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eProcurement
Graham KempUniversity of Toronto Educause 2002Atlanta GeorgiaCopyright Graham Kemp, 2002. This work is the intellectual property of the author. Permission is granted for this material to be shared for non-commercial, educational purposes, provided that this copyright appears on the reproduced materials and notice is given that the copying is by permission of the author. To disseminate otherwise or to republish requires written permission from the author.
Campus Business Connect
...to the point!
An End-to End Trip
Agenda
• Background
• Inception of the project
• Where we are today
• Future directions
• The experience
Campus Business Connect
...to the point!
University of Toronto
• 175th Anniversary• 29 Colleges/Faculties/Divisions• 278 Hectares – 262 Buildings• 3 Campus Locations• 10,000 Total Staff including 3,000 academics• >55,000 students• 12th Largest employer in Greater Toronto
Area• Annual budget of >$1.1billion• 380,000 alumni
Campus Business Connect
...to the point!
Background
• SAP R/3 Since 1995• Looked to BPR to solve procurement
issues• Considering eProcurement since 1997• 1998-1999 Built business case• 1999-2001 promoted eProcurement to
raise funds for initial phase• 2001 secured funding
Campus Business Connect
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Materials & Supplies $112,659
Services (e.g. Utilities) 64,918
Ancillary Services 54,823
Non Capital Repairs & Maintenance 32,554
Other Expenses 28,498
P-Card Purchases 6,738
TOTAL $ 300,190
$ 68 Million
University Non Salary Expenditures($ thousands)
Campus Business Connect
...to the point!
Procurement Issues• ~ 2,000 commercial trade accounts• 44,816 items (many duplicates)
• 280,000 purchases annually– 195,000 purchase order transactions– 85,000 renegade buys– 15-27% higher cost
• SAP purchasing difficult for casual users
• ~700 purchasersCampus Business Connect
...to the point!
eProcurement Philosophy
"Our goal is for eProcurement to become the purchasing method of choice for the University of Toronto. This will be achieved by creating the optimal purchasing experience for users while creating the optimal marketing channel for suppliers."
S. Whittaker, Director of Procurement Services
Campus Business Connect
...to the point!
Problem
• Many not using SAP purchasing module– Personal credit cards, PCards– Ordering over the phone
• Not clear what was being ordered and by whom
• Definitely not leveraging buying power• Large amounts of time administering
the purchasing process
User Involvement
• eProcurement Focus Group– 40 U of T participants– Across all campuses– Business officers, researchers,
management– Workshops and interviews– Review sessions– Constant feedback
Campus Business Connect
...to the point!
End user buy-in
• No incremental costs, no transaction fees
• Engage users in solution definition, selection, configuration and testing
• Solution has fewest “touch points”
• Eliminate need for shadow systems
• Initial focus on repetitive, non-strategic purchases Campus Business Connect
...to the point!
User Requirements
• Don’t just provide a fancy browser front end• A solution which allowed
– Filling a shopping cart electronically – Local business rules, approvals and workflow– Issue PO’s electronically– Invoices to be received electronically
• Three way matching for payment• Need to fully integrate into the backend• Must have funds availability checking at the
shopping basket
Savings and Benefits
• Estimated 7% - over $4.76M annually• Easy to use – 24 by 7 availability• Guide purchaser to prime vendor with value
assured• Multiple quotes eliminated• Streamline administrative tasks and
eliminates spending limits• Savings directly to departments and
researchers• Improved accountability More time devoted to academic pursuits
Campus Business Connect
...to the point!
Initial Plan
• In-House Catalog to provide:– Single unique university catalog– Aggregation of items and vendors– Hosted Service
• Proved costly– Transaction fees– Staff resources to manage and maintain
• Many vendors developing their own catalogs Campus Business Connect
...to the point!
New Direction
• Not to use a unique UofT catalog
• Use vendors catalogs:– UofT subset with UofT pricing– Leverage the vendors investment in
eCommerce
• Get access quickly to many catalogs with little investment by UofT
• Concentrate on the end-to-end solution
Software Selection
• After RFP Process selected SAP SRM:
– Commerce One EBP
• Provided best end to end solution
– SAP understood integration issues
• Other vendors did not have the experience
eProcurement Workflow
Workflow
PO
Ship
Receipt of Goods
Packaging
XCBL XCBL
yes
Goods ReceiptFunds Checking
PO=GR=INVOICE
PAYMENT
yes
EBP Login
VE
ND
OR
Uo
fT
eProcurement Workflow
INVOICE
OCI
Create Shopping Cart WF ApprovalCreate Goods Receipt
(Confirmation)
Electronic InvoicingCreate Manual
InvoiceCreate Purchase Order
NO NO
XCBL
P.I.Business
OfficerP.I.
Business Officer
P.I.Business
OfficerP.I.
Business Officer
Search for (source) product
Source competitive bids
Negotiate terms & conditions
Create account with vendor
Create vendor account in SAP
Create PO or Requisition in SAP
Record purchase to track BudgetFax supporting documents to ProcSvcs or PO to vendorFax PST Exemption Certificate to vendor
Fax PO to vendor
Receive goods (physical)
Forward shipping documents to Business Officer
Receive goods (system)
Receive vendor invoice
Reconcile vendor invoice with Purchase Order
Process invoice for payment
Issue cheque/funds to supplier
Reconcile departmental accounts
Touch points 4 4 6 8 5 10 3 1Process Touch points
Capture detail for reporting?
