The new supply chain: how IHEs are improving business processes with 3-procurement

University Business, Sept, 2005 by Robert Malone

BUSINESS GURU W. EDWARDS DEMING FIRST PROPOSED HIS "PRODUCTION Viewed As a System" while explaining his quality management theories to Japanese and American business leaders in the 1950s. Deming's system was primarily concerned with manufacturing, but it outlined the basic principles of the supply chain as it is defined widely today. As translated by the official Supply Chain Council, a group that represents a broad cross section of industries, including manufacturers, services, distributors, and retailers, these basics principles, are "plan, source, make, and deliver," or the SCOR model.

The Supply Chain Council and the university community are, admittedly, just getting acquainted. The supply chain is presented to industrial and business users by vendors as a Supply Chain Management (SCM) system. It may also have connections to, or partially include, logistics and transportation management depending upon the level of its granularity (processing details).

What does all this mean to colleges and universities? As the argument goes, universities make scholars, not widgets, and this does not make for an exact fit with the SCOR model, or any supply chain model. But IHEs are prodigious purchasers of goods and services, and, among the many departments and facilities located on the modern campus, finding those goods and services at the best price and tracking shipments--and then tying it all together in an efficient manner--is still a challenge.

However, an effective tool for better managing the supply chain is available. It has enormous impact on college and university business operations, and that is e-procurement.

Links in the Chain

Procurement plays an important part of so many university operations that the benefits of streamlining and automating the process can't be overstated. As university purchasing transitions from the paper-based, clerical activities of the past to the time- and cost-efficient, automated, self-service environment offered by e-procurement, a growing number of vendors have populated the field in recent years. Everything from computers, lab equipment, and multimedia products to food services, health products, athletic equipment, office supplies, and furniture--even office personnel--can be acquired through the various procurement products that dot the landscape. Among them are established players such as Oracle/PeopleSoft, SciQuest, SAE AcquireX, the Educational & Institutional Cooperative Service, and OrgSupply, all of whom claim higher education institutions as clients.

AcquireX, for example, has worked with such schools as University of California-Irvine, American University, and Cal State Fullerton. In 2003, the University of Chicago chose AcquireX as the e-procurement provider for the university's Campus Computer Stores. The university wanted to enable students and faculty to purchase goods on and offcampus, 24 hours a day, without the costs and risks associated with buying, implementing and maintaining order entry software. In just two years, the university has procured over $20 million of goods using AcquireX's ASP software application.

In May, the Berklee College of Music (Mass.), the world's largest independent music college, chose OrgSupply's Online Purchasing Management solution to manage online buying from preferred suppliers across their organization. The school wanted to control off-contract or "maverick" buying by encouraging purchases from vendors with whom it had negotiated favorable contracts. It could also negotiate better terms with suppliers by incorporating a snore efficient means of electronic payment. OrgSupply provides an e-procurement solution for the Boston Consortium, which comprises 11 Boston area colleges and universities.

SciQuest accelerated into the higher education market after acquiring HigherMarkets, an e-procurement solution provider for higher education, in 2002. Since then, SciQuest has added over 20 higher education customers, including the University of Pennsylvania, University of New Mexico, Yale University (Conn.), Massachusetts Institute of Technology, and New Mexico State University.

SciQuest's supplier enablement model quickly enables an institution's supplier base to work directly with the company's solution, automating the requisition/purchasing process through the settlement process, according to Susan Miglucci, vice president of marketing and strategic alliances. By enabling these suppliers, the institution gains greater visibility into their spending, and can monitor on-contract pricing, to realize greater savings.

Because SciQuest is a hosted, web-based solution, any maintenance or upgrades are made across all uses. All customers are always on the same software version, making support more efficient. The easy-to-use interface drives user adoption, which drives more transactions through the system, allowing for greater spend analysis and tracking.

For example, the University of Pennsylvania integrated SciQuest's Spend Director with Oracle iProcurcment software, and enabled approximately 1,800 users to access the University's strategic contract supplier's online catalogs in key commodity groups and within the first month saved $2.1 million in product savings alone. Using Spend Director, the university expects to direct at least 60 percent of campus purchase transactions through participating Penn Marketplace contract suppliers.