A LOOK INTO HOW UNIVERSITIES OPTIMIZE PROCUREMENT PROCESSES WITH INNOVATION

Transcription

1 A LO O K I N TO H OW U N I V E R S I T I E S OPTIMIZE PROCUREMENT P R O C E S S E S W I T H I N N OVAT I O N W R I T T E N BY: J I M K N I G H T, P R E S I D E N T O F S TO N E B R I D G E V E N T U R E S

2 CONTENTS CONTENTS EXECUTIVE SUMMARY... 3 CASE FOR CHANGE... 3 BRAND IMAGE... 4 TRANSFORMING PROCUREMENT WORK...5 IMPROVING STRATEGIC RELATIONSHIPS...6 DATA ANALYTICS & VISUALIZATION (KPI S)... 7 DATA ANALYTICS & VISUALIZATION (SPEND ANALYSIS)...9 SUMMARY QUESTIONS FOR YOUR TEAM ABOUT US... 12

3 EXECUTIVE SUMMARY EXECUTIVE SUMMARY JAGGAER convened its Higher Education Customer Advisory Board (CAB) earlier this year. The group shared their insights on how Higher Education trends impact procurement teams, and the role technology can play to assist them in making a greater strategic contribution on their respective campuses. To provide strategic value, technology must support lean work processes and the ability to manage big data in creative ways that move people toward actions that benefit the university community. Greater influence and respect must be earned and leveraging technology tools is an essential step in the right direction. CASE FOR CHANGE UNIVERSITY REVENUE SOURCES ARE INCREASINGLY CONSTRAINED Higher Education is likely in the beginning stages of significant changes in the way colleges and universities conduct business. Other industries have experienced similar transformations, most notably healthcare, where the role of the chief procurement or supply chain officer has become increasingly important. This trend may play out in higher education. In the interim, there is a strong desire by CAB participants to increase their value to the executive team and become trusted business advisors and strategic partners. WORKLOAD CAPACITY IS A CRITICAL CONSTRAINT The ability to do meaningful work and to be of service to customers is limited by the number of full time employees and their available work hours. The efficiency by which procurement teams operate is an important factor in growing workload capacity without adding people. This efficiency factor can either be a force multiplier or a drag on productivity. It is incumbent on leadership to do everything in their power to provide the tools and environment necessary to create a force multiplier effect. JAGGAER technology tools can play an essential role in supporting efficient work processes and reducing the impact of this constraint. NOW IS THE TIME TO IMPROVE AND INVEST CAB participants are focusing investments in work processes and tools that support strategic pursuits, such as: Strategic category spend management, especially in non-traditional areas Building strategic relationships with suppliers and internal customers Building a culture of continuous improvement Solving critical customer issues 03

4 BRAND IMAGE Developing talent Advancing data analytics capabilities to the point where behavioral changes occur Insights like these play a critical role in informing JAGGAER s product innovation roadmap. BRAND IMAGE BACKGROUND AND PERSPECTIVE The procurement team s brand image is controlled by the perception of others. It is the impression in your customer s mind regarding the real and imaginary qualities of your service to them. Brand image is developed over time through the customer s direct interactions and experience with your team. This is an important concept to consider as having a good brand image is a fundamental building block to increasing the procurement officer s influence in executive settings your seat at the table. A consistent theme expressed in a variety of higher education procurement forums is the desire to be thought of as a trusted business advisor and strategic partner who can deliver significant value and impact for their campuses. If our customer brand image is low, then it is likely the executive team holds a similar view. CAB DISCUSSION On a scale of 1 to 10 (1 = low, 10 = high) the CAB group rated their brand images in a range from five (5) to eight (8) with the dominant answer either a six (6) or seven (7). A generalized conclusion from these few data points suggests that within a group of leading chief procurement officers, their brand images are acceptable, but there is significant room to improve. The group discussed some of the barriers and challenges to improving these ratings which include: The interpersonal skills and overall talent of their team members Procurement codes, policies, state rules etc. that are difficult to counteract and enforce a view that procurement teams are auditors and inflexible A historic mindset that procurement is a back-room, transaction based operation A lack of bandwidth and resources to get involved in more strategic and impactful pursuits The group defines seat at the table to mean having a say in important decisions that impact their operations and to be thought of as a trusted business advisor. In many cases, the group believes they do not have a true seat at the table and instead operate as resource providers for decisions that have already been made. Some key activities discussed to improve brand image included the need to focus on influencer projects, that is, those initiatives that will make an impact for customers. There is no substitute for doing something positive that improves 04

