Procure-to-Pay Process Enhancement Project March 15, 2006

Purchasing Services What’s New in Purchasing? – New Sourcing Managers – Contract Suppliers – Penn Marketplace Suppliers – Spend Analysis Initiative – Equipment Maintenance Program – Online Competitive Bidding Purchasing related news and announcements are listed at:

New Sourcing Team Jim GrahamAssociate Director – Professional Services Colleen Reardon Sourcing Manager – Facilities & Operations David StaskinSourcing Manager – Technology Tom CantielloSourcing Manager – Research

Contract & Marketplace Suppliers Preferred contract suppliers provide the most commonly ordered products and services at “least total cost” The Penn Marketplace provides product visibility and easy ordering from the University’s most commonly used suppliers Supplier information is available on the web at:

Spend Analysis Initiative A formal review of School or Center purchasing activity across all buying methods: – Purchase Order – Purchasing/Fleet Card – C-Form The business objectives include streamlining the buying process, increasing compliance with approved methods and suppliers, reducing the cost of required products and services, and reducing risk for the institution

Equipment Maintenance Program An innovative alternative to traditional "Original Equipment Maintenance (OEM)" annual equipment maintenance agreements Offers a significant cost savings opportunity to departments without negatively affecting the service provider or the quality and timeliness of equipment repair and service. A wide range of equipment is eligible under this program, including research, technology, office, facilities and operations, and security related equipment (excluding copiers) Equipment can be added or deleted from this equipment service program as needed throughout the fiscal year.

Online Competitive Bidding eBay in reverse – goal is to drive down the cost of products and services Reverse auction is an online competitive bidding tool that creates competitive pricing pressure between bidders Utilizes traditional supplier selection process, RFP requirements, and supplier bid evaluation Bidding tool can be used for most product and service requirements

Receive & Process Invoices Receive Goods Pay Supplier & Finalize Transaction Proactively Source Goods & Services Monitor Supplier Performance Procure-to-Pay Process Overview An Effective and Efficient Process Requires a Great Deal of Coordination Between Suppliers, Purchasing, Schools/Centers and Accounts Payable Order Goods & Services Supplier

Procure-to-Pay Process Overview-Volumes FY05 – Monthly Averages 21,700 PO Invoices 6,800 C Forms 1,700 Requisitioners 900 PO Managers 15 AP Reps Efficient and Timely Processing of These Transaction Volumes Requires Teamwork and Full Compliance with Process Steps and Policies

Our Business Problem Suppliers Are Not Paid Within Terms FY 2006 YTD July – Jan Non-EDI PO Invoice Payment – Supplier Terms 30 Days Aging Invoice Count % of Total Invoice Dollars % of Total Total91, %$302,379, % 30 Days or Less55, %$116,821, % 31 to 60 Days25, %$121,821, % 61 to 90 Days5, %$41,344, % Over 90 Days5, %$22,390, %  PO  YTD approximately 40% PO invoices or were not paid within supplier terms   88% of PO invoices were paid within 60 days

Process Exceptions Our initial review has identified these key reasons for late payments: – PO Invoice Holds – PO Invoices Not Received in AP – PO’s Created After Invoices Are Received – PO Invoice Rejections – Use of C Forms Versus PO’s

Process Exception Statistics Statistics for February 2006: – 911 (42%) PO invoices on hold greater than 30 days – 2,848 or 21% of total PO invoices processed not were not received and entered in BEN Financials within 30 days of the supplier invoice date – 2,222 or 16% of total PO invoices processed where PO’s were approved after the invoices were received – 950 PO Invoice Rejections – C Forms still represent approximately 30% of transactions processed in AP

Process Improvement Goals & Actions Develop baseline measurements for process exceptions: – Invoice Matching Holds on hold for more than 30 days – PO Invoices not entered into BEN Financials within 30 days of the supplier invoice date – PO’s created or approved after the supplier invoice date Work with Schools/Centers to identify Buyers with significant exceptions and work with them to reduce the exceptions Partner with 2 to 3 Schools or Centers to perform an end-to- end P2P process review – Communicate lessons learned to all schools and centers Continue to develop measurements for invoice rejections and C forms Communicate progress on improvement metrics to Schools, Centers and Executive Management

Process Improvement Goals & Actions Process Improvement Goals – Invoice Matching Holds on hold for more than 30 days Clear all holds >30 days by June 1, 2006 – PO Invoices not entered into BEN Financials within 30 days of the supplier invoice date Reduce Avg. Monthly FY05 Exceptions by 50% with June 2006 PO invoices – PO’s created or approved after the supplier invoice date Reduce Avg. Monthly FY05 Exceptions by 50% with June 2006 PO invoices Schools/Centers – Run detail reports for their Org codes and identify PO Managers with significant exceptions – Work with PO Managers to reduce exceptions Communicate – Supplier or purchasing issues – AP processing issues – Other business issues causing exceptions