© 2000 Advanced Data Concepts. All rights reserved. PROCUREMENT ANALYSIS PROJECT Current Situation Analysis November 30, 2000 Advanced Data Concepts LLC

© 2000 Advanced Data Concepts. All rights reserved.

PROCUREMENT ANALYSIS PROJECTCurrent Situation Analysis

November 30, 2000

Advanced Data Concepts LLC

2© 2000 Advanced Data Concepts. All rights reserved.

Agenda

Project History Solicitation Process Deliverable One Common Themes and Important

Findings Best Practice - No change

Recommended Best Practice - Improvement

Recommended Areas Requiring Change/Benefits Overview of Deliverables II & III


Deliverable One

State of Wisconsin Management Team

Current Situation Analysis

State Agencies and UW Campuses

• Data Collection• Interviews

•130 staff• 4 vendors

• Maps•Process•Systems

• Validate• Best Practices

ADC

SERVICES

ADC

SERVICES


Common Themes & Important Findings

Purchasing Process– The creation, routing and approval of requisitions and

purchase orders is largely a manual process– The mix of manual and automated purchasing and

financial systems result in redundant processes and non-value added tasks

– Multiple levels of approval add time and complexity to informal purchasing process

– Lack of standardization and consolidation of commodities is costing the State money



Data Management– WisMart currently does not adequately support the

procurement and related functions– Lack of standard commodity coding system inhibits

accurate reporting of purchases– No Data Warehouse to capture purchasing spend data

Professional Development– Procurement staff are not in a continuous improvement

program– Cross-training does not exist



Six Purchasing Systems: – PurchasePlus– TIPs– Rapids– Proteus– WisMart– PeopleSoft

Six Accounting Systems:– FARs– EAPS– FOS– FMS– PeopleSoft– WisMart

Existing Automated Systems


Common Themes & Important FindingsTotal Spend,

fiscal year 2000

# of Purchasing

Directors/

Managers/

Directors

# of Purchasing

Agents, etc.

Annual man

hours (@ 2000

hrs. per man)

Database

maintained that

details

purchasing

information?

# of vendors

Sta

te A

gen

cy

2 PA's (@ 90%); 1 printing PA (@ 70%)Commerce $4.6M 1 (@ 10%-15%) 5,200 to 5,300No. WISMART used

for encumbrances

VendorNet file (1,680 vendors) is used, and other sources (research, Program

Area suggestions, etc.)

DATCP $7.6M1 staff acting as both manager

and PA6,500 to 8,000 No, only WISMART

VendorNet file (1,680 vendors) is used; PO's in fiscal '00:665 '99:1,178

'98:1,827

DHFS $219.1M1 Director; 1

Supervisor26,000 No, only WISMART

12,358 vendors, most used within the past year

DNR $32.6M 1 24,000 to 26,000No. Encumbrance

reporting with detailsWISMART vendor file is

used

DOA $84.3M 2 14,000 Yes150,000 vendors in vendor file 1,746 vendors used in

fiscal year 2000

DOC $291.9M1 Purchasing

Manager

Central Office Penal institutions Community Corrections Juvenile Justice Badger Corrections Bureau of Tech Mgmt

5 PA's 1 PA for each 3 PA's; 1 PC 3 PA's 2 PA's 1 IT person

60,000 No

18,000 vendors in FMS vendor file, which includes many duplicates, payments

to employees (travel expenses), and interagency

procurements

DOT $112.1M 1 23,000 Yes: TIPS24,000 vendors in vendor file, approximately 5,000

used per year

DWD $66.9M 1 12,000 Yes: RAPIDS5,000 vendors in vendor file (non-grant), approximately

67% used per year

SBOP n/a 3 (@ 50%) 30,000 Not since July 19991,680 vendors on the

VendorNet system

UW Madison $186M

1 Associate Director; 1 Director; 2

Supervisors

38,000

Yes, the Shared Financial System

tracks expenditures for given time periods;

however, not by commodity code

40,000 vendors in the vendor base, each campus

has a unique vendor file

UW System (as a whole)