5 TRANSFORMING PROCUREMENT WORK the customer experience. It is important to pay attention to customer feedback and act on what is learned through this process. When procurement teams close the feedback loop and demonstrate that improvements have been made and customers realize their voices have been heard and considered, then brand image improvement results. From an executive team perspective, procurement teams need to focus on driving cost and value improvement and impacting revenue needs. TECHNOLOGY IMPACT There are several key software decisions that executive teams are considering today. They include: software as a service purchasing processes, the integration and appropriate use of Customer Relationship Management (CRM) software, the need to meet accessibility requirements, how best to utilize elearning platforms and a need to define key performance indicators and report against them to various stakeholders and constituents. The CAB group believes their executive teams have a strong grasp of the strategic value of source-to-pay software. They rated this question in the range of eight (8) to ten (10). TRANSFORMING PROCUREMENT WORK BACKGROUND AND PERSPECTIVE Chief Procurement Officers (CPO s) want to be strategic partners and deliver significant value to campus stakeholders. Perhaps the biggest challenge they face to delivering on this potential is the workload capacity of their teams. There are only so many resources available and they can only work so many hours in a day. It is difficult to add FTE s when the economic environment is challenging. This means workload capacity is a significant constraint on the ability of CPO s to deliver on initiatives that carry a more strategic impact. The efficiency by which resources operate, their efficiency factor, is an important lever for CPO s to improve. How much time is wasted because of outdated policies, poorly designed processes, redundant workflows and not taking full advantage of technology solutions? The group s dialog on this topic suggests there is substantial improvement to be made. WORKLOAD CAPACITY # of FTE s Work Hours Efficiency Factor Desired Output 05

6 IMPROVING STRATEGIC RELATIONSHIPS CAB DISCUSSION The group agrees that workload capacity is an issue and they further agree there is a lot they can do to improve in this area. They believe that everyone can benefit from taking a fresh and thorough look at existing processes. They report that technology solutions are not used as effectively as possible and that many workarounds have proliferated. They believe process efficiency should be a key discussion item for all strategic supplier quarterly business reviews. It is critical to deploy metrics to determine whether improvements are being made. The group discussed what they would do with the additional resource capacity created through process improvements. Those ideas included the following: A greater emphasis on relationship management with key suppliers A focus on staff development A focus on spend categories that yield greater strategic impact (e.g. construction and benefits) A focus on stakeholder / customer relationships Execution on a hot list of key initiatives that bring bigger value More time to think strategically A greater emphasis on work / life balance IMPROVING STRATEGIC RELATIONSHIPS BACKGROUND AND PERSPECTIVE At a basic level a strategic relationship is one where two or more entities conduct specified activities or processes, to achieve specified objectives. In this definition, it is important that objectives are jointly determined as well as the activities agreed upon to deliver on them. Most relationships in procurement do not meet these criteria as they are often not jointly determined and/or may be one-sided. This definition assumes that procurement teams can define their strategic relationships (suppliers and customers), have the talent, the time and the wisdom to pursue them with thoughtful facilitation processes that yield jointly determined objectives, goals and action items. It is difficult to argue that we should have a seat at the table or that we should have greater influence on important decisions, if we do not manage strategic relationships at a high level. CAB DISCUSSION The group rated their performance in managing strategic supplier and customer programs. There was a wide range of experiences in the group. The participants rated on a scale of one (1) to ten (10) with 10 being high performance. With respect to strategic supplier programs the 06

