SAN DIEGO CITY SCHOOLS Office of the Superintendent. Desktop Delivery Update March 25, 2003

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1 SAN DIEGO CITY SCHOOLS Office of the Superintendent Introductory Statement Desktop Delivery Update March 25, 2003 This report provides an update to the District s Desktop Delivery program for office and classroom supplies. The goal of the program is to maximize the district s purchasing power and efficiency while improving customer service to the school site. Background On February 12, 2002, the Board of Education in a 5-0 vote approved the 90-day pilot program and on June 11, 2002 in a 5-0 vote approved a 21-month agreement to purchase office, classroom and custodial supplies via desktop delivery. Twelve school sites were initially part of the pilot program with the district attaining implementation at 308 cost centers with 1450 users by November Figure 1.0 contains a month-by-month count of the total number of schools participating in the program. Figure: 1.0 Total # of schools participating in the Desktop Delivery Program by Month: Month: # Participating: March April May June July August September October November The goal to purchase a majority of custodial supplies through the desktop delivery program was eliminated in October 2002, as the vendor was unable to carry the appropriate mix of products at a competitive price. As a result, the district has retained carrying custodial supplies in its warehouse inventory and is currently working with Maintenance & Operations to implement an umbrella contract that standardizes all custodial supplies in the district. Desktop Delivery Facts & Figures: (Data Current through February 9, 2003 unless otherwise indicated) Funds expended (March 1, 2002 to February 9, 2003): $1,429, Projected funds to be expended through June 30, 2003: $1,900, Total number of orders placed: 5,890 Total number of products ordered: 28,058

2 Page No.2 Percent of orders delivered next day: 82.16% Total number of products backordered: 480 (1.7%) Average delivery delay due to backorder: 6.97 (7 days) Order Accuracy: 99.91% Projected efficiency savings to the district through June 30, 2003: $490,200 Total rebate accumulated from March 1, 2002 to March 1, 2003: $42,896 (roughly 3% of funds expended) Total Savings accumulated and retained by the three pilot sites: $22,345 Total Reduction in warehouse inventory: $1,272,417 Overall Customer Satisfaction: 80% of survey respondents are very satisfied or satisfied with the program Instructional Implications Teachers and administrators can now order and receive material as needed instead of stockpiling for future use. In addition, site personnel now have a delivery system that can more effectively respond to their needs and requirements for delivery supplies and materials. Budget Implications The desktop delivery program has generated both real and soft dollar savings to the district. Real dollar savings are savings that can be counted against a budget line item or against the ending fund balance. Examples of real dollar savings include: reduction in expenditures and reduction in inventory on hand. Soft dollar savings are gains in productivity/efficiencies realized from an improved process where an employee or group of employees has saved time that can now be spent on other duties. It must be noted that both the district's warehouse program and the desktop delivery program charge sales tax and pass those costs onto the customer. Real Dollar Savings In order to quantify the districts real dollar savings, staff conducted a purchasing analysis of three school sites, which have participated in the Desktop Delivery Program since March 1, The schools selected were: Rosa Parks Elementary, Wilson Middle School and Pt. Loma High School. A summary of their comparative expenditures for 2001 and 2002 is provided below in Figure 2.0 with the complete data provided in attachment (1).

3 Page No.3 Figure 2.0 ROSA PARKS Total spending 2001 $65 $6,988 $14 $11,335 $5,408 $3,069 $7,368 $34,247 Total spending 2002 $6,885 $7,492 $3,606 $5,538 $5,158 $4,275 $4,721 $37,675 Variance $6,820 $504 $3,592 ($5,797) ($250) $1,206 ($2,647) $3,429 WILSON Total spending 2001 $7,067 $8,005 $3,896 $7,270 $27,087 $10,814 $10,406 $74,545 Total spending 2002 $10,318 $12,049 $6,670 $15,000 $5,621 $14,904 $10,084 $64,620 Variance $3,251 $4,043 $2,774 $7,730 ($21,466) $4,091 ($322) ($9,925) PT. LOMA Total spending 2001 $20,863 $22,238 $22,861 $2,296 $28,208 $30,087 $12,262 $138,814 Total spending 2002 $14,094 $28,218 $22,530 $8,424 $15,047 $17,642 $17,010 $122,965 Variance ($6,769) $5,980 ($330) $6,128 ($13,161) ($12,446) $4,748 ($15,849) Total Savings $22,345 Expenditures for 2001 include: warehouse and procurement card purchases while expenditures for 2002 contain warehouse, procurement card and desktop delivery purchases. The data shows that for the same seven-month period Pt. Loma and Wilson reduced their spending by $15,849 and $9,925 respectively while Rosa Parks spent $3,429 more. Our analysis indicates the majority of the real dollar savings for Pt. Loma and Wilson can be attributed to a significant (20-28%) reduction in procurement card purchases due to those purchases now being placed through the desktop delivery program. The original analysis presented to the Board of Education indicated simply shifting purchases from procurement cards to the Desktop Delivery Program could attain a savings of up to 30%. The savings are realized since most procurement card purchases are made at retail rates and do not benefit from the bulk buying power of the desktop delivery program. In the case of Pt. Loma and Wilson they have saved roughly 12% and 14% respectively to date. In support of this continued effort, all district procurement cards have now been registered with our Desktop Delivery Program vendor to guarantee any purchases made at their retail locations will receive the Desktop Delivery Program price. In our analysis of Rosa Parks Elementary, the site experienced a 9% increase ($3,429) in spending, which in part can be attributed to an increase in enrollment. Rosa Parks experienced an average increase in enrollment of 36 students during this time period, which accounts for about $830 (36 x $23.13 per student) of the $3,429. Lastly, Rosa Parks was unable to benefit from the savings realized by shifting retail rate procurement card purchases to the desktop delivery program since the site does not use procurement cards. A direct result of the desktop delivery program has been an overall reduction in inventory held on hand by the district and school sites. Since August 2002, the district has been able to reduce inventory holdings by $1.2 million. Currently the district holds, $1.65 million in inventory with $900,000 being attributed to textbooks (see attachment 2). Our goal is to draw down our inventory to the lowest levels possible and only stock items that have lengthy procurement timelines and those items not carried through our desktop delivery program. Staff has closely tracked pricing and products provided under the program and attachment (3) contains a list of