"Pick-up the phone and order" SAP / FIS SAP EBP
Purchasing Card"Bill me" - Certified
InvoicePurchase Order eProcurement
Purchasing Process ComparisonSteps / Touch Points
YES NO YES YES
8 14 15 4
Vendor Engagement
• Terms of engagement – eProcurement pre-qualifier
• Get CEO buy-in to allocate resources• Leverage vendors existing eCommerce
investment• Profile – “Founding partner”• Detailed project plan with milestones –
collaborate, communicate, monitor• Universal standards – OCI,XCBL• Exclusivity for non-strategic commodities• Payment terms – Net 10 Campus Business Connect
...to the point!
Vendor Issues
• UofT ahead of vendors– To a large extent OCI compliant, vendors not ready with
XML documents– Developed their solution with UofT– Vendors eager to participate
• Tax Codes an issue– PO’s must be returned with the correct tax codes
• Pricing, freight and other additional charges• Configuration of tolerances• Delivery addresses an issue Campus Business Connect
...to the point!
Timeline
2001 20032002
40 Suppliers7 Suppliers
500 Users200 Users
Campus Business Connect
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RFP to select vendorDecision to use SAP SRM Aug/01
Config. Version 2.0 Oct/01
First Transaction Dec 19/01
Upgrade to Version 3.0 Jan/02Phase I Group Live Sept/02
Implementation Team
• SAP Consultants (3 months) 3.7
• AMS Staff 3.0
• Procurement Services 1.5
• Financial Services .5
• Others– Business Officer 1.0– Researcher 1.0
Campus Business Connect
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Budget
• Consulting $ 381,000– SAP and Clockwork
• Hardware 200,000
• Training 29,500
• Miscellaneous 30,000
• Total Costs $ 640,500
Campus Business Connect
...to the point!
Where we are today
• Enabled three large vendor – Lyreco – office supplies– VWR – lab supplies– Dell – computers
• Successfully exchanging documents
• Currently working with 4 more large vendors
• Beginning engagement of SME’s
Critical Mass
• Important to get critical mass of suppliers
• Aiming for 30 to 40 by end of 2003
• Question - is how to do that?
• At least 4 more large suppliers
• 30+ small to medium (SME’s) suppliers
Small Medium Enterprises
• How to deal with SMEs?• Small suppliers with limited IT
resources– Bio Shop – One person operation– ~ 100 items
• Or larger suppliers with limited product line– Cannon for paper supplies
Enabling SMEs
Offer catalog services to SMEs• To UofT purchasers, catalog looks like the
SME’s own site• Order placed just as with large vendors
– All funds checking– POs issued through SAP R/3– XML document exchange for POs and Invoices
• Allow SMEs to update catalog and enter invoices through the web
Enabling SMEs
• Working with Concept Design (Dublin/Boston)
• Select 3 – 5 SMEs
• Pilot for 3 – 5 months
• No cost to the University
• Prove the concept
• Bring 30 + suppliers on board by the end of 2003
Our Experience
• Lack of experience on part of consultants
• Modifications to meet UofT requirements
• Vendor negotiations• Policy requirements• Business process• On-going maintenance and
administrationCampus Business Connect
...to the point!
Consultants
• Few experienced consultantsConsulting firms had the technical
knowledge but had not implemented end to
end solutions
• Funds Management knowledge lacking
Campus Business Connect
...to the point!
Suppliers
• Difficulty in dealing with business and technical staff
• Differing priorities
• IT structures – some vendors using consultants
• State of readiness in Canadian operations
Modifications
• Workflow– Not set up for independence of researchers– Set up UofT rules and approvals tables
• Taxes– Tax codes not passed to the PO from SRM
• Funds Management– Defaults and pick lists need to be developed for researchers– Funds availability checking not done at shopping basket
• Rejected Invoices– Rejected invoices parked – price matching
Campus Business Connect
...to the point!
Business Process & Policy
• Audit requirements moving from paper to electronic documents
• Policies on approvals, source documents, account reconciliations, documented procedures
• New processes required in many areas:– Org. structure maintained in SRM– Invoices arriving before goods receipt– Monitoring processes Campus Business Connect
...to the point!
On-going Maintenance
• Significant requirement
• Maintenance of:– User set up and changes– Org. Structure changes – HR responsibility?– Monitoring process – who does it? Fixes?– Delivery addresses
Campus Business Connect
...to the point!
Summary
• SRM was a good choice • Savings are achievable• User community committed• Vendors committed• Provides good foundation for further
eProcurement initiatives– Catalogs for small vendors– UofT providing a ‘Marketsite’ for other Canadian
universities and colleges
• Need to create critical mass of vendors
UofT Contacts
• Graham Kemp – Director AMS
• Pat Heslin – AMS Project Manager [email protected]
• Anne Joiner – AMS Manager Technical Services
• Steve Whittaker – Director Procurement Services [email protected]
• Eddie Jin - Procurement Services - Project Leader
[email protected] Business Connect
...to the point!