7 DATA ANALYTICS & VISUALIZATION ( KPI S) ratings ranged from three (3) to ten (10) with an average score of 5.1. In contrast, they rated their customer relationship program higher with a range between two (2) and eight (8) and an average score of 6.0. The average experience of the CAB group suggests there is significant improvement to be made in managing strategic relationships. When asked if the management team was spending the right amount of time on these relationships, the ratings averaged a 5.5 on the same scale. This result ties in with previous discussions about workload capacity and the desire to increase time for strategic thinking and execution. The group discussed the top performance issues where strategic suppliers could improve their assistance. Those ideas included: Embrace e-invoicing Support the need to report diversity spend Support proactive and meaningful business reviews Manage strategic agendas that are forward looking Additionally, the group discussed issues that strategic customers want solved. Those ideas included: Improve the quickness and simplicity of ordering processes Improve the nimbleness of the procurement team to support customer needs Improve the cycle times required for RFP s / Bids and help them understand their importance Improve the shopping experience and allow some variety and choice Increase visibility to the status of requisitions, orders, bids etc. so customers know where things stand without making a phone call DATA ANALYTICS & VISUALIZATION (KPI S) BACKGROUND AND PERSPECTIVE Key Performance Indicators (KPI s) are an overused term in business. Organizations often do not clearly define what they mean so that over time they come to mean any metric or data used to measure performance. One of the best definitions might be from Rob Petersen s article at sailthru.com who says KPI s are an actionable scorecard that keeps your strategy on track. They enable you to manage, control and achieve desired business results. This definition appropriately places a more prominent role for KPI s. Used correctly, they are one of the most important guideposts for any business or functional area. 07

8 DATA ANALYTICS & VISUALIZATION ( KPI S) One important aspect of leadership is to make sure that teams are focused on the right things, because the opportunity cost for pursuing and tracking the wrong things is high. If KPI s are used according to the definition suggested here, then they will be instrumental in helping procurement teams sort through the fog and focus on those activities that yield strategic outcomes. CAB DISCUSSION The group rated their performance in using KPI s on a scale of one (1) to ten (10) where 10 equals high performance. With respect to the use of KPI s the ratings ranged from zero (0) to seven (7) with an average score of 3.8. Additionally, they rated their use of benchmarking in a range from zero (0) to eight (8) with an average score of 2.6. This experience suggests that higher education procurement is in the beginning stages of using KPI s and benchmark information to monitor key elements of their operations. As mentioned above, KPI s should be used to keep strategy on track and to measure the achievement of strategic objectives. Without these guideposts, it is likely that higher education procurement teams are not operating as strategically as they would like. The group brainstormed suggestions for the types of KPI s they believe are important to track and report to the executive team. Those ideas are presented below, but should be considered carefully before adoption to make sure they meet the definition for true KPI s: The incidence of change orders Contract v. non-contract spend Cost savings Diversity spend The incidence of competitively bid contracts v. sole source The incidence of payment optimized suppliers Cycle time data Indicators regarding contract workflow steps Additionally, the group discussed the benchmark measures they would use if readily available. Those ideas included: Total spend managed against the number of FTE s The incidence of after the fact requisitions The number and spend volume flowing through enabled catalogs Supplier fill rates How forms are utilized The volume of change orders 08

9 DATA ANALYTICS & VISUALIZATION ( SPEND ANALYSIS) The amount of spend on purchase orders The breakdown of PO spend and volume v. non-po spend and volume The percentage of manual invoice processes (spend and quantity) TECHNOLOGY IMPACT JAGGAER s technology solution handles a considerable amount of data. It could play a critical role in improving how procurement officers see their internal data in the following key dimensions: Provide the data needed to track commonly accepted KPI s Provide data in a way that is easily customizable and supports advanced visualization tools Provide a forum where common benchmark metrics could be shared across the customer base DATA ANALYTICS & VISUALIZATION (SPEND ANALYSIS) BACKGROUND AND PERSPECTIVE Spend analysis has a wide range of uses and definitions. It is typically understood as the process of collecting, cleansing, classifying and analyzing expenditure data with the purpose of decreasing procurement costs, improving efficiency and monitoring compliance (en.wikipedia. org/wiki/spend_analysis). Spend analytics is a broad topic that is deserving of considerably more discussion time then the CAB group devoted. In general, we can think of spend analytics capabilities on a continuum from spend categorization (placing whole suppliers into spend buckets based on industry standard classifications and/or university specific categories) to advanced analytics (the capability to analyze text string data to sort product and service usage patterns). University procurement teams need to decide how advanced they want to be, what their underlying data will allow and how they intend to use the data. Perhaps the best purpose definition for spend analytics comes from Duane Tucker, Director of Strategic Procurement, University of Colorado who says, the primary purpose of spend analytics software is to change customer behavior. Experience suggests that credible data professionally presented has a powerful impact on enabling changes in customer behavior. CAB DISCUSSION How do the CAB participants utilize spend analytics in their operations today? The following examples were provided: To support value analysis 09

