Gap aanalysis final presentation

Advanced Data Concepts, LLC

State of WisconsinProcurement Analysis Project

Desired Future Situation & Detailed Recommendations

January 2001

2© 2000 Advanced Data Concepts, LLC State of Wisconsin

CONTENTS

INTRODUCTION

RECOMMENDATIONS– GAP ANALYSIS

– IMPERATIVES

– SYSTEM OPTIONS

ORGANIZATIONAL & POLITICAL

CONSIDERATIONS

IMPLEMENTATION GAME PLAN

BEST PRACTICES PROCESS MAPS

APPENDICES– GLOSSARY

– CASE STUDIES

– E-PROCUREMENT VENDOR LISTING

– SUPPORTING CHARTS

– Data Warehouse Project - Development & Implementation


PROJECT OBJECTIVES, DEFINED BY THE INTERAGENCY GROUP, DROVE INTENSIVE SET OF INTERVIEWS AND ANALYSES

INTRODUCTION

OBJECTIVESOBJECTIVES

DESIGN GUIDELINES

PHILOSOPHY

• Identify and realize efficiencies from common business needs

• Reengineer procurement/purchasing processes and implement performance metrics

• Define and understand successful procurements

• Make purchasing a strategic asset

• Provide quality goods and services for the best possible price

• Encourage participation of other units of government and vendors

• Identify and accommodate different business requirements and needs

• Make it easy and timely• Provide timely and accurate information

to all participants• Leverage the State’s scale and scope• Use technology effectively throughout

the procurement cycle


ADVANCED DATA CONCEPTS COMPLETED AN INTENSIVE TEN WEEK EFFORT TO ANALYZE THE STATE’S PROCUREMENT OPERATIONS

INTRODUCTION

State of Wisconsin Management Team

Current Situation AnalysisDesired Future Situation

ModelDetailed/Global Recommend.

State Agencies and UW Campuses

• Data Collection• Interviews (10 agencies)

• Surveys (all others)

• Document•Process•Systems

• Validate• Best Practices

• Reengineered Business Processes

• Performance Metrics• Data Model• Vendor Analysis

• Detailed Requirements

• Data Schema• Vendor

Management• Impact• Cost• Implementation

time• Politics

ADC

SERVICES

ADC

SERVICES


In November 2000, ADC provided SBOP with a picture of the current procurement situation in the State of Wisconsin

This document now answers the questions:– What is the Desired Future

State?– How do we get there?

RECOMMENDATIONS TO FACILITATE WISCONSIN MOVING FROM ITS CURRENT STATE TO A DESIRED FUTURE STATE HAVE BEEN DEVELOPED

INTRODUCTION


Buyer/Supplier ManagementPurchasing as a Strategic Asset

EMBRACING THE FOLLOWING STRATEGIC FRAMEWORK WILL DRIVE PROCUREMENT & OPERATIONAL EXCELLENCE

Strategic Planning• Continuous Learning &

Innovation• Review Buying and

Supplier Behavior• Strategic Sourcing• Key Performance

Indicators

Technology Architecture• Enterprise Application

Solution• E-Procurement • Data Warehousing• N-Tier / Client-Server

Architecture

Business Process Re-Engineering

• Best Practices• Imperatives• Organization Impact• Commodity Code

Standardization• Human Capital

Development

Vendor Management• VendorNet• E-Procurement• Supplier Performance

Measurement

INTRODUCTION


THIS PROJECT RESULTED IN SEVERAL MAJOR RECOMMENDATIONS

THE FOLLOWING IMPERATIVES MUST BE ADDRESSED TO REALIZE IMPROVEMENT OPPORTUNITIES IN THE PROCUREMENT CYCLE.

INTRODUCTION

– Leverage Large Volume Purchases - achieve maximum vendor discount

– Expand Use of Cross-Functional Teams - develop sourcing strategies for high volume and complex purchases

– Approval Process - decrease approvals to one per transaction (requisition and purchase order)

– Commodity Coding - standardize on UN/SPSC naming convention– Purchasing Card Reporting and Management - report on P-Card

purchases by commodity and dollar amount– Purchasing as a Strategic Asset – establish purchasing as an

integral part of the strategic planning process



KEY IMPERATIVES CONTINUED …

INTRODUCTION

– Expand Training Program - provide a continuous improvement program for SBOP and agency procurement staff

– Standardization and Consolidation - institute a standardization program to achieve cost savings

– VendorNet Official State Bidders List - eliminate all bidders list but VendorNet

– Vendor Data Rationalization - WISMART the only vendor table for State

– Key Performance Indicators - for Staff, Vendors and Customer Satisfaction

– Develop Data Warehouse - for the analysis of statewide purchasing activity and spend data



SYSTEMS SOLUTIONS– Near-Term, Immediate:

Begin development of Data Warehouse to capture data for the analysis of statewide purchasing activity and spend data [Also listed as an Imperative]

Conduct detailed feasibility study to determine best approach for dedicated statewide procurement solution that automates the requisition to payment process

Enhance in-house purchasing system (e.g., PurchasePlus) Purchase procurement software package (e.g. PurchasingNet, Compusearch Software

– Prism, Dynamic Software, MRO Software, …)

– Medium-Term: Utilize E-Procurement – use reverse auctions and/or strategic sourcing for new

purchases where feasible Chief Information Officer – centralize technology initiatives under leadership

statewide executive

– Long-Term: Adopt the implementation of an Enterprise Application System (EAS); also

referred to as an Enterprise Resource Planning (ERP) System Includes consideration of upgrading WisMART (AMS Advantage 3.0 Software) and

migrating all agencies to WisMART in conjunction with retaining newly deployed statewide procurement system

INTRODUCTION


WE HAVE TRIED TO ENSURE THAT RECOMMENDATIONS ARE CONSISTENT WITH THE INTERAGENCY GOALS

Please reference exhibit on the following page.

INTRODUCTION

© 2000 Advanced Data Concepts, LLC State of Wisconsin


RECOMMENDATIONSRECOMMENDATIONS

GAP ANALYSIS


GAP ANALYSIS

ADC created 85 process maps that outline the current situation in ten agencies, including the University of Wisconsin

Gap analysis charts, on the following pages, identify changes required to migrate current processes to best practices

GAP ANALYSIS


AGENCY

RECOMMENDED ACTION

DOT

DOC

DWD

DH&FS

DNRDATCP

Comm

erce

DOA

SBOP

UW S

yste

m

Expand Use of P-Card

Extend to All Small Dollar Purchases

Expand Use to Statewide Contracts

Add Language in Bids Accepting P-Card Payments

Add Requirement for Bidders to Identify Reporting Level

Negotiate With Statewide Vedors to Provide Level Three Reporting

Negotiate With Visa to Obtain Level Three Reporting

Reconcile Level Two Information With Commodity Codes for Reporting

GAP ANALYSIS – P. CARD

GAP ANALYSIS


GAP ANALYSIS – SIMPLIFIED BID

GAP ANALYSIS

AGENCY

RECOMMENDED ACTION

DOTDOC

DWD

DH&FS

DNRDATCP

Comm

erce

DOAUW

Sys

tem

Automate

Obtain Quote Before Requisition Entered

Automated Validation of Account Codes

Online, Real Time Requisition Approval

Reduce Number of Approvals

Eliminate Evaluation Committee

System Generates Purchase Order (PO)

On-Line PO Approval

Electronically Transmit PO to Vendor


GAP ANALYSIS – SEALED BID

GAP ANALYSIS

AGENCY

RECOMMENDED ACTION

DOTDOC

DWD

DH&FS

DNRDATCP

Comm

erce

DOAUW

Sys

tem

Automate

Requisition Entered by End-User

Automated Validation of Account Codes1

Online, Real Time Requisition Approval


System Calculates Lowest Bidder


On-Line Purchase Order Approval


1. UW's PeopleSoft software will allow full automation, including end user requisitioning, automated account validation and online PO approval when the system-wide implementation is completed.


GAP ANALYSIS – DIRECT CHARGE

AGENCY

RECOMMENDED ACTION

DOTDOC

DWD

DH&FS

DNRDATCP

Comm

erce

DOAUW

Sys

tem

Continue Current Process

Eliminate Requisition

Reduce Use of Direct Charge

GAP ANALYSIS


GAP ANALYSIS – REQUEST FOR PROPOSAL (RFP)

AGENCY

RECOMMENDED ACTION

DOTDOC

DWD

DH&FS

DNRDATCP

Comm

erce

DOAUW

Sys

tem


Maximize Automated Processes

GAP ANALYSIS


GAP ANALYSIS – STATEWIDE RELEASE

GAP ANALYSIS

AGENCY

RECOMMENDED ACTION

DOTDOC

DWD

DH&FS

DNRDATCP

Comm

erce

DOAUW

Sys

tem

Continue Current Practice

Automate

Eliminate Pre-Approval


End-User Enters Requisition

Automated Validation of Account Codes1

On-Line Requistion Approval


On-Line Purchase Order Approval


1. UW's PeopleSoft software will allow full automation, including end user requisitioning, automated account validation and online PO approval when the system-wide implementation is completed.


