1. e-Procurement in Scotland Steve Murray April 2005 www.eprocurementscotland.com steve.murray@scotland.gsi.gov.uk

2. Lack of management information; Lack of skilled resource; Fragmentation and duplication of effort; Off-contract buying; Many different processes; No strategic approach to procurement at a national level (and limited at a local level); Significant extra expense caused to business, particularly SMEs, by fragmented approach. Procurement Issues 2000

3. Create single platform for whole of public sector Hosted service model Service not software (business not technical) Emphasis on collaboration No or Low cost for suppliers Approach to e-Procurement in Scotland

4. First implementation - March 2002 Implement 50 organisations by end 2005 125 by end 2007 Annual cost reductions of €290m by end 2007 Exploit sourcing technologies (e-tender and e-auction) Scope/Targets

5. Objectives To make Scotland the best place to do business electronically To be the first choice for e-procurement for public sector organisations in Scotland To obtain management information about procurement and use it to encourage good practices, collaboration and smarter working

6. Buying on-line - web hosted service Catalogue Management facilities Help with integrating to Finance & Stock Control systems e-tendering and e-auction facilities and support Customer service centre Standardised approach to suppliers Forums for participation and collaboration –P2P, Suppliers, user groups, new developments etc. Service Includes:-

7. So far…. 34 Government organisations using service –Central, Local Government and Health Sectors e-orders placed with over 4000 suppliers €188m since 2001- €150m of orders placed in last 12 months This represents 12% of potential for the 34 €12m (12% of all orders through cXML links with a small number of suppliers (high volume/low value)…

8. A big IT project A marketplace What e-Procurement Scotl@nd is NOT:-

9. Changing the way we do business Improving services Obtaining and Adding Value It is about :-

10. Keeping it simple and easyKeeping it simple and easy How we presently do something ………the “Process”How we presently do something ………the “Process” How we improve – step by stepHow we improve – step by step –How to simplify and make more robust solutions …. “Business Process Re-engineering” How we overcome the ‘we’ve always done it that way’ ….. Change ManagementHow we overcome the ‘we’ve always done it that way’ ….. Change Management Making Progress

11. Transactional (Process) Savings Payments savings and… efficient and on-time Catalyst for Change:- –Sourcing –Reinforcing best practice –Supplier Development –Improved Supplier Relationships –Management Information – improved planning –Collaboration/Sourcing Expected Benefits

12. A Local Council – Improving internal ordering and payment… Issues with existing process Non standard ordering process Re-keying of data to stock management Issues over deliveries Duplicate orders Query resolution (lack of MI) Query on price Time taken to effect payment Example

13. Benefits after e-procurement:- Standard purchasing process for internal and external suppliers Paperless, efficient transaction with management information Removal of journals and assoc. spreadsheets Reducing processing time from 4 days to 1 Accurate and timely internal charging with full audit trail Best use of the investment made in ePS Example

14. Scottish Executive internal process improvements:- Pertemps provide temporary admin staff to the 8 core Departments A manual ordering and invoicing process was in place that involved several stages and multiple staff Solution – ‘Punch Out’ from ePS to Pertemps and electronic consolidated invoicing Change - HR Teams now order temps centrally 8 weekly Departmental invoices rather than 1 weekly invoice per temp Example

15. Benefits….. ‘Punch Out’ – provides HR Teams with greater visibility & control and much improved management information Electronic Consolidated Invoice – has improved invoice accuracy and allows fast and accurate data upload into the finance system Example

16. The cost of processing a €40 million subsidy payment is the same as processing a paper invoice and payment for the hire of a meeting room and coffees at €85... It takes the same time, resource and effort Payment Costs

17. Payments 10% of Expenditure “Transactional Purchasing” which previously accounted for 95% of paper invoices...10% of Expenditure “Transactional Purchasing” which previously accounted for 95% of paper invoices... –Stationery, Business Travel, Catering, Temporary staff 90% of expenditure accounted for 5% of paper invoices...90% of expenditure accounted for 5% of paper invoices... –Policy Initiatives, Fisheries Protection vessel etc

18. The Scottish Public Sector receive “millions” of paper invoices: Local Authorities 20,000,000 invoices per annumLocal Authorities 20,000,000 invoices per annum Health 4,000,000 invoices per annumHealth 4,000,000 invoices per annum Central Govt 2,000,000 invoices per annumCentral Govt 2,000,000 invoices per annum ………..these in the main are processed manually

19. Estimated Cost of processing a paper invoice:- €15 Estimated cost of automated / integrated p-card within eProcurement Solution €0.16

20. Approval 33% administrative costPURCHASE TO66% administrative ordering PAY PROCESS cost invoicing Place Purchase Orders Suppliers Receive Paper Invoices Accounts Payable Old way…..

21. Business Travel and Electronic Consolidated Invoice Approval Place Purchase Orders Supplier Consolidated Invoice 1 x Electronic File to be checked and loaded onto Finance System Accounts Payable New way

22. For…business travel - eliminated 18,683 invoices, saving over €200,000 per annum For… temporary staff - eliminated 14,560 invoices, saving over €160,000 For… temporary staff - eliminated 14,560 invoices, saving over €160,000 per annum per annum e.g. Implementation in one organisation:-

23. e-Procurement as a catalyst for change:- Planning and collaborating improves sourcing… e.g. Collaborative savings opportunities identified in Health for 2005:- Stationery (€2m), non-sterile gloves (€2m), agency nurses (€5m), travel (€1m)

24. Limited Expertise & Experience Reluctance to Change Slow Decision Making in Organisations Large no. of stakeholders (Finance, IT, HR, Audit) Large User and Supplier base (Communications!!) Issues 2005

25. In Summary… e-Procurement benefits are about ‘change’…. Process change (the full purchase to pay process) Culture change Using best tools and resources available… …..and making them work together Continuous improvement – not big bang!

26. End