been hosted by Global Exchange Services, but in January of this year we migrated to SciQuest and went live with it." Maier says that Penn has 102 strategic suppliers in its marketplace, who receive 70 percent of the school's purchase transactions. "From the beginning of this year we've been able to realize $2.1 million worth of new product savings," he says.
According to Maier, the success of online purchasing still depends substantially on the availability of vendors and the cost of the product. "Two-and-a-half years ago at this time, we had 31 catalog suppliers. Now we have 102 with SciQuest. Unlike our previous partner, with SciQuest there is no cost to suppliers to participate."
IHEs are also either adopting or investigating web-enabled bill paying solutions. Touchnet, for example, offers a commerce management system that features a true e-commerce component. However, the core of the system is still the Touchnet Payment Gateway, says company President Dan Toughey.
"Recently we added to our electronic billing product the capability to operate and manage an online payment plan. A lot of campuses outsource electronic billing because it's very complex. The product generates the payment plan online, and then automatically deducts the payment from your bank account or posts it to a credit card," Toughey says.
"Now, we can automatically change the payment plan if something happens. Where schools are putting the pencil to the paper on this, third parties have traditionally charged students to sign up for the plan. The third party would charge the student a fee, typically between $25 and 50 per term," he says.
It is this new capability that allows schools to do paperless billing. "We saved over $100,000 the first year in not mailing out paper bills," says Judy Salyer, assistant director of Student Business Services at Eastern Michigan University, who noted that the school doesn't send out any paper bills.
"When we mailed bills, we got a huge amount of returned mail," Salyer adds, noting that the school at one time received 500 to 600 pieces of returned mail each month.
Infinet, a company that provides business services and software to IHEs, offers a centralized source for all payment processing on campus. Company CEO Harvey Gannon says, "It could be Joe Public buying tickets to this Saturday's football game. It could be someone submitting an admissions form."
Beth Stack, director of operations for Student Financial Services at the University of Pittsburgh, says the Infinet application is well suited for higher education. "Electronic payment is different in the educational environment than in retail sales. In retail, if you buy a sweater but want to return it the chances are that you personally will take that sweater back. On the other hand, in higher ed, who's paying the student's bill? It could be Mom or Dad. If the student decides not to attend, or changes enrollment status, we need to refund the funds to a credit card account, but how do you know who did it? How do you track that?" Stack adds that Pittsburgh will also go paperless next fall.
John Otrompke is a freelance writer based in Chicago, Ill.
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