GAP ANALYSIS – ACCOUNTS PAYABLE

AGENCY

RECOMMENDED ACTION

DOTDOC

DWD

DH&FS

DNRDATCP

Comm

erce

DOAUW

Sys

tem


On-line Receiving & Invoicing

Automated 2/3 Way Match

Implement Enterprise Procurement

GAP ANALYSIS


GAP ANALYIS – REQUEST FOR BID (SBOP)

AGENCY

RECOMMENDED ACTION

DOTDOC

DWD

DH&FS

DNRDATC

P

Comm

erce

DOASBOP

UW S

yste

m

Leverage Large Volume With Accurate Spend Data

Use Standards Committee(s)

Develop Sourcing Strategy

Develop Performance Standards for All Contracts

Inititate E-Procurement Solutions

GAP ANALYSIS


AGENCY

RECOMMENDED ACTION

DOT

DOC

DWD

DH&FS

DNRDATCP

Comm

erce

DOA

SBOP

UW S

yste

m

No Registration Fee

Registration Required to Bid

Vendors With Current Contracts Required to Register With VenorNet

Develop Performance Standards for All Contracts

Charge Fees for Automated Services

Capability to Accept Online Payment

Enhance Search Engine

GAP ANALYSIS - VENDOR NET (STATE BIDDRS LIST)

GAP ANALYSIS



IMPERATIVES


IMPERATIVES REPRESENT FOUNDATIONAL RECOMMENDATIONS THAT MUST BE ADDRESSED BY THE STATE TO ENSURE SUCCESS

– Leverage Large Volume Purchases

– Cross-Functional Teams– Approval Process– Commodity Coding– Purchasing Card

Reporting and Management

– Purchasing as a Strategic Asset

– Expand Training Program– Standardization and

Consolidation– VendorNet State Bidders

List– Vendor Data

Rationalization– Key performance

Indicators

Imperatives have been identified in the following areas:

IMPERATIVES


LEVERAGING LARGE VOLUME PURCHASES

Desired Future State Leverage large volume purchases to

achieve maximum vendor discount

Business Case for Action Currently not all agencies consistently

utilize statewide contracts therefore lessening volumes

– Usage on statewide office supply contract $4 to $5 million

– UW utilizes different office supply contract; year to date expenditures approximately $5 million

– DWD did not utilize statewide office supply vendor for a three year period.

Combination of this volume would result in the state leveraging lower costs from the office supply vendor and insuring states customer service requirements would be met

State has no official purchasing classification system and spend data cannot be aggregated for evaluation

IMPERATIVES


LEVERAGING LARGE VOLUME PURCHASES …

Recommendation(s) SBOP must identify and manage

classification system that would allow the aggregation of purchasing spend data by commodity

Aggregated commodity spend data must be used to identify the largest volume commodities

Items within the largest volume commodities must be standardized so that number of items is reduced while item volume is increased

SBOP must obtain data from municipalities and school districts that utilize their contract. This information must be included in quantity and spend estimates provided to vendors in solicitation

Solicitations methods must require vendor to offer maximum cost saving and customer services

Approach A standard commodity code must be

adopted Baseline spend data must be gathered on all

commodities purchased statewide Standards committees must be formed to

consolidate items in commodities with multiple items purchased in large quantities

As new leveraging opportunities are uncovered, SBOP must determine the procurement method that will result in the highest savings. For example:

– Strategic Sourcing solicitations– Reverse auctions– Discounts based on quantity thresholds– Rebates based on quantity thresholds– Discounts in return for contract

extensions

IMPERATIVES


USING STANDARDS COMMITTEES/ CROSS-FUNCTIONAL TEAMS

Desired Future State Standards Committees are used to

leverage large volume purchases and to develop a sourcing strategy

Business Case for Action According to Purchasing Online, a supply

chain magazine, the use of cross-functional teams is the best of the best practices in supply management

In his book, Balanced Sourcing, Timothy Laseter indicates that using multi-functional teams is a winning sourcing strategy

Wisconsin currently uses standard committees to develop RFB/RFPs

Standards committees are not used consistently by agencies or SBOP staff members


USING STANDARDS COMMITTEES/ CROSS-FUNCTIONAL TEAMS

Recommendation(s) SBOP should increase the use standards

committees to develop RFB/RFPs SBOP should use cross-functional teams

to develop sourcing strategies on all high-volume state-wide commodities. The strategy may include:

– Standardization

– E-commerce opportunities

– Strategic vendor partnering opportunities

– Volume discount sourcing These teams should set client goals and

objectives and be held responsible for the success and/or failure of the initiative.

Approach Identify staff in agencies to participate in

cross-functional teams To ensure team success, they will need

– Organizational resource availability– Supplier participation and

involvement– High level of internal and external

decision-making authority– Effective team leadership– Performance evaluation and rewards


APPROVAL PROCESS

Desired Future State Approvals done on-line via automated

workflow:

– Requisition would be entered on-line by program end-users

– One approval for requisitions

– Purchase Orders would be created by copying information from requisition

– One approval for purchase orders

– One approval for releases against a master ageement

Business Case for Action Five of the nine agencies reviewed have

manual requisitioning and purchase order processes

Many departments require multiple approvals (manual or online) of requisitions and purchase orders

Manual budget checking in non- automated agencies add to required approvals and slows processing

Routing paper requisitions and/or rekeying information into multiple systems

– increases processing time

– reduces customer satisfaction

IMPERATIVES


APPROVAL PROCESS …

Recommendation(s) Implement an automated purchasing

system with online budget verification The automated purchasing system should

accommodate decentralization to the end user level

The system should maintain an online vendor file, accessible to all users

System should have automated workflow

Approach Non-automated agencies should

streamline paper process Non-automated agencies should

implement an automated purchasing system

– Automated requisitions include:

• commodity codes

• commodity description

• accounting string(s) - pre-encumbrance

– System creates purchase orders by copying requisition information, releasing pre-encumbrance and performing an encumbrance against accounting string(s)

IMPERATIVES


COMMODITY CODING …

Desired Future State Create a standardized naming

convention that:– Allows the standardized coding

of purchases– Allows the compilation of

aggregate purchase information in a unified framework permitting search and analysis

– Integrates procurement card statement categories with all purchase transactional data

Business Case for Action State Bureau of Procurement (SBOP)

is required by statute to report on Purchases throughout the state

No Statewide naming convention exists for purchasing data

Base line spend data by purchase is necessary for:

– Standardization– Workload management– Performance measure development– Strategic sourcing– E-Procurement– Negotiating better pricing agreements

with vendors Currently base line spend data cannot

be produced on a timely and accurate basis

IMPERATIVES


COMMODITY CODING …

Recommendation(s) Select UN/SPSC classification system as

State’s commodity coding system– Code maintains good hierarchical

groupings– Allows reporting on a contractible

group– Identifies all buyable products and

services and places them into a logical hierarchical classification

– Has a pilot commodity coding project with Visa

Set SBOP staff as the state-wide mangers of the code

– Will determine code classifications– Make decisions about adding new

code– Liaison to code management company

for developing new code when required

Approach SBOP should:

– Work with IT to determine most efficient way to disseminate code throughout enterprise

– Develop procedures for code application and maintenance

– Develop a cross functional groups to facilitate code implementation through all agencies

– Provide all changes to code

– Determine how items should be classified in response to agency question

– Develop a continuous training program on use and value of commodity code

End user to add commodity code description to system requisition

IMPERATIVES


PURCHASING CARD REPORTING AND MANAGEMENT

Desired Future State Report on P-Card purchases by

commodity and dollar amount Maximize the utilization of P-Cards

throughout state agencies Utilize P-Cards for ordering on

statewide contracts

Business Case for Action Utilization of P-Cards for low dollar

hi-volume purchases is a best practice

According to the study on corporate procurement practices conducted by the Hackett Group:

– P-Cards, when used with other best practices, can reduce the cost of a transaction from $9.50 to $1.87.

– P-Cards can reduce the cost of making a payment by 85%.

