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e. Procurement An End-to End Trip Graham Kemp University of Toronto Educause 2002 Atlanta Georgia Copyright Graham Kemp, 2002. This work is the intellectual property of the author. Permission is granted for this material to be shared for non-commercial, educational purposes, provided that this copyright appears on the reproduced materials and notice is given that the copying is by permission of the author. To disseminate otherwise or to republish requires written permission from the author. Campus Business Connect. . . to the point!
Agenda • • • Background Inception of the project Where we are today Future directions The experience Campus Business Connect. . . to the point!
University of Toronto • • 175 th Anniversary 29 Colleges/Faculties/Divisions 278 Hectares – 262 Buildings 3 Campus Locations 10, 000 Total Staff including 3, 000 academics >55, 000 students 12 th Largest employer in Greater Toronto Area • Annual budget of >$1. 1 billion • 380, 000 alumni Campus Business Connect. . . to the point!
Background • SAP R/3 Since 1995 • Looked to BPR to solve procurement issues • Considering e. Procurement since 1997 • 1998 -1999 Built business case • 1999 -2001 promoted e. Procurement to raise funds for initial phase • 2001 secured funding Campus Business Connect. . . to the point!
University Non Salary Expenditures ($ thousands) Materials & Supplies $112, 659 Services (e. g. Utilities) 64, 918 Ancillary Services 54, 823 Non Capital Repairs & Maintenance 32, 554 Other Expenses 28, 498 P-Card Purchases 6, 738 TOTAL $ 300, 190 $ 68 Million Campus Business Connect. . . to the point!
Procurement Issues • ~ 2, 000 commercial trade accounts • 44, 816 items (many duplicates) • 280, 000 purchases annually – 195, 000 purchase order transactions – 85, 000 renegade buys – 15 -27% higher cost • SAP purchasing difficult for casual users • ~700 purchasers Campus Business Connect. . . to the point!
e. Procurement Philosophy "Our goal is for e. Procurement to become the purchasing method of choice for the University of Toronto. This will be achieved by creating the optimal purchasing experience for users while creating the optimal marketing channel for suppliers. " S. Whittaker, Director of Procurement Services Campus Business Connect. . . to the point!
Problem • Many not using SAP purchasing module – Personal credit cards, PCards – Ordering over the phone • Not clear what was being ordered and by whom • Definitely not leveraging buying power • Large amounts of time administering the purchasing process
User Involvement • e. Procurement Focus Group – 40 U of T participants – Across all campuses – Business officers, researchers, management – Workshops and interviews – Review sessions – Constant feedback Campus Business Connect. . . to the point!
End user buy-in • No incremental costs, no transaction fees • Engage users in solution definition, selection, configuration and testing • Solution has fewest “touch points” • Eliminate need for shadow systems • Initial focus on repetitive, non-strategic purchases Campus Business Connect. . . to the point!
User Requirements • Don’t just provide a fancy browser front end • A solution which allowed – – Filling a shopping cart electronically Local business rules, approvals and workflow Issue PO’s electronically Invoices to be received electronically • Three way matching for payment • Need to fully integrate into the backend • Must have funds availability checking at the shopping basket
Savings and Benefits • Estimated 7% - over $4. 76 M annually • Easy to use – 24 by 7 availability • Guide purchaser to prime vendor with value assured • Multiple quotes eliminated • Streamline administrative tasks and eliminates spending limits • Savings directly to departments and researchers • Improved accountability More time devoted to academic pursuits Campus Business Connect. . . to the point!
Initial Plan • In-House Catalog to provide: – Single unique university catalog – Aggregation of items and vendors – Hosted Service • Proved costly – Transaction fees – Staff resources to manage and maintain • Many vendors developing their own catalogs Campus Business Connect. . . to the point!
New Direction • Not to use a unique Uof. T catalog • Use vendors catalogs: – Uof. T subset with Uof. T pricing – Leverage the vendors investment in e. Commerce • Get access quickly to many catalogs with little investment by Uof. T • Concentrate on the end-to-end solution
Software Selection • After RFP Process selected SAP SRM: – Commerce One EBP • Provided best end to end solution – SAP understood integration issues • Other vendors did not have the experience
e. Procurement Workflow
Hardware Overview Browser SAP ITS SRM SAP R/3 Business Connector Vendor
Vendor Engagement • Terms of engagement – e. Procurement prequalifier • Get CEO buy-in to allocate resources • Leverage vendors existing e. Commerce investment • Profile – “Founding partner” • Detailed project plan with milestones – collaborate, communicate, monitor • Universal standards – OCI, XCBL • Exclusivity for non-strategic commodities Campus Business Connect • Payment terms – Net 10. . . to the point!
