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Business Technology

Principles of Purchasing

Smart buying strategies improve internal efficiencies and save money.
University Business, Apr 2005

In this era of cost cutting and budget slashing, one area where colleges and universities can realize true savings is in purchasing. Well-managed purchasing strategies can recover considerable sums of money by curtailing off-contract spending and enhancing staff efficiency.

"Unfortunately not many schools have really taken the plunge to evaluate their procurement practices or to institute e-procurement solutions," says Chris Rother, vice president of education sales of CDW-G, a technology solutions provider. "Part of the holdup is that building a complete e-procurement solution from scratch can be a challenge because of personnel cuts as well as budget constraints."

In an ideal world, a full-fledged e-procurement system could make purchasing everything from pencils to laptop computers to part-time office help, a seamless, paperless exercise. By itself, the process of eliminating the paper shuffle from one person to another for signatures can have a significant impact on the productivity and effectiveness of a purchasing staff. But not every school needs--or wants--an e-procurement system.

Still, there are ways to improve the purchasing process.

"What I have seen to be effective is when universities take 'baby steps' toward a total solution," Rother says. "Instead of setting out for the ultimate change--where you restructure your entire university and go all out to e-procurement--a more basic approach will see remarkable results."

The first step for many universities is to establish standards and centralize procurement practices. At a large university, it is not unusual to find different networking equipment, or different standardization on PCs, notebooks and servers.

"Start with just standardizing on the product sets that you have, or centralizing the purchasing so that you can control what you are purchasing and how much you are paying for those purchases," Rother suggests.

Standardized purchases mean that schools can negotiate the best prices for volume deals with vendors. When Troy University (Ala.), decided it was time to update more than 6,000 PCs on campus, it partnered with CDW-G to help streamline its technology acquisition and implementation practices. "We needed a company to come in and work with us to standardize our systems from the top-down, while at the same time keeping down costs and providing top-of-the-line customer service," says Greg Price, director of Information Technology Management at Troy. "These upgrades will certainly enhance our learning environment, allowing us to provide our students with the best IT solutions available."

The university was able to consolidate procurement over its various campuses into one centralized system and leverage collective purchasing power. The process also resulted in improved internal efficiencies--read: cost savings--for the IT department. The reason? Standardization means greater system compatibility. The fewer PC models or operating systems that the IT staff has to be proficient in maintaining, the more time they will have to address important tasks.

Standardize technology across
campus to get control of what you
purchase and how much you pay.

Consolidation and standardization of technology products also means that a school can better track its assets. Software licensing and product version updates can be more easily managed when there is a standard technology environment. Many PC vendors, such as Dell and Gateway, offer trade-up policies, so technology never becomes obsolete.

But, as Rother points out, over time many university departments have developed their own purchasing practices, which can make such consolidation challenging. "It gets into a territorial thing--somebody feels that they own the process and have set the standards, and now you are trying to aggregate and consolidate," she says. "Sometimes that is a hard message to accept."

In cases like that, she says, it is often advisable for a university to seek outside help--a third party with purchasing and consolidation know-how. "The successes we've seen tend to be where the university works in conjunction with private-sector partners, as well as industry advisors, to establish and guide them through purchasing practices and then help them develop a timeline for how the solution will come about," Rother says. "They can help the school answer the two big questions: what should it be looking at first, and, ultimately what does the school want the system to look like in the end?"

Eliminating the "purchasing paper shuffle" through automation is another strategy that IHEs should consider. Purchasing efficiencies are greatly improved when order forms don't have to be sent back and forth for various signatures and approvals. Many colleges and universities have moved to PC-based purchasing software to help reduce or eliminate paperwork. A process that once took a day or more is now immediate. "Doing away with paper forms is huge," says Rother. "Universities that have been successful in just that--not even full e-procurement--report that the customer experience is greatly improved. In the past, when you had the paper shuffle and all the approval processes, it sometimes forced the customer to go outside of the university's procurement practices."

Total e-procurement solutions are still relatively uncommon in higher education, but a number of schools are moving in that direction to varying degrees.

The University of Pennsylvania was an early proponent of e-procurement, and has developed a purchasing model that is often held up as the standard bearer of a total e-procurement solution. "It's a pretty seamless process," says Vira Homick, associate director of eBusiness at the university. The school's Penn Marketplace is an effective, efficient, and user-friendly system for ordering the most commonly required products and services from university-preferred suppliers.

The Marketplace is hosted by SciQuest HigherMarkets. SciQuest manages the online catalog and standardizes the hosted content. "Marketplace users also have the ability to 'punch-out' of the hosted site to hundreds of key suppliers who have more volatile product line or whose prices change quickly or who have a very large amount of product items to offer us," says Homick. These contracted vendors feature Penn-specific pricing that has been negotiated beforehand. Users choose a product and it is added to their Marketplace shopping cart.

The user can also compare pricing of an item with the various vendors in the hosted catalog. "Say you are looking for purple latex gloves," explains Homick. "You type that term in and then all the suppliers who carry that item will be listed on the screen so you can compare prices or look for specials. It gives you a side by side comparison that lists a variety of product attributes."

At the University of New Mexico, the e-procurement solution is integrated with the administrative system. The result is accounting control added to procurement. UNM, which processes about $180 million a year in purchases, uses HigherMarkets for SCT Banner, a partnership of SCT and SciQuest. The e-procurement system is tied directly to the school's SCT Luminis Data Integration system giving the school complete control of procurement costs. The overall integrated e-procurement solution enables UNM's administrative staff to coordinate purchasing, accounting, and financial management operations for improved efficiency and compliance with budgetary and policy guidelines.

"The SciQuest HigherMarkets e-procurement application gives us the capability to do business-to-business purchasing with just a few clicks, while the integration to SCT Banner Finance gives us the control and coordination with accounting that we require," says Bruce Cherrin, director of Purchasing at the school.

Of course, not every university will be able to implement a full e-procurement strategy, but for any part of the process, getting the support of the user base is critical. "A school considering any system really has to make sure they can market it and promote and bring it to the table as a good process efficiency for the end users," UPenn's Homick says. That is best done with solid demonstrations of how such a system can make life easier for them. "Before we had the Marketplace, our users would be 'free forming' their requirements, so it was cumbersome to create a requisition," she says. "They had to type everything out, they had to find the best price, choose the supplier, and so on. Now they just enter the product name or part number, put in the needed quantity, and off it goes."

The key to acceptance is in doing as much of the process work for the end-user in advance, so they can quickly place an order and go about their work. "We in purchasing are the contract managers," says Homick. "We do all the price negotiating and contracting work, so they don't have to. We try to make the process as easy as possible for the end user."

Homick says improvements in technology as well as internet communications have played a big role in bringing people around to e-procurement. In earlier iterations of the system, she says, it wasn't uncommon to find many of the punch-out sites down, making ordering difficult, if not impossible. That has changed as networks become more reliable and applications more robust. She estimates that "maybe less than a tenth of a percent" of the sites have had any trouble in the last year.

Still, some argue that the cost of implementing an e-procurement system is time- and cost-prohibitive. But Homick argues that the cost is minimal compared to what is ultimately gained in efficiency and ease of use. And the suppliers couldn't be happier. "Before, our suppliers were getting orders which were essentially 'garbage in, garbage out.' They couldn't match orders properly, so they weren't even getting paid properly or quickly. Now they get clean data. Orders get fulfilled cleaner and suppliers get paid faster, which means we get better prices."

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