The state is expected to expend $50+million dollars using P-Cards this fiscal year however individual purchases cannot be identified or aggregated by commodity

IMPERATIVES


PURCHASING CARD REPORTING AND MANAGEMENT …

Business Case for Action Vendors that accept Visa report purchases

using Merchant Category Codes (MCCs)– codes are tiered – merchants that are coded at level two

provide data on dollars spent via a general classification code

– merchants coded at level three can provide more itemized expenditure information and a commodity code can be added to each record

– Currently Visa has a pilot program with Dun & Bradstreet to utilize its UN/SPSC commodity code

Identification of P-Card purchases will allow:

– Required oversight and reporting of state purchases

– Identification of commodities where volume discounts are likely

– Identification of commodities for E-Procurement initiatives

Recommendation(s) Require current bank/Visa to provide level

3 reporting for companies that currently have it

Include level 3 reporting as a requirement in all supply bids where the volume is expected to exceed $1million

Request that all current suppliers on high volume contracts, with 2 years or more left on their contract become level three vendors

Cross reference current level 2 reporting to commodity codes and develop reports

IMPERATIVES


Approach SBOP obtain level 3 reports from bank for

all level 3 vendors Require P-Card acceptance and level 3

reporting on large volume procurements expected to exceed $1 million

Since only 1000 vendors provide level three information this information will not be available from most vendors. To capture some purchasing detail SBOP should:

– Use ProCard (reporting software) to develop a report that will cross reference level 2MCCs to commodity codes by department

– Report information monthly to agencies

It is noted that some level 2 MCC information will not correspond to an individual commodity code group

MCC Code 5200 Home Supply Warehouse as an example is used for companies like Home Depot and Menards that supply a wide variety of items

– Given the variety of items sold by these companies level three reporting is not likely to yield the required detail

– Spend data from these vendors should be given a special category.

– Items bought here cannot be captured for inclusion in aggregated spend data

– Dollars in this category should be used to negotiate discounts at Home Supply Warehouse stores such as Menards and Home Depot

PURCHASING CARD REPORTING AND MANAGEMENT …

IMPERATIVES


PURCHASING AS A STRATEGIC ASSET

Desired Future State Purchasing is a strategic asset to the

State of Wisconsin and an integral part of the strategic planning process

Business Case for Action SBOP is statutorily charged with

reporting the state purchasing activities

Accurate spend data enhances the ability of SBOP to develop commodity management strategies, leverage purchasing volumes and improve sourcing

Strategic sourcing and E-Procurement could save the State $90 million dollars (10% of $900 million) over the first two years based on research conducted by research organizations such as the Gartner Group

Strategic sourcing and E-Procurement can improve the quality of goods and services

IMPERATIVES


PURCHASING AS A STRATEGIC ASSET …

Recommendation(s) Identify a commodity for immediate

strategic sourcing initiative, such as telecommunications including cell telephones and pagers

Conduct a pilot E-Procurement initiative Identify a commodity such as food and

food service and identify contracting improvement opportunities

Utilize cross-functional teams comprised of end-users, buyers, SBOP staff and management for:

– continuous improvement in commodity and supplier strategies and relationships

– E-Procurement opportunities– strategic sourcing– standardization's and consolidations

analysis of services across agencies Develop on-going training for SBOP and

agency procurement staff

Approach Purchasing can be established as a Strategic Asset

through a set of specific pathways designed to achieve incremental and significant cost savings by improving procurement - Buy for Less, Buy Better and Consume Better

– Buy for Less where savings are 5 to 15%:• Volume consolidation• Supply base optimization• Enhanced negotiation and contracting skills• Leverage State clout

– Buy Better typically results in savings of 5-15%:• Improved coordination/forecasting accuracy• Streamlined bidding processes• Longer-term commitments to suppliers

– Consume Better savings are expected to exceed 5%:• Optimize lifecycle costs• Outsource non-core activities• Increase use of cross-functional teams• Reduce complexity/simplified specifications• Increase standardization• Rationalize requirements

Identify staff in agencies to participate in cross-functional teams

Implement a data warehouse Benchmark current pricing Develop an effective communication program

– workshops– email– intranet

IMPERATIVES


PURCHASING AS A STRATEGIC ASSET …

Management's View of Purchasing:A Historical Perspective

View Organizational Position Performance Measures1970s &earlier

ClericalFunction

Low on org. chart, often a subsetof accounting or operations

Focused on the past, quantitative efficiencyand control of expenditures

1980s CommercialActivity

Reports to Management Focused on present, qualitative effectiveness,measures such as cost savings/cost reduction

1990s &beyond

StrategicBusinessFunction

Integral part of the strategicplanning process

Focused on proficiency, gaining present andfuture competitive advantage throughintegrated resource management & reductionof purchase and ownership costs

© 1994 Solutions Consulting Group

IMPERATIVES


EXPAND TRAINING PROGRAM

Desired Future State State provides a continuous improvement

program for procurement staff providing 40-80 hours of training for SBOP staff and 20-40 hours of training for agency staff on an annual basis

Business Case for Action Best-in-Breed organizations provide

continuous improvement training for its procurement staff

SBOP conducts in-house training directed primarily at agency procurement personal

New SBOP procurement staff receive entry-level training

Staff not required to attend refresher courses

Long term staff may not have received any training within the last ten years

IMPERATIVES


EXPAND TRAINING PROGRAM …

Recommendation(s) SBOP should continue with its in-house

training of new staff for entry level knowledge

Develop “brown bag lunches” once a month at various agencies

Develop web-based training for self-paced learning of all State staff involved in Purchasing

SBOP should provide outside training

– National Association of Purchasing Managers (NAPM)

– National Institute of Governmental Purchasers (NIGP)

– Pool of training consultants SBOP should encourage its staff to

become certified as a C.P.M., or a CPPO, or CPPB

Approach SBOP should update training to include initiatives

implemented by this assessment, develop and disseminate a schedule to all agencies

Develop the “brown bag lunches” series given once a month at various agencies. Recruit agency staff to lead the discussion on trends and best practices in the purchasing field as it relates to their agency

Identify resources to develop web-based training, such as:

– University– NAPM– Outside Consultants

SBOP should identify classes given either by NAPM or NIGP for:

– Mid-Level Purchasing and Supply Training

– Senior-Level Purchasing and Strategic Supply Training.

These classes can be taught off or on-site. SBOP should develop a RFP for procurement

training services and identify a pool of consultants that can provide purchasing training

IMPERATIVES


STANDARDIZATION AND CONSOLIDATION

Desired Future State Institute a standardization program (tool to

achieve cost savings)

Business Case for Action Neither state nor agencies limit the type of

items purchased to increase the volume of a selected item or commodity

Examples of state contracts providing too much variety:

– copier contract 15 types of copiers , 6 to 8 brands per type

– printer contracts 25 types of printers, 4 to 12 brands per type

– hand & electric tool contract offers access to all items on eight vendor catalogs

Standards committees have no cost savings goals and are encouraged to develop requirements for many of items rather than consolidation to as few different types as possible

Agencies provide no guidelines for staff regarding types of supplies which they are allowed to purchase therefore staff may use several varieties of the same item.

IMPERATIVES


STANDARDIZATION AND CONSOLIDATION …

Recommendation(s) Set cost saving goals for specific

commodities Develop multi-agency standards

committee with goals of reducing number of items in commodity

Rebid expiring contracts within targeted commodities using reduced items listing and include requirements for analyzing cost savings.

Approach SBOP should work with agencies to

develop statewide, internal support for cost reduction/cost savings programs.

SBOP should obtain baseline spend data on statewide purchases

– Until this data can be obtained from internal reporting vendors should be asked to provide usage

– Evaluate commodities to determine where standardization is warranted

– Develop cross function, multi-agency team to work on standardizing designated statewide contracts

Agencies should also develop agency wide teams to target standardization and consolidation opportunities within the agency

IMPERATIVES


VENDORNET STATE BIDDERS LIST

Desired Future State VendorNet the only State Bidders List

Business Case for Action PRO C 35 has established VendorNet as

the State’s bidders list VendorNet is a real-time, interactive, bid

posting Internet application VendorNet is a precursor of E-

Procurement initiatives Currently, VendorNet has a base of

1,600+ vendors Many of the State agencies continue to

maintain their own bidder lists It is a common practice for agencies to

send copies of bids and RFPs to non-VendorNet vendors

IMPERATIVES


VENDORNET STATE BIDDERS LIST …

Recommendation(s) Allow all vendors to register on-line with

VendorNet Registration required for bid to be responsive All vendors that have a current contract must

be on VendorNet Do not charge vendors to register with

VendorNet Charge fee for automated services, such as

receiving bid notification electronically or downloading bid documents

Fee structure is based on:– number of commodity classes– in-state vs. out-of-state vendor

Change legal notice requirement from newspaper advertisement to electronic notification

Enhance VendorNet ability to accept online payment

Enhance VendorNet to calculate bid tabulation

Enhance search engine capabilities

Approach Change Wis.Stats. 16.004;

16.701>Wis.Adm.Code Chapter Adm 9 to indicate that vendors must register with VendorNet to bid with the State and/or receive contracts. Vendors must pay a fee to be notified automatically of all agency requests for bids/proposals over $25,000.