10 DATA ANALYTICS & VISUALIZATION ( KPI S) To provide a strategic sourcing roadmap To understand where spend is fragmented As a fundamental technology tool to support increasing spend under management The group is in the beginning stages of using spend analysis reports in a strategic manner. Three primary examples were cited: To provide executive level dashboards To provide customer scorecards To support quarterly business review agendas and discussions with strategic suppliers SUMMARY Higher education economics will drive a need to deliver greater procurement and supply chain value. Chief Procurement Officers want to be trusted business advisors and strategic partners to the campus community. Procurement teams are constrained by workload capacity and efficiency factors. There is a big opportunity to improve and reinvest time toward the following activities: Strategic category spend management Building strategic relationships Lean processes Solving customer issues Developing talent Using robust data analytics strategically The pathway that leads to establishing greater influence at the executive level is not an easy one. To make progress requires a commitment to excellence in all dimensions of source-topay processes and a willingness to become involved in initiatives that move the needle for customers. As the leader in higher education, JAGGAER technology solutions play an important role in supporting efficient workflow and processes that improve internal customer experience. JAGGAER is also committed to providing procurement officers with access to resources including people, white papers, case studies, best practices and other materials that support continuous improvement in higher education procurement. 10

11 QUESTIONS FOR YOUR TEAM QUESTIONS FOR YOUR TEAM BRAND IMAGE What is the top software decision being considered on your campus today? What does seat at the table mean to you? What 3 things can you do to improve your brand image? How well does senior administration understand the value proposition of your source to payment software? TRANSFORMING PROCUREMENT WORK What % of workload capacity do you think is inefficiently used? Why? What 3 things would you do with more capacity? What 3 process improvements can you make to increase paperless or frictionless commerce? IMPROVING STRATEGIC RELATIONSHIPS On a scale of 1 to 10, how do you rate your strategic supplier program? On a scale of 1 to 10, how do you rate your strategic customer program? On a scale of 1 to 10, my management team spends the right amount of time on strategic relationships. What are the top 3 performance issues you would like strategic suppliers to improve? What are the top 3 procurement issues your strategic customers want solved? DATA ANALYTICS & VISUALIZATION (KPI S) On a scale of 1 to 10, how do you rate your department s tracking of KPI s? On a scale of 1 to 10, how do you rate your ability to benchmark against a group of peers? List the top 3 to 5 key performance indicators tracked by your procurement team and reported to senior leadership? List the top 5 to 7 items you would benchmark against peers if it was easy to do? DATA ANALYTICS & VISUALIZATION (SPEND ANALYSIS) How do you use spend analytics software today? On a scale of 1 to 10, is spend analytics used strategically to influence customer behavior? What priority changes are needed to improve the value and utility of the spend analytics software? What key spend dashboards or reporting do you provide to senior leadership? To customers? 11

12 ABOUT US ABOUT US JAGGAER offers the only comprehensive and complete spend solution suites enabling commerce between any businesses, anywhere. We pioneered spend solutions over two decades ago and have continued to lead the innovation curve by listening to customers and analyzing the market. Our solutions suites are trusted by the world s largest higher education, manufacturing, pharmaceutical, life sciences, automotive, engineering, construction equipment, serial production and medical technology companies. Our indirect and direct spend solutions suites collectively form a global network processing billions of dollars in annual spend between 1,000+ customers and 2.5 million suppliers. JAGGAER s SaaS based, Source to Pay (S2P) solutions enable an efficient relationship between buyers and suppliers, covering the entire spectrum of needs, from spend analysis to sourcing, through contract and supplier relationship management. Additionally, JAGGAER holds 38 patents, more than any other spend management company, and acquired POOL4TOOL, a direct solutions company, in Learn more about JAGGAER s commitment to higher education here. Additionally, view the webinar connected to this White Paper here. Stonebridge Ventures, Inc. is a leading professional services firm focused on creating innovative solutions in the higher education procurement profession. We work collaboratively with client partners to solve pressing challenges and help enhance the procurement team s role as an essential strategic partner. We specialize in strategic planning, spend analytics, category management, process improvement, supplier relationship management, organizational design and training. We have expertise in driving collaboration between procurement and the facilities / construction team. Stonebridge helps you cultivate Better Connections with executives, suppliers, internal stakeholders and employees to deliver flexible solutions that enhance service, improve quality and reduce cost (procurement brand performance). Contact Jim Knight at Jknight@stonebridge-ventures.com to learn more. 12

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