Strategic Tech Purchasing

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Strategic Tech Purchasing

9/25/2006

By Linda L Briggs

Which kind of eProcurement setup is best for your institution? Weigh the pros and cons carefully, then augment your decision with volume buying, standardization, and other smart moves.

DREXEL’s Bielec: Purchasing
cards are cheaper and easier.

FINDING WAYS TO better manage your purchasing strategy can help save considerable sums not just on purchases, but on back-end support costs. For suggestions on how to cut tech procurement costs and control spending, we spoke with CIOs at two universities and a senior manager of higher ed purchasing at one of the biggest tech product suppliers in the world. Here are their suggestions on ways to control, standardize, and save on tech purchasing.

eProcurement vs. Credit Card

eProcurement is one of the most talked-about technology solutions in purchasing. If you’re as yet unfamiliar with the process, it refers to replacing paper-based transactions with electronic ones. Purchases are made over the internet; a school with an eProcurement system in place also has an electronic method of producing a purchase order and tying the transaction into the back-end accounting system. For some schools, it can be an immediate money-saver.

“We are seeing a shift toward more eProcurement,” confirms J'e Sartin, senior manager/higher education sales at CDW-G, a provider of technology products and services to business, government, and education. Sartin’s advice for colleges and universities considering an eProcurement solution: “You don’t have to [incur] a huge expense to make the change.” Because there are many different partners and eProcurement organizations to select from, he says, “Customers can choose anything that fits their infrastructure.”

eProcurement isn’t for everyone though. According to John Bielec, CIO at Drexel University in Philadelphia, the university has been saving money for several years through JPMorgan Chase PaymentNet purchasing cards, a highly effective route to procurement, Bielec maintains. To control spending, he says, staff members are simply assigned appropriate spending levels on the card.

As part of the card program, Drexel receives data once a day from the card issuer, JPMorgan Chase. The data g'es directly into the financial system. “It’s totally paperless,” Bielec says of the three-year-old system. He estimates that 95 percent of purchases are now completed at Drexel using purchasing cards. Compared to either an ERP system with a paper invoice or an eProcurement process in which a purchase is transacted online, a purchasing card is several times cheaper, Bielec says. When Drexel implemented the purchasing card system in 2002, the university had just recorded over 12,000 purchase orders a year, he points out. Three years later, he reports, that number had dropped to 2,700; an 80 percent decrease —and an indication of considerable savings.

“When anyone mentions eProcurement,” Bielec adds, “I say, ‘Why would anyone spend the time and effort to go through all that process—because it’s a lot of overhead— when the credit card is the simplest and easiest way to do business?’” He points out that 95 percent of purchase orders at universities are typically for less than $2,000, and that magnifies the labor savings possible when eliminating purchase orders, as purchasing cards do.

Multi-System Solutions

Rather than an all-or-none solution, many schools have a variety of procurement programs in place, all of which work together. At Wayne State University in Detroit, for example, there are three programs, according to John Camp, WSU’s CIO.

First, like Drexel, the school issues a procurement card (the Visa ProCard) to WSU employees who have spending authority, empowering them to make online purchases. Monthly statements are available online and by e-mail; controls are in place to prevent excess spending or unauthorized purchasing.

Second, WSU’s Purchasing department has set up a direct online order system with select vendors such as Apple, Dell, and Gateway, each of which has a contract (with established pricing schedules) with the university. That speeds up turnaround time and reduces paperwork.

Third, when open bids are solicited, WSU uses an electronic bid process, in which requests for proposals (RFPs) and requests for quotes (RFQs) are posted on the purchasing department’s website, to foster competition among vendors. Camp says that WSU’s purchasing department has considered third-party solutions such as SunGard Higher Education’s HigherMarkets for Banner eProcurement system, but there’s no current move to review or deploy one.