SBOP should work with agencies to ensure all current agency vendors are on VendorNet

SBOP should develop a two-year strategic plan to ready all its vendors for E-Procurement

– At the end of 2-years, change Wis. Stats. 16.75 to identify legal notice as electronic notification

SBOP should implement enhancements to VendorNet application/environment to include:

– on-line payment– calculate bid tabulation– increased search engine capabilities

IMPERATIVES


VENDOR DATA RATIONALIZATION …

Desired Future State WISMART the only vendor table for State Vendor List cleansed and rationalized

within WISMART.

Recommendation(s) Standardize Vendor Information.

Business Case For Action Multiple Vendor lists, files and databases

across the State inhibits the State’s ability to effectively manage Vendors and monitor their performance.

No coding standards for Vendor Information (e.g., identification, address standardization, multiple locations, etc.)

Approach Define rules and standards for Vendor

identification and coding. Combine, cleanse, and rationalize multiple

Vendor lists in use across State.

IMPERATIVES


KEY PERFORMANCE INDICATORS - VENDORS

Desired Future State RFPs and contracts resulting from RFPs

should contain clear vendor performance standards

SBOP should monitor vendor performance on statewide contracts

Central purchasing staff within agencies should monitor performance on agency initiated contracts

Business Case for Action Failure of vendors to meet performance

criteria means

– agency is paying for a quality level that will not be achieved

– terms and conditions which are key to cost savings may not be honored

Customer (end-user) satisfaction will be low

Performance criteria that is not quantifiable or unclear leads to differences in the expectations of the vendor and the end user and results in disputes

IMPERATIVES


KEY PERFORMANCE INDICATORS – VENDORS …

Recommendation(s) All RFPs and contracts resulting from

them should contain measurable performance standards

Performance standards at a minimum should identify:

– the specific service (s) that must be performed

– expected outcomes or deliverables

– provide quantifiable test methods by which outcomes or deliverables will be judged

– quality measures that must be met

– time frame of delivery requirements

– any performance/cost reduction relationships

– minimum vendor capabilities

Approach Contract value and complexity should

dictate the contract monitoring frequency for SBOP and agency staff

On Statewide contracts SBOP should work in tandem with lead agencies to identify vendor performance standards

At contract start up, purchasing staff and vendor should review performance requirements included in contract

Procurement staff should be assigned specific contract administration duties that include:

– determining vendor compliance with contract terms and conditions

– determining the level of customer satisfaction with vendor services

– working with Accounts Payable to insure that invoices reflect contract

terms and conditions

IMPERATIVES


KEY PERFORMANCE INDICATORS - STAFF

Desired Future State SBOP and Agency purchasing staff will

have clear goals and objectives for performance

Goals, objectives and performance standards will reflect purchasing as a strategic asset

Staff goals and objectives will be tied to the overall goals and objectives of the their department

Staff will be given performance standards that identify a satisfactory level of performance that are specific and

measurable

Business Case for Action Currently criteria for doing a good job is

defined by evaluating transaction data (how many bids or RFPs handled, timely renewal of expiring contracts, attendance, on time arrival, etc.)

To achieve an overall goal of purchasing as a strategic asset, goals, objectives and performance standards must be based on activities that add value to the procurement process

– Samples of typical performance appraisal questions for transactional purchasing and performance indicators of purchasing as a strategic asset are listed on the next slide

IMPERATIVES


Recommendation(s) SBOP and agencies should identify goals

and objectives that enhance the purchasing performance as a strategic asset ( goals related to cost savings require accurate baseline spend data)

Staff should be apprised of organizational goals and objectives and (in tandem with supervisors) set goals for performance that support agency goals.

Specific and measurable performance standards should be gleaned from goals and objectives that clearly identify satisfactory performance

Incentives should be developed that will reward successful completion of employee goals and objectives

Approach SBOP Management and Human

Resources department must identify incentives (over and above standard increases) that can be offered to employees that successfully complete goals and objectives.

SBOP and agency management must develop a strategic plan for department procurement that identifies departmental goals and objectives

Supervisors, in tandem with employees, must set goals and objectives that support agency goals.

Supervisors must develop employee performance standards and measures.

Goals and objectives must support purchasing as a strategic asset as opposed to a transactional activity.

KEY PERFORMANCE INDICATORS – STAFF …

IMPERATIVES


Comparison of Performance Indicators for Transactional vs. Strategic Procurement Performance Indicators must be specific, measurable and time limited. Listed below are sample questions that are

used to determine performance in a transactional purchasing environment and measurable performance indicators that are used when purchasing is a strategic asset

KEY PERFORMANCE INDICATORS – STAFF …

Typical performance appraisal questions in a Transactional Purchasing Environment For the current evaluation period what activities did the employee perform?

– Sourcing• How many bids and Requests for Proposals were

completed?• Were the bids or requests for proposal completed within

department time frames?• How many standards committees did employee chair?• Was an RFP developed as a result of the Standards

committee?

– Purchasing Process• How many purchase requisitions and purchase orders

did the employee process?• Customer Services• How did the end user rate the employee?

– helpful– courteous

– Contract Administration• Did the employee assist in the resolution of vendor/

end-user disputes?

Performance Indicators for Activities where Purchasing is a Strategic AssetWithin the upcoming fiscal year employee will meet the following performance standards

– Sourcing• Cross functional teams chaired by employee will meet a

minimum of 85% of the cost saving goals for target commodity

• The aggregate of purchases managed by employee will result in 1% cost savings over the aggregate of those same commodities in the previous fiscal year.

• Employee will have 0% of re-bids due to unclear specifications, terms or conditions

– Purchasing Processes• Employee will evaluate the processes of 3 agencies to

determine if there are opportunities for streamlining

– Customer Services• Purchasing staff will collect and deploy to a minimum of 3

end users market intelligence that will result in improved end user buying decision

– Contract Administration• Employee will audit vendor reports and invoices quarterly

to determine if contract terms and conditions are being met

IMPERATIVES


Desired Future State SBOP mission statement incorporates its

customer service initiatives

Business Case for Action SBOP currently receives customer

feedback from interagency meetings and surveys to agency purchasing staff and vendors

monthly meetings of Purchasing personnel

– too large for meaningful customer feedback and dialogue

– does not include agency end users Current surveys are information gathering

tools not specifically targeted to determine customer satisfaction

SBOP is considering charging agencies for value added services

– internal customer’s perceptions of SBOP’s service overall service and value will have a great impact on their acceptance of this funding philosophy

KEY PERFORMANCE INDICATORS - CUSTOMER SATISFACTION

IMPERATIVES


KEY PERFORMANCE INDICATORS - CUSTOMER SATISFACTION …

Recommendation(s) SBOP should develop a mission

statement that includes its customer service goals. Mission statement should be incorporated into policies and procedures

SBOP should conduct easy to answer “pulse” surveys, assessments of specific purchasing initiatives, for both vendor and internal customers

Implement Customer Advisory Boards much like users groups that exist in the software industry. They provide feed back on both SBOP and agency practices.

Utilize feedback from surveys and Customer Advisory Boards to develop performance standards for SBOP staff

Approach Develop mission statement and internal

communication plan for incorporating customer service principles of mission statement into SBOP culture.

Determine areas requiring feed back and develop survey schedule and topic. Staff should be assigned to this initiative.

Purchasing advisory teams, comprised of like size agency end-users, procurement staff and vendors should be developed to provide SBOP feedback on its polices, procedures and services.

Incorporate customer service performance standards as evaluation criteria in employee performance appraisals

IMPERATIVES



SYSTEM SOLUTIONS


MIGRATE FROM MANUAL FRAGMENTED SYSTEMS TO AUTOMATED INTERGRATED SOLUTIONS

Current Situation– Highly manual; many

hand-offs– High “touch”; labor

intensive– Significant non-value-

added activities– Multiple systems;

heterogeneous environment

Desired Future Situation– Fully automated, end-

to-end– Low “touch”;

exception-based processing

– Integrated workflow– Leverage N-Tier

Systems Architecture

SYSTEM SOLUTIONS


DESIRED SYSTEM MUST CONTAIN FEATURES CONSISTENT WITH INDUSTRY BEST PRACTICES ACROSS THE PROCURMENT CYCLE

Process System Characteristics Process System Characteristics

Create Requisition Requisitions created on-line (no paper).

Commodity Codes and Item Descriptions required foreach line item on Requisition. System providesCommodity and Vendor search capabilities.

Integration with Vendor e-catalogs where applicable.

System automatically validates accounting strings andfunding sources, and pre-encumbers funds.

Create Purchase Order Once Vendor is selected, Purchase Order can be createdautomatically from Requisition.

