With 10 campuses, five medical centers, three affiliated national laboratories and a statewide agriculture and national resources program, the University of California system can be, to say the least, a challenge for supply chain professionals. Its operating budget is a staggering $18 billion to serve 220,000 students and 180,000 faculty and staff.
And procurement will play a critical role as public, higher-education institutions must create an optimal learning environment with reduced funds, said Ted Johnson, Supply & Demand Chain Executive’s 2012 Practitioner Pro of the Year.
How reduced? Gov. Jerry Brown recently announced that the University of California, California State University and the state’s community college system will each lose an additional $100 million in funding. The pressure to reduce expenses and improve efficiencies is rising.
“While in the past administrators may have viewed procurement as more focused on enforcing policy rather than as a partner, that mindset has changed during the past few years,” Johnson said. “Department heads and key stakeholders are now looking at us to provide guidance on innovative ways to reduce costs. There’s also a greater realization that savings initiatives can help prevent budget cuts. More than ever, procurement is tasked with finding creative and strategic ways to reduce expenses, streamline operations, increase our buying and negotiating power and collaborate with other institutions.”
The challenging economic environment underscores the importance of embracing a more strategic approach to procurement and the streamlining of the supply chain. Johnson wanted to transform the role of UC San Diego’s procurement and contracts system. Instead of playing a transactional processing role—handling invoices and purchase orders—the department would provide significant negotiation and commodity expertise.
Automating low-value processing tasks would free up the department to work closely with staff and personnel to identify cost savings and provide strategic guidance on high-dollar and complex purchases. To help achieve these goals, UC San Diego implemented an eProcurement platform. Once the new purchasing platform was in place, Johnson and his team were able to gain greater visibility into spending. Previously, spend data was only visible at line-item detail to suppliers. The new purchasing system showed quick results. For instance, the amount of time to process orders was dramatically reduced, with 94 percent of all purchase order transactions finalized within one business day. Within a year of its campus-wide deployment, an average of 3,500 users accessed the marketplace to browse and view contracted suppliers and 1,900 users made their purchases, accounting for more than $53 million in spending.
Johnson believed one of the biggest challenges is implementing supply chain/ procurement initiatives in a decentralized setting. In addition, without the ability to mandate change, the task of receiving buy-in, even for programs that are approved by executive leadership, is extremely difficult. In such an atmosphere, Johnson suggested, that for strategic initiatives to succeed, they must be accompanied by proactive communication to all affected parties regarding the potential benefits of the program. In a corporate environment with a firm mandate from executive leadership, supply chain professionals have the leeway to focus on the “how” when implementing new initiatives. However, in a decentralized environment without a mandate, it’s important to focus on the “why” far in advance of the “how.” As a result, more time and effort must be dedicated to the change management portion of any project. Johnson’s philosophy is that the change management prospects of any project are equally important to the technical aspects. It’s critical that consideration is given to engaging constituents far in advance of executing change.
Why reinvent the wheel?