$276.5M15 Purchasing

Directors; 3 Supervisors

85,950

Yes, the Shared Financial System

tracks expenditures for given time periods;

however, not by commodity code

40,000 vendors in the vendor base, each campus

has a unique vendor file

2 Administrators; 3 Bid Processors; 3 Requisition Entry & Vendor Files staff; 7

Purchasing Agents

28 Purchasing Agents

Sta

te A

gen

cy

2 PA's (@ 90%); 1 printing PA (@ 70%)

15 PAL's (@ 15% to 20%)

7 PA-Senior's; 5 PA-Obj's

8 PA's; 3 Purch. Asst/ Admin. (2 @ 100%, 1 @ 50%)

5 PA's

3 PA's; 2 Acquisition Specialists

6 Central PA's; 7 Regional PA's (2 @ 50%, 5 @ 80%-100%)

9 Procurement Specialists; 1 Contract Specialist; 2 IS Comprehensive Consultants


Common Themes & Important FindingsS

tate

Ag

enc

y

Commerce Manual WISMART Manual Manual Manual WISMART WISMART N

DATCP Manual WISMART Manual Manual Manual WISMART WISMART N1

DHFS Manual Manual / FMS5 Manual Manual Manual WISMART FMS Y

DNR Manual WISMART Manual Manual Manual WISMART WISMART N2

DOA PurchasePlus WISMART Manual4 Manual4 Manual WISMART WISMART N3

DOCManual /

PROTEUSManual / FMS5

PROTEUSManual Manual Manual WISMART FMS Y

DOT TIPS TIPS TIPS TIPS TIPS WISMART EAPS/FOS Y

DWD RAPIDS RAPIDS RAPIDS RAPIDS RAPIDS WISMART FARS Y

SBOP PurchasePlus WISMART Manual4 Manual4 Manual WISMART WISMART N3

UW System PeopleSoft PeopleSoft PeopleSoft PeopleSoft PeopleSoft PeopleSoft PeopleSoft Y

Sta

te A

gen

cy

Notes:1. DATCP has developed a set of VisualBasic macros that allows the mass uploading of certain transaction types from Excel to WISMART that are processed through the interface system.2. DNR has a Grants subsystem that generates recurring payment and liquidation transactions that are uploaded to WISMART and processed through the interface system.3. DOA has developed a web-based application, PurchasePlus, for Requistion creation, tracking and approval, which in turn generates PO transactions which are uploaded to WISMART and processed through the interface system.4. Phase 3 of the PurchasePlus implementation will address Invoicing and Receiving.5. PO information is manually entered into FMS from the hardcopy purchase order to maintain encumbrance balances.


Common Themes & Important FindingsBEST PRACTICES SUMMARY

Leadership/ComplianceBest Practices Process High Moderate Low

1. Centralization vs. Decentralization X2. Cross Functional Sourcing X3. Dollar Thresholds & Solicitation Types X4. Informal Bid X5. Formal Bid X6. Printing X7. Statewide Contracts (Leveraging Volume) X8. Intergovernmental Procurement X9. Procurement Audits X10. Purchasing Transactions (PO’s and Req.’s) X11. P-Card X12. Vendor Payment X13. Vendor Management (Vendor Net) X14. Measure Supplier Performance X15. Minority Business Development X16. Reporting X17. Automated Systems X18. IT Organization X19. Systems Architecture X20. Data Management X21. Business Intelligence X22. Training X


Best Practice - No Change Recommended

Organization of State Procurement– Best Practice is a combination of centralized and decentralized

models

Dollar Thresholds– Best Practice is to delegate low volume purchases to the end-user

P-Card– Best Practice is to use P-cards

Vendor Payment– Best Practice is instituting a prompt payment act


Best Practice - Improvement Recommended

Informal & Formal Bid Leveraging Purchasing Volumes Procurement Audits VendorNet Minority Business Program



Informal and Formal Bid– Best Practices:

• conduct an informal bid within one to five days• use formal bid for high dollar, high volume

purchases• automated workflow

– one approval per transaction

– Multiple approvals negate the benefit of informal purchases and slows the formal process