Route Requisition for Approval Based on Requestors profile, Requisition is automaticallyrouted to Supervisor for approval, if necessary.

Approve Purchase Order If necessary, PO is routed to Purchasing Manager forapproval. Once approved, Purchase Order is ready fordistribution.

Approve Requisition “In-Box” functionality used to notify Approvers ofRequisitions awaiting approval. Once approved,Requestor is notified of authority to proceed.

Distribute Purchase Order Once approved, Purchase Order is automaticallydistributed to Vendor via fax, e-mail, etc.

Develop Requirements (Formal &Informal)

System allows for the development of specifications thataccompany the requisition.

System calculates the lowest bidder by line item, bygroup or by entire bid from manually entered quotations.

Record Receipt of Goods As goods are received, they are recorded in the systemand matched against the Purchase Order line items.

Create Formal Bid Formal Bids are developed on-line. System assists in Bidcreation by automatically generating standard language,terms and conditions.

Record Receipt of Invoice As Invoices are received, they are recorded in thesystem.

Post Formal Bid Once completed, Bids are posted automatically toVendorNet.

Perform 3-Way Match System automatically performs 3-way match betweenPurchase Order, Delivery Receipt and Invoice.

Receive and Record BidQuotations

As Quotations are received, they are entered into thesystem.

Authorize Payment Upon successful 3-way match, payments areautomatically authorized and an EFT to Vendor initiated.

Select Vendor Once all quotations are entered into the system, thesystem can analyze the quotations and recommend themost appropriate Vendor. Requestor can approveselection or override selection and choose an alternateVendor.

SYSTEM SOLUTIONS


DESIRED SYSTEM FLOW MUST MINIMIZE MANUAL PROCESSESS, MAXIMIZE AUTOMATION AND MANAGE BY EXCEPTION

Create Requisition

Approve Requistion

Deve lop Requirem ents

(Form al & In form al)

C reate Form al B id

Post Form al B id

Rece ive and Record

Q uotationsSelect Vendors

Create Purchase O rder

Approve Purchase O rder

R equestor

Supervisor

Purchasing M anager

Vendor

Purchasing System

Route Requisition for Approva l

Q uote

G enerate Purchase O rder

B id(VendorNet) D istribute

Purchase O rder

Purchase O rderDeliver G oods

Record R eceipt o f G oods

Invo ice

Record R eceipt o f Invo ice

Perform 3-W ay M atch

Authorize Paym ent

EFT

Legend

O n-L ine Process

System ProcessE lectron ic Docum ent

Paper Docum ent

M anual P rocess

Accounts Payable

SYSTEM SOLUTIONS


MAJOR SYSTEM RECOMMENDATIONS

SYSTEMS SOLUTIONS– Near-Term, Immediate:

Begin development of Data Warehouse to capture data for the analysis of statewide purchasing activity and spend data [Also listed as an Imperative]

Conduct detailed feasibility study to determine best approach for dedicated statewide procurement solution that automates the requisition to payment process

Enhance in-house purchasing system (e.g., PurchasePlus) Purchase procurement software package (e.g. PurchasingNet, Compusearch Software

– Prism, Dynamic Software, MRO Software, …)

– Medium-Term: Utilize E-Procurement – use reverse auctions and/or strategic sourcing for new

purchases where feasible Chief Information Officer – centralize technology initiatives under leadership

statewide executive

– Long-Term: Adopt the implementation of an Enterprise Application System (EAS); also

referred to as an Enterprise Resource Planning (ERP) System Includes consideration of upgrading WisMART (AMS Advantage 3.0 Software) and

migrating all agencies to WisMART in conjunction with retaining newly deployed statewide procurement system

SYSTEM SOLUTIONS


SEVERAL SYSTEM SOLUTION OPTIONS EXIST

Option Degree

of Change

Complexity Timeframe Cost Benefits

1. a) Maintain Existing Environment b) Deploy Data Warehouse

Low Low 1Q00 Low Accurate reporting of Spend data

2. a) Deploy a Purchasing Software (WISMART Agencies) b) Deploy Data Warehouse

Medium Low 1Q00 Low Accurate reporting of Spend data

Automated purchasing 3. a) Upgrade WISMART (v3.0)

b) Migrate DHFS/DOC and DWD to WISMART c) Deploy Purchasing Software (WISMART Agencies)

High Medium 2002 Medium Accurate reporting of Spend data

Automated purchasing Eliminate FMS and

associated costs 4. a) Upgrade WISMART (v3.0)

b) Migrate all Agencies to WISMART c) Deploy Purchasing Software (all Agencies)

High High 2002 High Accurate reporting of Spend data

Automated purchasing Single Accounting System

5. Deploy EAS Solution Very High

Very High 1Q00 Very High

Fully integrated purchasing, accounting and financial management

SYSTEM SOLUTIONS


RECOMMENDED NEAR TERM SOLUTION

Option 2. State should pursue this option as the near-term solution:

– Data Warehouse enables State to capture, report and analyze spend data.

– Deploying Purchasing Software into the WISMART agencies automates the majority of manual purchasing functions within the State Agencies.

SYSTEM SOLUTIONS


INVESTMENT REQUIREMENTS OFFER ANOTHER PERSPECTIVE FOR EVALUTING SYSTEM OPTIONS

3 520

50

0

50

Implementation Costs (Millions)

Rengineer Current Environment, Maintain Existing Systems andDevelop Data WarehouseEnterprise Procurement System (In-House or Purchase SoftwarePackage)Upgrade WisMART (AMS Advantage Software), Adding ProcurementFunctionality As It Becomes Available (e.g., E-Procurement)Migrate to EAS/ERP for Purchasing, GL, AP, AM

SYSTEM SOLUTIONS


TWO KEY DIMENSIONS THAT DIFFERENTIATE ALTERNATIVE SOLUTIONS ARE IMPLEMENTATION TIME (SPEED) AND DEGREE OF CHANGE (FOCUS)

Maintain Existing Systemand Deploy EnterpriseProcurement Software

To Agencies

No FeasibleAlternatives

Maintain/Upgrade AMSAdvantage Software

and Deploy Enterprise

Procurement Software

Deploy EAS/ERPSolution

FOCUS

Procurement Integrated Financial Mngt.

SPEED

Fas

tS

low

SYSTEM SOLUTIONS


DEPLOYING A DATA WAREHOUSE IS AN IMPERATIVE FOR A COMPREHENSIVE ANALYIS OF STATEWIDE PURCHASING ACTIVITY

What’s a Data Warehouse?– An information source containing data from

multiple, heterogeneous, independent and possibly non-synchronous systems, which is stored to optimize retrieval and reporting of data across the enterprise.

– Typically subject-oriented allowing users access to operational data to track and respond to business trends and facilitate forecasting and planning efforts.

SYSTEM SOLUTIONS


HOW DO DATA WAREHOUSES DIFFER FROM OPERATIONAL SYSTEMS?

Typically operational and transaction processing systems store data in its most atomic (non-redundant) format to alleviate performance issues and ease database maintenance.

– Data stored in such a state is referred to as Normalized. Normalized data can be difficult to extract and analyze when large

amounts of data are required across a broad range of information types. – This difficultly is compounded when multiple systems and/or databases need

to be accessed.– Large data extracts also degrade performance, which is not advisable in on-

line, operational environments. Data Warehousing addresses theses issues by focusing on structuring

information into specific subject areas of interest (e.g., Purchasing).– Data is the restructured into relevant Facts (e.g., Spend Data) and Measures

(e.g., Total Spend Amount) that can be accessed by various Dimensions (e.g., Agency, Time [Month/Year], Vendor, Commodity, etc.) for analysis.

SYSTEM SOLUTIONS


DATA WAREHOUSE ARCHITECTURE

Each “interfaced” agency would be responsible for generating an extract for the Data Warehouse.

Remaining agencies purchasing activity would be captured via an extract from Purchase Software / WISMART.

A “DW Load” process would then consolidate, cleanse and load the combined purchasing data to the Data Warehouse.

Various Data Marts could then be generated to support the required reporting and analytical needs.

Desktop and Browser-based query, reporting and OLAP tools (e.g., Business Objects) would provide access to the Data Marts.

SYSTEM SOLUTIONS


DATA WAREHOUSING ARCHITECTURE

FMS

TIPS

FMS /Proteus

PeopleSoftUW/System

Financial Data Warehouse

RAPIDSDWD FARS ETL

EAPS ETLDOT

DHFS FMS ETL

FMS ETLDOC

P/S ETL

Purchasing Software/ WISMART

DOA, et.al.WISMART ETL

DW Load

Spend Data

StrategicSourcing

Vendor Performance

Data Marts

Note: An automated extract of Detailed Purchasing Activity from DHFS and DOC may not be available until Purchasing function is automated.

