Pumping up procurement: online procurement systems can simplify ordering, reduce paperwork and save time and money. But choosing the right solution for your school involves more than a point and click

Matrix: The Magazine for Leaders in Education, Nov-Dec, 2001 by Nicole Rivard

E-procurement systems decentralize the purchasing process, even more so than procurement cards which were introduced a few years ago, so faculty and administrators can buy goods directly. A good e-procurement solution improves processing efficiencies, including making request for proposal distribution easier, creating better sourcing opportunities and enhancing customer service. In addition, ASPs are particularly attractive because they integrate with a school's financial system, essentially providing a front-end to the school's ERP system, linking accounting and payments in real-time, to provide a streamlined process.

An institution can realize both hard dollar savings related to contracts, as well as soft dollar savings related to the purchase order process, says Dorrian Porter, vice president of corporate development at HigherMarkets.

"It allows the procurement department to channel the spending of their faculty and administration towards contracts that have been negotiated with advantageous pricing to the university," he says. "Without that common e-procurement platform to be used by campus-wide users, they're really at their leisure to go wherever they want to buy the goods and aren't really channeled into a negotiated contract situation."

Currently, Rensselaer orders online only with HigherMarkets and the select vendors that have partnered with them. If users choose to order from a vendor not on the list, then they still need to produce the paper requisition and send it to purchasing. The goal, after integrating their ERP System, is to have all orders, both catalog and non-catalog, flow through HigherMarkets and be placed electronically with the vendor.

"As far as savings, we have some pretty healthy targets, but most of the savings will come from increased contractual buying" Rensselaer's Martin says.

Administrators estimate that $35 million of Rensselaer's spending is addressable through e-procurement. Of that, at least 50 percent, or $17.5 million, typically has been off contract. With e-procurement, the institute expects to save 5 percent against this $17.5 million, due to improved contract use and increased purchasing volume on existing contracts, leading to the ability to negotiate better contract pricing. Over four years, the potential hard dollar savings is more than $1.2 million.

Processing Efficiencies

Rensselaer is working on reducing its purchasing cycle time from several days to a few hours. This results in a more efficient use of money as well as human resources. Through these improved efficiencies, the average cost per purchase order at the school has been reduced from $140 to $35. In addition, with online procurement, employees are no longer inundated with paper and have more time to build sources and negotiate contracts.

"Particularly with the office supplies contract, we know statistically that it is saving one person's work per week" says UD's Windley.

Another advantage of an e-procurement system is more robust financial data with access and analytical capabilities.