– State should consider:• Reducing the number of approvals per transaction



Leveraging Purchasing Volumes– Best Practice is to use statewide contracts and

intergovernmental procurements– SBOP has no data on how often or how many

of the municipalities and school districts use statewide contracts

– State should consider:• Use cross functional teams to increase participation

in statewide contracts• Capturing the volume from other municipalities and

school districts for statewide contracts



Procurement Audits– Best practice suggests the elimination of all

tasks that are not core competencies – Audits are not core competencies nor value

added services State should consider:

– Outsourcing– Spot checks– Roundtables or procurement groups



VendorNet– Best Practice is to have an automated bidders

list & electronic notification– State’s official bidder’s list - 1,600+ vendors– Non-VendorNet vendors routinely receive bid

notification– State should consider:

• free registration• fee for automated services (may want to lower to

under a $100)• Charge more for multiple commodity codes & out-

of-state vendors



Best Practices include:– formal policy– support from highest

level– program coordinator– performance ratings of

purchasing staff– targeted solicitations– training– monthly and annual

reports

State should consider:– holding all procurement

staff accountable for reaching a 5% goal

– innovative programs, such as:

• Identify the number of solicitations to MBEs by dollar volume.

• Target Market Program. Bidding is limited to certified MBEs.

Minority Business Program


Areas Requiring Change/Benefits of Change

Paper or standalone purchasing systems Commodity Codes Standardization and Consolidation Move Procurement from an ordering function to a

strategic asset function


Areas Requiring Change/Benefits of Change Paper or standalone purchasing systems

Best practices:– Automate purchase requisition to end user– Automated Workflow – One approval signature for requisition and purchase order– A more synergistic approach would offer operational

efficiencies and cost savings Current Situation

– Six independent purchasing systems – Existing systems environment include mainframe, client-

server and web-based– Database environment is just as diverse, which includes

DB2, IMS, VSAM, Oracle and SQLServer



Problems created by current situation– Significant re-keying of information to various systems – Time consuming manual routing of documents to

multiple layers of management staff– Minimal data integration and standardization across

platforms, systems and databases– Increased staffing requirements due to maintenance

and support of multiple platforms, systems and databases.



Change– Automation of

purchasing function

Benefit– Real time procurement

information to all system users

– Manual requisition budget checking eliminated

– Elimination of duplicative data entry

– Reduction in transaction process time



Change– Standardization of

platforms, systems and databases

Benefit– Reduction of cost of system

maintenance– Seamless integration of

business & system processes is key to E-procurement initiatives

– Standardized data management with decentralized stewardship facilitates accurate reporting


Areas Requiring Change/Benefits of Change Commodity Codes

Best Practice:– A single product classification system to provide a uniform view of the

State’s spend data• Helps to identify true volumes of commodities allowing for vendor volume

discount

Current Situation– State uses two commodity code schemes– Maintenance is handled by all agencies

Problems created by current situation– The state cannot generate enterprise-wide reports on its purchases and

their cost– SBOP is unable to comply with statutory requirements for managing and

reporting purchases– Lack of information inhibits agencies’ ability to manage procurement

function


Areas Requiring Change/Benefits of Change Commodity Codes

Benefits of Change– Allow SBOP to create required reports using accurate

data– Improve agencies’ ability to manage purchases and

budgets– Facilitate cooperative purchasing efforts across

agencies and other municipalities


Areas Requiring Change/Benefits of ChangeStandardization and Consolidation

Best Practice:– Develop Standardization and Consolidation

Program• Establish a standard quality for needed items• Leverage economies of scale (large volume for

lower cost)• Fewer items to service• Increased purchasing efficiency (fewer orders to

place) • Position State to begin e-commerce and strategic

sourcing programs


Areas Requiring Change/Benefits of Change Standardization and Consolidation

Current Situation– Inconsistent use of standards committees

• No clearly defined goals for successful procurement

– Lower quantities of many items– Inability to identify commodities purchased

Problems created by current situation – Cost savings missed

• statewide contracts provide a laundry list of agencies needs instead of a consolidated standards list