SYSTEM SOLUTIONS


AN ENTERPRISE APPLICATION SYSTEM IS THE LONG-TERM RECOMMENDED SOLUTION

Enterprise Application System (EAS) is:

“An integrated technology bundle (some combination of software, hardware, and services) designed to integrate multiple facets of a business through the interchange of information from various vertical business process areas and related databases. These solutions effectively enable agencies to retrieve and disseminate mission critical data from throughout their organizations, providing managers with real-time operating information.”

Source: “Enterprise Application Solutions in the Public Sector”, Dataquest Perspective, VMPS-WW-DP-9903, Garter Group, April 1999.

SYSTEM SOLUTIONS


BASED ON DISCUSSIONS WITH GARTNER GROUP …

One-third of State Governments have or are moving towards EAS solutions– Within 2 years, remaining States will enter RFP process for

EAS solutions Governor Councils mandating EAS solutions

– Most will pursue single-vendor solutions– Fluidity in E-Commerce market space will likely drive “best-of-

breed” solutions 70% of existing State legacy environments are

American Management Systems sites Public Sector EAS providers:

– Leaders: Oracle, PeopleSoft, SAP– Others: JD Edwards, Lawson, Baan

SYSTEM SOLUTIONS


PROCUREMENT IS ONE COMPONENT OF AN OVERALL EAS SOLUTION

1. Core Business (ERP)• Finance and Accounting• Controlling• Human Resources• Asset Management• Materials Management• Maintenance Management• Treasury

2. Extended• Case Management• Fleet Management• Claims Processing and Settlement• Procurement• Licensing• Logistics• Customer Interaction Systems• Real Estate• E-Business / EDI• Tax and Revenue• Reporting / Decision Making• Project Management• Sales and Distribution

3. Business Line-Specific• Administration and Finance• Social Services• Criminal Justice• Public Safety• Transport• Health• Public Works

Source: G2R/Dataquest (April 1999)

SYSTEM SOLUTIONS


RISING EAS SPENDING UNDERSCORES THE GROWTH OF THIS APPROACH IN THE PUBLIC SECTOR ENVIRONMENT

8711,071

1,318

1,627

2,011

2,492

0

500

1000

1500

2000

2500

1999 2000 2001 2002 2003 2004Total U.S. Public Sector EAS Spending Forecasts, 1999-2004 (in Millions)Source: G2R/Dataquest (April 1999)

Avg. AnnualGrowth Rate:

23.4%

SYSTEM SOLUTIONS


AN EAS/ERP IS THE RIGHT LONG-TERM SOLUTION AND MUST EXTEND BENEFITS BEYOND PROCUREMENT TO JUSTIFY BUSINESS CASE FOR INVESTMENT

Pursuant to Executive Order No. 408 and specifically Section 14.019 of the Wisconsin Statutes, the Secretary of the Department of Administration is to create an internet-based “service center” giving citizens access to core state government services which includes portals, e-procurement, e-records and e-signatures.

Electronic Government requires a well designed front-end web portal, tight integration with back-office administrative systems (finance, purchasing, human resources, etc.), and reengineered business processes to successfully manage the new business model.

Enterprise Application Systems or ERP serve as the most comprehensive foundation for the successful implementation of electronic government initiatives. Such systems not only provide the technical capability to make this happen, but also force the necessary degree of organizational change required.


AN EAS/ERP IS THE RIGHT LONG-TERM SOLUTION AND MUST EXTEND BENEFITS BEYOND PROCUREMENT TO JUSTIFY BUSINESS CASE FOR INVESTMENT

Software consolidation– State will minimize costs associated with maintaining a large number of

disparate systems (e.g., over 12 different financial and purchasing systems currently in use)

Real Time update Better management through seamless integration with finance, human

resources, payroll, manufacturing (Badger Industries), and other functions. Examples include:– Cut financial period closing times– Capability to properly link cross-functional business process and

adapt to organizational changes Leverage EAS/ERP built-in “best business practices”, research and

development, best-of-breed pre-configured solutions (e.g., E-procurement, Citizen Relationship Management) and industry groups


THE STATE CAN REALIZE THE FOLLOWING BENEFITS FROM AN INTEGRATED E-PROCUREMENT & PURCHASING SOLUTION

Reduce transactions to lower procurement costs Faster cycle times Reduced maverick or unauthorized buying Increased control over the supply chain Improved integration of the procurement function with

back-office systems Proactive management of key procurement data Higher quality purchasing decisions Elevation of procurement to a position of strategic

importance

SYSTEM SOLUTIONS


Procurement Today:Managed pertransaction

Hands-FreeProcurement: Managedby exception.

Online productselection

Search large catalogs Personalized views; namedshopping carts

Requisitionapproval

One to multiple levels ofmanagement approval

Transactions automaticallyapproved based on rules

POtransmission

Fax, e-mail, EDI direct tosuppliers; supplierretypes the order

Order is sent through asupplier clearinghouse

Paymentauthorization

Dependent on three-waymatch of PO with invoiceand receipt

Immediate; based onshipment notice

Analysis Sporadic; not linked tosupplier performance

Continuous; integrated inreal time; drivesoptimization of process.

Forrester Research, Inc - Jan. 2000

E-PROCUREMENT HAS THE POTENTIAL TO CREATE NEW EFFICIENCIES BY PROVIDING IMPROVED QUALITY, LOWERING COSTS, REDUCING CYCLE TIME AND TRANSACTION COSTS

SYSTEM SOLUTIONS


CENTRALIZED MANAGEMENT ENHANCES OPPORTUNITIES FOR SUCCESS IN STATEWIDE ENTERPRISE TECHNOLOGY INITIATIVES

Gartner Group indicates majority of States currently have or are in process of recruiting a Chief Information Officer.

Given Wisconsin’s push toward E-Government and E-Procurement, a Statewide CIO will be crucial to achieving the State’s vision.

IT Organization and System changes necessary to support the vision require CIO-level authority to direct and coordinate their implementation.

SYSTEM SOLUTIONS


ORGANIZATIONAL &POLITICAL CONSIDERATIONS

ORGANIZATIONAL &POLITICAL CONSIDERATIONS


BUY-IN MUST BE DEVELOPED EARLY AND REAFFIRMED OFTEN; UNDERSTANDING AND MANAGING CHANGE IS CRITICAL TO ORGANIZATIONAL SUCCESS

Major organizational change for State of Wisconsin implies significant potential disruption to existing ways of doing business

Willingness to accept change cannot be assumed A success implementation must have sponsorship at the

highest levels of the organization Middle management and staff must also internalize and buy

into the vision The buy-in process must start before the project begins

– Agency staff must be deeply involved in implementing the new business imperatives and systems solution

– An effective communications process is a necessary vehicle to obtain staff input and share information

ORGANIZATIONAL & POLITICAL CONSIDERATIONS


TRADITIONAL INTERNAL BARRIERS TO CHANGE

BARRIERS TO IMPLEMENTATION COMMON SYMPTOMS

Inadequate definition of change Implementation breaks down at lower levels Organization questions management’s knowledge of “the details”

No architecture to manage change Vague directives from senior management No follow-up Unclear role definition

Not aligned with the culture Organization ignores directions as being inconsistent Change viewed as temporary or reversible

No understanding or management of resistance

Employees exhibit dysfunctional behavior Line management frustration

Inadequate sponsorship Middle managers kill initiatives Management loses credibility

Poor execution of roles Partial implementation or implementation breaks down completely

Successes are not repeatable

Too much change already on the plate Organization grinds to a halt Activities fall through the cracks Complaints of overload and burnout Strategy de jour syndrome



BARRIERS TO CHANGE EXIST AMONG THE AGENCIES

De-centralization has created information silos– Agency vision instead of State vision– Lack of structured interagency communication

Independent spirit of agencies– Agencies are operating with a variety of processes and

procedures within the framework of the statutes and procedures set forth by DOA

Agency staff highly invested in maintaining solutions developed by them for their particular agency

Lack of centralized leadership in Information Technology – No comprehensive IT strategy to support business goals

Limited financial resources



THE CHALLENGE GOING FORWARD IS TO IMPLEMENT THE RECOMMENDATIONS TO REALIZE THE GREATEST BENEFIT AND AVOID “ORGANIZATIONAL STONEWALLING”

Characteristics of Effective Implementation Planning

Focused and manageable implementation projects

Fast-paced planning with deliverables and due dates

Top management team leadership

Target improvements by implementation project



FIRST STEP... ESTABLISH STRONG EXECUTIVE SPONSORSHIP

The extensive nature of the business change, broad number of agencies and stakeholders impacted, and the balance between central coordination and local control requires strong executive sponsorship– Create common agreement around a common

enterprise view that transcends interagency conflict and “stonewalling”

