Leveraging eProcurement Technologies and Strategic Purchasing Initiatives to Produce Return on Investment (ROI) NAEB Annual Conference May 6, 2003

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

3 Purchasing Overview  Decentralized purchasing environment with purchase requisition creation delegated to the point-of-demand in offices and laboratories  Over 1,800 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 –Reduce time & effort related to order creation –Provide online access to most commonly ordered products and services –Reduce order creation & approval cycle time  Enhance the value of the purchasing organization –Maximize potential of purchasing data and systems –Increase purchases from “contract suppliers” –Increase compliance & reduce maverick buying –Manage purchasing system supplier database –Leverage the University’s buying power

5 Oracle Purchasing System (BEN Buys)  Oracle Financials (Purchasing, Payables & General Ledger) implemented in July 1996  Oracle’s iProcurement electronic requisition and the Penn Marketplace introduced to the campus in January 2002 as part of upgrade to Oracle Financials Release 11i –Provides integration with the Penn Marketplace –Enables item shopping and requisition creation at the point-of-demand –Enables multi-supplier and multi-commodity 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 550,000 SKU’s from 32 suppliers with Penn specific contract pricing to contain critical mass  Supports strategic purchasing initiatives by making it easier 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 eProcurement Technologies  Electronic Data Interchange (EDI) services provided by Global Exchange Services –Standard EDI for outbound purchase & change orders –Standard EDI for inbound supplier invoices  Integrated document imaging system from 170 Systems –EDI invoices are imaged electronically –Paper invoices are imaged upon receipt in Accounts Payable  Procuri, Inc provides an online competitive bidding tool to enable reverse auction events –Used for competitive bidding of Penn and local cooperative buying group initiatives

8 Strategic Purchasing Initiatives  Supply Chain Management Objectives –Focus marketing effort on acceptance of strategic suppliers and business relationships –Expand use of long term and sole source supplier contracts whenever possible –Recruit suppliers and manufacturers for the Penn Marketplace –Rationalize supplier database and multiple sources for products where appropriate –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 Program –Formal cost savings program launched in July 1996 with implementation of Oracle Financials –Commodity teams established for large volume commodities –Formal contracting effort for Penn Marketplace supplier recruitment –Transaction savings for purchases >$5,000  Cooperative Buying Initiative –Participate in Philadelphia Area Collegiate Cooperative (PACC) for regional group pricing agreements –Conduct E & I contract benchmarking study to utilize E&I agreements where appropriate

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

11 Key Accomplishments  Campus wide utilization of a fully integrated paperless electronic purchase-to-pay system  Reduced order creation and approval cycle time resulting in 92% of all orders created, approved and transmitted to suppliers in less than 1 hour  550,000 SKU’s in the Penn Marketplace exceeds project goal of 400,000  54.5% of all purchase orders created in 2003 were issued to the 32 Penn Marketplace suppliers (52.9% in 2002) exceeding project goal of 40%  New business opportunities for preferred contract suppliers resulting from the deactivation of 217 suppliers in 2002  Penn Marketplace suppliers realized a 16 to 42% increase in business during 2002  $64.9M in documented hard dollar cost savings  45% of supplier invoices were processed via EDI during 2002

12 Performance Metrics for ROI  Purchasing Activity: utilization of approved buying tools and reduction in maverick buying  eProcurement Utilization: campus-wide utilization of suppliers recruited for the Penn Marketplace  Transaction Audits: compliance with use of appropriate buying tools  Supplier Management: management of the Purchasing System supplier database  Transaction Efficiencies: third party purchasing initiative w/Fisher Scientific resulting in elimination of paper invoices & checks  Cost Savings: documented hard dollar product and service cost savings  Supplier Diversity: purchases from community based and MBE/WBE suppliers

13 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

14 Contact Information  Ralph Maier Associate Director, Purchasing Services  Vira Homick eProcurement Manager, Purchasing Services  Penn Purchasing Services  What We Do  Performance Metrics

15 Questions ? Conclusion