• Agencies failing to participate in statewide contracts that have consolidated purchases

– Spend data not reliable


Areas Requiring Change/Benefits of Change Standardization and Consolidation

Benefits of Change– Reduce cost of goods by obtaining best pricing on high

volume items– Positions agencies to receive “preferred customer”

status from vendors– Simplify the preparation of bid documents– Simplify inventory and storeroom management – Facilitate the use of strategic sourcing methodologies


Areas Requiring Change/Benefits of Change Strategic Asset Function

Best Practice– Move Purchasing from an ordering function to a strategic asset function

Current Situation– Emphasis on processing transactions rather than improving processes – No accurate spend data

Problems Created by Current Situation– Unreliable historic spend data

• Management strategies cannot be developed• Value added purchasing techniques cannot be planned• Discounts and preferred pricing cannot be negotiated

– Vendor performance cannot be monitored without performance measurement requirements


Areas Requiring Change/Benefits of Change Strategic Asset Function

Change:– Standardize on a commodity code– All bidders should reside on VendorNet– Maintain one vendor table– Automate purchasing reporting activity– Increase use of the Standards Committees– Improve the mission of the Standards Committees– Use cross-functional teams– Develop measurable performance standards for all contracts– Implement a training program for SBOP and agency

procurement staff– Automate all manual purchasing activity– Initiate e-procurement solutions


Areas Requiring Change/Benefits of Change

Strategic Asset Function

Benefits of Strategic Asset Purchasing– Provides accurate information for management

and taxpayers– reduces costs– obtains discounts or rebates– meets end users quality requirements– meets end users delivery requirements– insures procurement process legality and

integrity – minimizes delays and paperwork


Overview of Deliverables II & III


Approach

State of Wisconsin Management Team

Desired Future SituationModel

Detailed/Global Recommend.

State Agencies and UW Campuses

• Reengineered Business Processes

• Performance Metrics• Data Model• Vendor Analysis

• Detailed Requirements

• Data Schema• Vendor

Management• Impact• Cost• Implementation

time• Politics

ADC

SERVICES

ADC

SERVICES


Process Recommendations – Sample Format

Conduct Process Reengineering that: Utilizes cross-functional teams comprised of end-users,

buyers, procurement support personnel and management Finalizes a new “To-Be” process design, which streamlines

non-value added tasks Facilitates utilization of Internet based Purchasing solutions Calibrates appropriate authority levels Maximizes efficiency and serves the end-user Facilitates a refocusing of time to strategic purchasing

activities

Purpose

A reengineering team will validate “As-Is” process maps and work to refine the “To-Be” process maps which identify the steps that should be streamlined, eliminated, reorganized, or reallocated to achieve maximum performance improvement. This new process design will be coordinated with the introduction of internet based enabling technology that will allow CPS to utilize automated controls and supplier catalogs when possible to replace outdated inefficient manual, paper based procedures.

Approach Create cross-functional teams comprised of end-users,

buyers, procurement support personnel and management

Run workshops to create CPS ownership for the “As- Is” and “To-Be” process

Agree the most effective use of internet based technology and where changes in organizational structure can be utilized to streamline or eliminate certain manual tasks

Develop a risk management strategy Determine where certain forms or procedures can be

standardized to attain maximum efficiency Test the implementation of the streamlined process and

refine as necessary

Benefits Quicker response time to all aspects of the requisition to

payment process Elimination of low or non-value added tasks Increase in efficiency of CPS projects Improved supplier communication and satisfaction Reduction in overall processing time delivers significant

process savings Improved vendor qualification and vendor management

process Improved electronic tracking of procurement

transactions throughout the process Facilitates better assessment of supplier performance Frees up time of buyers to focus on large spend items

Sample Template


Question & Answer Session

Documents

© 2000 Advanced Data Concepts. All rights reserved. PROCUREMENT ANALYSIS PROJECT Current Situation Analysis November 30, 2000 Advanced Data Concepts LLC