– Continuously communicate the value and importance of the initiatives



SECOND STEP... CREATE FIVE TASK FORCES, WITH CROSS-FUNCTIONAL REPRESENTATION FROM THE AGENCIES, FINANCE, AND IT

STANDARDS(PROCESSES, COMMODITIES, …)

VENDOR DATA MANAGEMENT(RATIONALIZATION OF VENDOR DATA)

DATA WAREHOUSE(DESIGN & IMPLEMENTATION)

ENTERPRISE PROCUREMENT SYSTEM(EVALUATION & SELECTION)



Change Wis.Stats. 16.004;16.701>Wis.Adm.Code Chapter Adm 9 to indicate that vendors must register with VendorNet to bid with the State and/or receive contracts

Change Wis.Stats. 16.75 to identify legal notice as electronic notification

The State should establish a centralized CIO position to provide consistent direction to the agencies– Centralized leadership in Information Technology would support the

States business strategies and goals while insuring that technology decisions remain aligned with IT strategies

Develop incentives (financial or others) to reward agencies and staff for participating in new statewide procurement initiatives

THIRD STEP… ADDRESS POLITICAL CONSIDERATIONS



IMPLEMENTATION GAME PLANIMPLEMENTATION GAME PLAN


Implementation Timeline and Preliminary Cost Estimates


MAJOR INITIATIVE Q1-2001 Q2-2001 Q3-2001 Q4-2001I Data Warehouse:

- Design - $250 - 300K

- Development $100 - 150K

- Implementation $75 - 100K

- Training $50 - 75K

- Hardware: Servers - $75K

- Software: DB License $100K, DB Tools $125K

- Software: Query Tools $250-$400K

II Procurement System Evaluation & Selection

- In-house Solution vs. Package Software

- Consider AMS Advantage Upgrade

III Reengineering Procurement Processes

- Imperative Implementation

- Process Gap closure

IV Vendor Data Rationalization

- Reconcile and Cleanse Vendor Data

- Migrate to Single Master Vendor File

V Implement UN/SPSC Commodity Code System

- Implementation Assistant to SBOP

VI Strategic Sourcing - Phase I

- Commodity/Service Selection $50-$75K

- Market Analysis $30-$60K

- Specification Development $100-$150K

- Agreement Management $25-$50K

VII E-Procurement (Pilot)

VIII Establish Implementation Committee(s) &Communications Program

$300,000

Design, Development, & Implementation$500,000 - 625,000

$80,000 - $100,000

Hardware & Software$550,000 - $700,000

DOA

$200,000

DOA

$50,000

To Be Determined - based on number of agenciesand scope of services


BEST PRACTICES PROCESS MAPSBEST PRACTICES PROCESS MAPS


BEST PRACTICES PROCESS MAPS FOR THE DESIRED FUTURE STATE HAVE BEEN DEVELOPED

Process Maps illustrating “Best Practices” in procurement have been developed in the following areas:

– Direct Charge Process– Purchase Card Process– Simplified Bid Process– Statewide Contract– Sealed Bid– RFP Services

– Quarterly Procurement Plan– Accounts Payable– Statewide Contract RFB /

RFP– VendorNet Registration– Special Services

Process Maps are presented on the following pages of this section of the report.

BEST PRACTICES PROCESS MAPS


APPENDICES


GLOSSARY OF TERMS

AM - Account Management AP - Accounts Payable Baseline Spend Data - Spend information for a commodity for a designated time

period to base future cost savings Bidders List - A listing of all vendors who wish to do business with the State of

Wisconsin. Browser - A software application used to locate and display Web pages. Browser-based Query - The ability to request information from Web databases. Data Marts - A database, or collection of databases, designed to help managers

make strategic decisions about their business. Data Warehouse - A collection of integrated subject-oriented databases

designed to support the decision-support-system function. “DW Load” - Data Warehouse Load EAPS - Encumbrance Accounting and Payment System EFT - Electronic Fund Transfer FARS - Financial Accounting Reporting System FMS/Proteus - Financial Management System/ Purchasing and Cost Accounting

System


GLOSSARY OF TERMS

GL - General Ledger OLAP - Online Analytical Processing, a category of software tools that provides

analysis of data stored in a database. Process Maps - a graphic description of a process showing the sequence of

process tasks, for a specific purpose from a selected viewpoint. N-Tier - A special type of client/server architecture consisting of well-defined

and separate processes, each running on a different platform. Client/Server Architecture - A network architecture in which each computer or

process on the network is either a client or a server. Servers are powerful computers or processes dedicated to managing disk drives, printers, or network traffic. Clients are PCs or workstations on which users run applications.

RAPIDS - Purchasing System for DWD RFB/RFP - Request for Bid / Request for Proposal TIPS - Transportation Interactive Procurement System UN/SPSC - United Nations Standard Products and Services Codes system is an

open, global standard that provides a logical framework for classifying products and services of all kinds throughout the world. It is structured as a five-level hierarchy. At each level, a two-character numerical value classifies each item more specifically.


GLOSSARY OF TERMS

Vendor Table - A list of all vendors who have done or are currently doing business with the State of Wisconsin.

WisMART – Wisconsin State Management Accounting and Reporting Tool

WISCONSIN STATE DEPARTMENTS

DHFS - Department of Health and Family Services

DOA - Department of Administration

DOC - Department of Corrections

DOT - Department of Transportation

DWD - Department of Workforce Development

SBOP - State Bureau of Procurement

UW/System - University of Wisconsin


State of Georgia State of Washington State of Pennsylvania / State of Ohio Dell Computer

SELECTED CASE STUDIES

CASE STUDIES


STATE OF GEORGIA

Georgia’s Department of Administrative Services (DOAS) implemented PeopleSoft Inc. ERP software, on time, 18 months, and on budget, at $52 million 1999

“Big bang” approach – went live with ERP system throughout the entire organization at once

– Modules include financials, purchasing and human resources– Provides better compliance with Generally Accepted Accounting Principles

(reduce audit time by 50%)– Enabled the consolidation of old, non-integrated mainframe applications

Success factors:– Strong support from Governor’s Office– Extensive planning– Effective communications through project Web page, e-mail, instant messaging,

and face-to-face meetings– Needed to add temporary employees to help oversee the project– Extensive training of existing staff– Effectively managed regulations, boards, commissions and agencies to minimize

turf wars and maximize cooperation

CASE STUDIES


STATE OF WASHINGTON

Selected AMS’ E-Procurement solution, called Buysense, which allows the state to purchase goods and services online. (July 2000)

AMS’s Buysense is powered by software from Ariba, Inc. and can be implemented in three to four months.

In pilot study, a transaction made through Buysense reduced transaction cycle time by over 60%.

State officials intend to leverage embedded tracking technology to increase the number of purchases at government discount rates.

When fully implemented, the state expects to have 10,000 users making more than 500,000 transactions annually totaling approx. $150 million in expenditures

Deal is structured such that AMS’ revenue will come from transaction feeds charged to both the State and vendors. Supplier will pay a percentage of the value of the transaction, <1%, and the state will incur a purchase order fee of $3.30, but will drop to as $2.50 as transaction volumes increase toward target of 500,000 by the fourth year.

CASE STUDIES


PENNSYLVANIA & OHIO

Have successfully utilized “Reverse Auctions” to realize cost savings.

Pennsylvania has claimed savings of $11 million in 2000.

Ohio is the first state in the U.S. to conduct competitive, Internet auction of $250 million in interim Treasury funds.– Using new competitive live auction system, BidOhio, has

generated tax savings of over $3 million with the last 12 auctions.

CASE STUDIES


DELL COMPUTER

Implemented packaged E-procurement suite from Ariba

Established electronic catalogs for suppliers

Routing about $10 million per month worth of requisitions, representing a broad range of non-production commodities

CASE STUDIES


E-PROCUREMENT VENDOR LISTING

Source: Forrester Research, Inc

Ariba

Rules-

base

d

requ

isitio

ning

Suppli

er

clear

ingho

use

Dynam

ic

prici

ng to

ols

Direct

mat

erial

s

CommerceOne

Oracle

SAP

Comments

Clarus

Sun-Netscape

Intellisys

PeopleSoft

Concur

Rightworks

VendorsMarket leader known for usability; trailing Commerce One with supplier links

Leads with supplier links; backing away from pushing own requisitioning tool

Good workflow; good potential base with direct materials, will play to installed base

Less aggressive than Oracle but same key characteristics; will play to installed base

Build-in analysis tool; direct buyer-to-supplier links

Good support for exchanging trading info; no supplier clearinghouse connections

SupplyNet hosted catalog service acts as a clearinghouse for suppliers

Links to Commerce One’s MarketSite; similar direct material potential to Oracle, SAP

Partnered with Nortel to deliver worldwide as British Telecom did with Commerce OneFewer than 10 customers; built-in analysis tool; links to Commerce One’s MarketSite

Wil

l S

urv

ive

May

Su

rviv

e

FullCapabilities

SomeCapabilities

NoCapabilities

E-PROCUREMENT VENDORS


E-PROCUREMENT DEPLOYMENT STRATEGIES

0 10 20 30 40 50 60 70 80

ERP

Browser

Human Resources

Financial

Other

No Integration

% of Respondents

Home Built-System65%

CommercialProduct

22%

CommercialService

10% SupplierSolution

3%

What is your Internet procurement system?