4 Page No.4 products retained in the district-warehouse due to the vendor s inability to obtain like or equivalent products. We have also had a few instances where the material provided by the vendor was at a significant higher price compared to what the district had previously purchased the material for. In many cases the vendor has appropriately adjusted their prices but in some cases we retained the material in our warehouse and distribution system. In addition, Pt. Loma, Wilson and Rosa Parks have experienced a significant reduction in inventories held on hand as a result of this program. At this time we are unable to quantify real dollars savings from site inventory reductions since we do not have a standardized process in place to track school site supply inventory at a district level. Soft Dollar/Efficiency Savings Under the desktop delivery program the district has been able to achieve significant soft dollar or efficiency savings through the improved process flow and delivery to sites. The once paper intensive process of ordering supplies has now been automated with the school sites experiencing one of the largest benefits as they now spend less time ordering, receiving and stocking supplies. In fact, every teacher or school site employee is eligible to have access to the system depending upon how the school site wishes to operate. The electronic purchase system accepts orders and automatically notifies the approving authority (Principal or Financial Clerk) that an order has been placed and requires approval. No longer do district personnel have to hand write order requests just so they can be re-keyed into the districts ordering system. The individual who needs the supplies can place the orders in a matter of minutes with no duplication of effort. Unfortunately, the current design of the desktop delivery program does not allow a teacher to purchase supplies using their own out of pocket dollars. This feature could be added to the system at a future date, as we all know teachers spend a significant amount of their own money on their classrooms and students. The improved invoicing process has enabled the district to receive, review and approve invoices electronically, allowing our Accounts Payable Department to be current in our payments to the desktop delivery vendor. In order to quantify the soft dollar savings in actual dollars we can apply the overhead and pricing difference rates to arrive at a savings approximation. From our analysis, for every dollar spent through the warehouse by a school site or department, it costs the district an additional 75 cents in overhead to procure, receive, warehouse and distribute the material. Under the desktop delivery program, what previously cost a school site a dollar though the district warehouse now costs between a $1.15 and $1.30. However, The desktop delivery price includes all of the overhead costs of procurement, warehouse, inventory and distribution. In other words, the district benefits from a minimum savings of 45 cents per dollar spent or almost $500,000 in soft dollar or efficiency savings by year-end. Attachment (4) contains the analysis overhead rate and soft dollar approximation analysis. Rebate Program The school sites and district have achieved rebate savings of approximately $42,896 to date. Attachment (5) contains the specific milestones/goals to achieve the specific rebate percentages. Due to the phased implementation of this program, the district did not achieve the maximum rebates available in the categories of total annual spending, annual spending per student and minimum order size. This resulted in the district achieving only 3% of the total 7% available under the program.

5 Page No.5 Customer Service Implications As part of the ongoing management tracking and review of the program, customer service surveys were conducted in May and October of 2002 and in January of The results of these surveys are contained in attachment (6). Overall customer satisfaction has remained high with approximately 80% of respondents feeling the program left them satisfied to very satisfied. In our ongoing review of the program the January 2003 survey did raise some concern with staff due to the low number of respondents and what appeared to be a shift in customer satisfaction. For the January 2003 survey, only 57 people responded compared to the October 2002 survey where over 130 people responded. Staff has been able to draw no concrete solutions for the low response to the survey. In addition, staff conducted a cross tab analysis (see attachment 6) of the respondents who felt the desktop delivery program did not meet their expectations and found no consistent patterns in the data or themes in their written responses. Staff does share on a routine basis customer feedback and survey results with our desktop delivery vendor in order to continuously improve the program. Staff intends to conduct another survey in the May/June timeframe. Policy Implications This report is consistent with Board of Education policy D-2400 Recommendation No Board Action Required. 1. Staff will continue the Desktop Delivery program for classroom and office supplies and provide the Board with annual updates to commence in January Prepared by Veronica Froman, Chief of Business Services.