Vendor Issues • Uof. T ahead of vendors – To a large extent OCI compliant, vendors not ready with XML documents – Developed their solution with Uof. T – Vendors eager to participate • Tax Codes an issue – PO’s must be returned with the correct tax codes • Pricing, freight and other additional charges • Configuration of tolerances • Delivery addresses an issue Campus Business Connect. . . to the point!
Timeline RFP to select vendor Decision to use SAP SRM Aug/01 Config. Version 2. 0 Oct/01 First Transaction Dec 19/01 Upgrade to Version 3. 0 Jan/02 Phase I Group Live Sept/02 2001 2002 7 Suppliers 200 Users 2003 40 Suppliers 500 Users Campus Business Connect. . . to the point!
Implementation Team • • • SAP Consultants (3 months) AMS Staff Procurement Services Financial Services Others – Business Officer – Researcher 3. 7 3. 0 1. 5. 5 1. 0 Campus Business Connect. . . to the point!
Budget • Consulting $ 381, 000 – SAP and Clockwork • Hardware • Training • Miscellaneous • Total Costs 200, 000 29, 500 30, 000 $ 640, 500 Campus Business Connect. . . to the point!
Where we are today • Enabled three large vendor – Lyreco – office supplies – VWR – lab supplies – Dell – computers • Successfully exchanging documents • Currently working with 4 more large vendors • Beginning engagement of SME’s
Critical Mass • Important to get critical mass of suppliers • Aiming for 30 to 40 by end of 2003 • Question - is how to do that? • At least 4 more large suppliers • 30+ small to medium (SME’s) suppliers
Small Medium Enterprises • How to deal with SMEs? • Small suppliers with limited IT resources – Bio Shop – One person operation – ~ 100 items • Or larger suppliers with limited product line – Cannon for paper supplies
Enabling SMEs Offer catalog services to SMEs • To Uof. T purchasers, catalog looks like the SME’s own site • Order placed just as with large vendors – All funds checking – POs issued through SAP R/3 – XML document exchange for POs and Invoices • Allow SMEs to update catalog and enter invoices through the web
Enabling SMEs • Working with Concept Design (Dublin/Boston) • • • Select 3 – 5 SMEs Pilot for 3 – 5 months No cost to the University Prove the concept Bring 30 + suppliers on board by the end of 2003
Diagram of SMEs Browser SAP ITS SRM SAP R/3 Business Connector Concept Design SME Host Vendor(s) SME’s
Our Experience • Lack of experience on part of consultants • Modifications to meet Uof. T requirements • Vendor negotiations • Policy requirements • Business process • On-going maintenance and administration Campus Business Connect. . . to the point!
Consultants • Few experienced consultants Consulting firms had the technical knowledge but had not implemented end to end solutions • Funds Management knowledge lacking Campus Business Connect. . . to the point!
Suppliers • Difficulty in dealing with business and technical staff • Differing priorities • IT structures – some vendors using consultants • State of readiness in Canadian operations
Modifications • Workflow – Not set up for independence of researchers – Set up Uof. T rules and approvals tables • Taxes – Tax codes not passed to the PO from SRM • Funds Management – Defaults and pick lists need to be developed for researchers – Funds availability checking not done at shopping basket • Rejected Invoices – Rejected invoices parked – price matching Campus Business Connect. . . to the point!
Business Process & Policy • Audit requirements moving from paper to electronic documents • Policies on approvals, source documents, account reconciliations, documented procedures • New processes required in many areas: – Org. structure maintained in SRM – Invoices arriving before goods receipt Campus Business Connect – Monitoring processes. . . to the point!
On-going Maintenance • Significant requirement • Maintenance of: – – User set up and changes Org. Structure changes – HR responsibility? Monitoring process – who does it? Fixes? Delivery addresses Campus Business Connect. . . to the point!
Summary • • • SRM was a good choice Savings are achievable User community committed Vendors committed Provides good foundation for further e. Procurement initiatives – Catalogs for small vendors – Uof. T providing a ‘Marketsite’ for other Canadian universities and colleges • Need to create critical mass of vendors
Uof. T Contacts • Graham Kemp – Director AMS graham. [email protected] ca • Pat Heslin – AMS Project Manager pat. [email protected] ca • Anne Joiner – AMS Manager Technical Services anne. [email protected] ca • Steve Whittaker – Director Procurement Services s. [email protected] ca • Eddie Jin - Procurement Services - Project Leader eddie. [email protected] ca Campus Business Connect. . . to the point!