With which applications is yourprocurement system integrated?

Data Source: Forrester Research, Survey of 40 Companies

SYSTEM SOLUTIONS


E-Government(G2C) Services

E-Commerce(G2B/Trade Exchanges)

Enterprise Resource Planning

N-Tier Architecture/Internet Enabled

Government Finance Officers Association, October 2000

Building Blocks

ERP Systems and N-Tier Architectures form the foundation of

E-Government and E-Procurement offerings.

SYSTEM SOLUTIONS


N-TIER SYSTEMS ARCHITECTURE IS REQUIRED TO SUPPORT THE STATE’S DIGITAL GOVERNMENT INITIATIVES

EAS solution providers have, or are in the process of migrating their product offerings to n-tier architectures.

E-Procurement (G2B) and E-Government (G2C) solutions leverage n-tier architectures.

Tiered architectures provide increased performance, flexibility, maintainability, reusability and scalability, while hiding the complexity of distributed processing from the user.

Classical distributed, client/server architectures typically consist of three (3) tiers: Presentation, Application, and Data (see appendix x).

– Internet adds variations on the Presentation and Application tiers to support web browsers (i.e., thin clients) and web servers, resulting in the “n-tier” characterization.

SYSTEM SOLUTIONS


N-Tier Systems Architecture

T ier 3 - Database Servers

StateAgencies

T ier 2 i - W eb Servers

Vendors

Accounting

W I W AN

Internet

Purchasing

Financia l Data W arehouse

Supplier System s

Spend Data M art

S trategicSourcing

Data M art

Vendor Data M art

eCata logsInvoicesEFTs

LocalG overnm entAgencies

Rem oteState AgencyUsers

T ier 1 i - Presentation (Thin C lient / B rowser)

In ternet

T ier 2 - Application Servers

W IIntranet

StateAgencies

T ier 1 - P resentation (Fat C lient / W inTel)

SYSTEM SOLUTIONS

Advanced Data Concepts, LLC


Purchasing Data Warehouse Project

Development & ImplementationJanuary 2001



DATA WAREHOUSE IMPLEMENTATION METHODOLOGY

PROJECTORGANIZATION

DATA MODELANALYSIS

SUBJECT AREASOURCE SYSTEM

ANALYSISSPECS PROGRAMMING

BREADBOXANALYSIS

DATA WAREHOUSEDATABASE DESIGN

TECHNICALASSESSMENT

TECHNICALENVIRONMENTPREPARATION

POPULATION

Adapted from Building the Data Warehouseby W. H. Inmon


DATA WAREHOUSE IMPLEMENTATION TASKS

PROJECT ORGANIZATION– Establish Purchasing Data Warehouse project steering

committee• Responsible for managing project priorities• Manage expectations of agencies as to benefits they will derive

from the data warehouse• Expedite resolution of major issues

– Establish project office– Organize project team and define key roles

• Project Manager, Architect, Senior Business Analysts• Database Administrator(s)• IS Manager(s) responsible for supporting the project and

development

– Determine enterprise communications strategy



DATA WAREHOUSE IMPLEMENTATION TASKS …

DATA MODEL ANALYSIS – Identify major subject areas (e.g., strategic sourcing, vendor

analysis, commodity spend, etc.)• keys, attributes, relationships among data attributes, etc.

– Separate primitive from derived data– Entity Relationship Diagram (ERD)– Midlevel Data Model (data item set)– Physical Data Model

BREADBOX ANALYSIS – Sizing (gross estimates) of the purchasing decision support

environment; projecting how data the data warehouse will hold– Develop projections for one-year and three-year horizon for the

purchasing data warehouse environment– Determine levels of granularity - the level of detail held in the units of

data in the data warehouse




TECHNICAL ASSESSMENT & PREPARATION– Review both the methods for loading the data warehouse and its access within

acceptable performance requirements• ability to manage large amounts of data• ability to organize data according to data model• ability to both receive and send data to a wide variety of technologies supported in the

various agencies• ability to allow data to be accessed flexibly

– Determine timing requirements for data loads– Determine security requirements– Define amount of disk space storage needed– Estimate volume of processing anticipated– Profile nature of traffic – short or long bursts – coming out of the technology that

controls the data warehouse– Identify required network links– Define technical and online analytical processing (OLAP) tools

• Business Objects, Crystal Reports, Cognos PowerPlay• DBMS technology and operating system• Performance monitors

– Ensure that facilities are available when needed




SUBJECT AREA ANALYSIS– Reconfirmation of the scope based on the data to be included

– Definition of what data is to be populated

– Evaluate the business questions:• What business questions need to be answered by the data warehouse• Which business questions will not be answered by the data warehouse

SOURCE SYSTEM ANALYSIS– Identify the source data for purchasing data mart

– Data integration – key structure/key resolution as data passes from the operational environment to the DSS environment

– Mapping of data from the operational environment to the decision support environment

– Develop meta data (data dictionary for all data elements)

– Determine how time variancy will be created from current value data




DATA WAREHOUSE DESIGN– Develop data schema (star schema and facts tables) based

on previously defined data model and source system analysis– Physical denormalization of data where applicable (e.g.,

where performance improvements are desired)– Creation of data artifacts to ensure that relationships are

preserved (even if source system no longer retains the needed data)

– Define performance improvement opportunities through the use of derived, summarized, and aggregated data

– If the volume of warehouse warrants, consideration should be given to partitioning the data and distributing portions of it to remote sites

– Identify indexes




PROGRAMMING SPECIFICATIONS– Some of the major issues associated with developing the

formalized interfaces include:• Determining if two sets of programming specifications may be

needed – one for the initial load and one for the ongoing operation

• Time stamping of operational data

• How updates are made to the data warehouse

POPULATION– Execution of the programs– Frequency of population– Purging of data



DATA WAREHOUSE IMPLEMENTATION - TIMING


Activities Est. Costs January February March April May June July

I Project Organization $3,600

II Data Model Analysis $48,000

III BreadBox Analysis $12,000

IV Technical Assessment $33,000

& Preparation

V Subject Area Analysis $9,000

VI Source Systems Analysis $12,000

VII Data Warehouse Design $48,000

VIII Program Specifications $125,000

IX Programming (Code & Test) $125,000

X Rollout and Training $75,000

1 Week

4 Weeks

2 Weeks

4 Weeks

1 Week

1 Week

4 Weeks

4 Weeks

8 Weeks

2 Days / Agency


DATA WAREHOUSE IMPLEMENTATION - INVESTMENT

Cost Considerations Hardware and Software – data storage, OLAP tools,

hardware, and related licensing fees Development costs are variable and depend heavily on the

state of existing operational purchasing systems Development may require the acquisition of new hardware

and/or software environment Ongoing maintenance will require process



DATA WAREHOUSE IMPLEMENTATION – RISK MANAGEMENT

Risk Area Techniques to Mitigate Risk TECHNICAL New client/server platform Trained, dedicated technical

support Vendor partnership to share risk

New extract and query tools Tool training Vendor consulting Proof-of-concept project

Lack of experience with data warehousing database design

Warehouse design training Use consultants

Unknown data volumes/capacity Proof-of-concept project (start with one agency and rollout to others)

SCOPING Undocumented source system data,

poor quality of source data

Structure analysis tool, data pre-verification

Legacy application system specialist

Initiate metadata repository and data rationalization

Data quality program and data stewardship

Data subject scope unclear Facilitated work sessions with user sponsors to agree on subjects, priorities

Track scope change requests Stovepipe perspective Global enterprise data model

Identify related information needs Mixed operational and data

warehousing requirements

Establish operational database and data warehouse



DATA WAREHOUSE IMPLEMENTATION – RISK MANAGEMENT …

Risk Area Techniques to Mitigate Risk ORGANIZATIONAL Multiple uncoordinated data efforts Common architectural framework

Assign single accountability Limited experience of data

warehousing team with business

Increase analysis and design time estimates

No user participation on project Stop project until users assigned IS-initiated project Obtain business sponsor/support MANAGEMENT/ADMINISTRATIVE Delivery dates determined before

scooping

Negotiate reasonable subject scope Identify incremental deliverables


Education

Gap aanalysis final presentation