Leveraging Purchasing Technologies and Strategic Initiatives to Produce ROI The Next Level Conference March 3, 2003

2 Presentation Agenda Purchasing Overview Business Objectives Purchasing Technologies Strategic Purchasing Initiatives Key Accomplishments Critical Success Factors Contact Information Conclusion

3 Purchasing Overview  Decentralized purchasing environment with purchase requisition creation delegated to the point-of-demand  Over 1,700 purchasing system users in 12 schools and 20 business centers  Over 1,400 MasterCard P-Card cardholders  Purchase order approval for transactions <$5,000 delegated to authorized purchasing system users in the schools and centers  Fiscal year 2002 purchase activity: –155,000 purchase transactions for $505M –105,000 P-Card transactions for $20M  Purchasing staff consists of 10 professional and 2 non-professional positions

4 Business Objectives  Provide administrative excellence in support of Penn’s educational and research mission –Make purchasing easy for faculty and staff –Reduce time and effort related to purchase order creation and related activities –Provide easy access to supplier content for most commonly ordered products  Enhance the effectiveness of the purchasing organization –Increase purchasing activity from “preferred contract suppliers” –Consolidate supplier database –Reduce maverick buying –Identify new cost savings opportunities

5 Oracle Purchasing System (BEN Buys)  Implemented Oracle Financials (Purchasing, Payables & General Ledger) in July 1996  Introduced Oracle’s iProcurement electronic requisition to the campus community in January 2002 as part of upgrade to Oracle Financials Release 11i –Provides integration to the Penn Marketplace –Delegates item shopping and requisition creation to the point-of-demand –Enables multi-supplier ordering using a single electronic requisition –Oracle workflow used for requisition routing, encumbrance, regulatory requirements, and purchase order approval

6 The Penn Marketplace  Penn’s private online supplier exchange for most commonly ordered products and services  Catalog content hosting and management services provided by Global Exchange Services (GXS)  SciQuest provided additional content services to GXS/Penn to cleanse, enrich, categorize, & format a number of scientific supplier catalogs utilized within the Penn Marketplace  Contains over 550,000 products from 31 suppliers with Penn specific contract pricing  Supports strategic purchasing initiatives by making it easy to order from preferred contract suppliers  Consistent content presentation across commodities and suppliers  Robust search tools enables customers to quickly and easily find desired products and services

7 Related Purchasing Technologies  Electronic Data Interchange (EDI) services provided by Global Exchange Services –Outbound purchase & change orders –Inbound supplier invoices  Integrated document imaging system from 170 Systems –EDI invoices are imaging electronically –Paper invoices are imaged upon receipt in Accounts Payable  Procuri, Inc provides an online bidding tool to enable reverse auction events –Used for competitive bidding of Penn and local cooperative buying group requirements  Electronic payment of supplier invoices using Electronic Funds Transfer (EFT) to be implemented in 2003

8 Strategic Purchasing Initiatives  Supply Chain Management –Focus on marketing acceptance of strategic suppliers and new pricing agreements –Expand use of long term and sole source supplier contracts whenever possible –Recruit suppliers and manufacturers for the Penn Marketplace –Reduce supplier database and multiple sources for products –Streamline distribution channels to maximize University buying power –Enforce financial policies, use of approved buying tools and suppliers to reduce maverick buying

9 Strategic Purchasing Initiatives (cont)  Purchasing Cost Savings –Formal cost savings program launched in July 1996 with implementation of Oracle Financials –$64.8 Million in documented hard dollar product and service cost savings since 7/96 –$4.7 Million in negotiated savings for Penn Marketplace supplier recruitment  Cooperative Buying –Participation in Philadelphia Area Collegiate Cooperative (PACC) created for regional pricing agreements –E & I contract benchmarking initiative to take advantage of E & I competitively bid agreements

10 Strategic Purchasing Initiatives (cont)  Strategic Marketing –Promote benefits of business initiatives and key supplier relationships to faculty and staff –Promote value of and create support for new strategic purchasing initiatives –Provide internal marketing opportunities for strategic suppliers and manufacturers that support Penn’s purchasing and technology initiatives –New Supplier Promotion Module hosted by SciQuest and integrated into Penn’s BEN Buys purchasing system to be launched in March 2003 –Generate awareness of purchasing department accomplishments throughout all levels of the institution

11 Key Accomplishments  Campus wide use of a fully integrated paperless electronic purchase-to-pay process  Reduced order creation and approval cycle resulting in 92% of all orders created, approved and transmitted to suppliers in less than 1 hour  550,000 items in the Penn Marketplace exceeds first year project goal of 400,000  53% of all purchase orders created in 2002 were issued to the 31 participating marketplace suppliers exceeding first year project goal of 40%  Deactivation of 220 suppliers in 2002 resulted in increased business opportunity for preferred suppliers  Penn Marketplace suppliers realized a 16 to 42% increase in business during 2002  $64.8M in documented hard dollar cost savings  45% of supplier invoices were processed via EDI during 2002

12 Critical Success Factors  Consistent and on-going senior management support for business initiatives and technology projects  Collaboration between central administration and Schools and Centers  Faculty and staff involvement in focus groups, commodity teams, and IT project teams  Strong internal IT support for the development, implementation and on-going maintenance of new purchasing technologies  Staff buy-in to changing role of purchasing  Training of faculty and staff on new technologies  Internal marketing of the value and benefits of new technology investments and purchasing initiatives  Support from key strategic suppliers

13 Contact Information  Ralph Maier Associate Director, Purchasing Services  Vira Homick eProcurement Manager, Purchasing Services  Penn Purchasing Services  eProcurement Project Overview

14 Questions ? Conclusion