12.0 PURCHASING AND WAREHOUSING

Transcription

1 12.0 PURCHASING AND WAREHOUSING This chapter reviews purchasing and warehousing functions for the Clay County School District in the following two sections: 12.1 Purchasing 12.2 Warehousing Purchasing is an essential function for any school system because instructional supplies, materials, and equipment critical to each school s educational mission must be obtained in the most efficient and cost effective manner possible. Schools, centers, and offices must be able to order and receive these items on time and in good condition. An efficient purchasing and warehousing function should have management processes in place to ensure that supplies, equipment, and services are purchased, from the right source, in the right quantity, and at the lowest price. Once purchased, equipment and materials must be efficiently stored and delivered to the appropriate location in a timely manner Purchasing An efficient procurement system is one that readily responds to the needs of its customers. District schools and departments rely on the purchasing function to expeditiously translate their requests for goods and services into quotes and bids from vendors that can be reviewed to determine the extent to which they meet the requirements of the original request. Once a vendor is selected, the purchasing function facilitates prompt delivery of the goods and services to the requesting school or department. CURRENT SITUATION In the Clay County School District, the purchasing function is housed within the Division of Business Affairs. Exhibit 12-1 illustrates the current organizational structure of the Purchasing and Warehouse operation for the Clay County School District. The Purchasing and Warehouse operation is one of four departments that report to the Assistant Superintendent for Business Affairs. The Director of Purchasing and Warehouse is responsible for ensuring that the district purchases all needed goods and services as specified by policies and procedures established by the School Board. The Director of Purchasing and Warehouse is charged with ensuring that the Clay County School District purchases the goods and services at the lowest possible price, while not sacrificing quality. As shown in Exhibit 12-1, the Director of Purchasing and Warehouse has four positions reporting directly to her the Purchasing/Warehouse Coordinator, the Accounts Payable Assistant, and two Support Assistant positions. As discussed in Chapter 10.0, the Accounts Payable Assistant and the Support Assistants handle both accounts MGT of America, Inc. Clay Page 12-1

2 payable and purchasing functions, and although the formal reporting relationship of these positions is the director, in reality the Coordinator of Purchasing and Warehouse provides day-to-day oversight of the position. EXHIBIT 12-1 CURRENT ORGANIZATIONAL STRUCTURE FOR THE DEPARTMENT OF PURCHASING AND WAREHOUSE CLAY COUNTY SCHOOL DISTRICT Assistant Superintendent of Business Affairs Director of Purchasing and Warehouse Accounts Payable Assistant Support Assistant (2) Purchasing/Warehouse Coordinator Warehouse Manager Courier (2) Warehouser II Warehouser Senior Source: Clay County School District, January Exhibit 12-2 details the bidding requirements established by Board policy. All school sites and departments are responsible for obtaining their own informal quotes; formal bids required for purchases of $15,000 or more are handled by the Purchasing Department, with the exception of goods and services procured for the Food Services Department and the Facilities Planning Department. The Purchasing Department assists these two areas in the formal bid process. MGT of America, Inc. Clay Page 12-2

3 EXHIBIT 12-2 BIDDING REQUIREMENTS IN THE CLAY COUNTY SCHOOL DISTRICT DOLLAR AMOUNT* PROCEDURE $5,000 - $6,999 Documented telephone quotes from two or more qualified vendors. $7,000 - $14,999 Written quotes from three or more qualified vendors. $15,000 or more Formal bids from three or more responsible sources. Source: Clay County School Board Policy Manual, *NOTE: The limits stated in Board policy refer to cumulative totals for like products/services needed through the fiscal year. Purchase orders are entered into the purchasing system directly by employees in the schools and departments. The automated purchasing system controls the budgeted expenditures by disallowing purchase orders that come within 90 percent of budgeted levels. In order to exceed 90 percent of a budgeted line item, the Director of Purchasing must pre-approve the purchase order. After schools and departments enter their purchase orders, the Purchasing Department prints a five-part purchase order. After reviewing and approving each purchase order, the Director distributes the purchase order copies as follows: original to vendor; two copies to the school or department site (one copy serves as a permanent copy and one serves as a receiving copy); one copy is maintained in the Purchasing Department files; and one copy is held for Accounts Payable. As supplies are delivered throughout the district by vendors, school sites and departments are required to inspect the goods received, sign the receiving copy of the purchase order, and forward this form to Accounts Payable where it is used to verify proper receipt of goods. Vendors are required to send invoices directly to the Accounts Payable Department where they are processed for payment. Surveys of district administrators, principals, and teachers show a high degree of satisfaction with the purchasing function in the Clay County School District percent of administrators and 81 percent of principals, in Clay County feel that the district s purchasing function is either adequate or outstanding. In addition, when the percentage of Clay County administrators expressing satisfaction with the purchasing function is compared to satisfaction levels of purchasing functions in other school district s throughout the country, 82 percent of administrators in Clay County respond that the purchasing function is either adequate or outstanding, as compared to 52 percent satisfaction reported by other school systems. MGT of America, Inc. Clay Page 12-3

4 COMMENDATION The Clay County School District is commended for the high level of customer satisfaction of its purchasing function. Currently, emergency purchases in the Clay County School District are handled by obtaining telephone approval for the expenditure, and then issuing a confirming purchase order after the emergency purchase has occurred. In addition, petty cash is used for the purchase of small items not exceeding $30. Petty cash vouchers are replenished on a frequent basis, with the petty cash custodian submitting all receipts to Accounts Payable. RECOMMENDATION Recommendation 12-1: Implement procurement cards for the purchase of emergency items and for other allowable purchases in the district. Procurement cards are credit cards issued by the district to employees. The Clay County School District can set spending limits for each card when issued, and place restrictions on the types of purchases made. Procurement card expenditures would be paid monthly to the issuing bank in one lump-sum payment. Cardholder payments can be reviewed daily, weekly, or monthly by both the cardholder and Accounts Payable staff. Using procurement cards should eliminate the need for confirming purchase orders and should reduce the number of payments processed annually. To implement a procurement card program, the Clay County School District should contract with a procurement card company to provide the cards. Through effective negotiations, the card and service fees can be negotiated out of the agreement (at no cost to the district). The Clay County School District should assign one of their Accounts Payable staff to manage the program. IMPLEMENTATION STRATEGIES AND TIMELINE 1. The Assistant Superintendent for Business Affairs should establish a team of members from Purchasing, Accounts Payable, Accounting and other customer departments. 2. The team should visit and interview other procurement card users. 3. The team should review card capabilities with major providers (American Express, Visa, MasterCard). May 1998 May-June 1998 June 1998 MGT of America, Inc. Clay Page 12-4

5 4. The team should gain the approval of the Assistant Superintendent of Business Affairs to move forward with a Request for Proposals (RFP). July The team should develop the RFP. August The Assistant Superintendent of Business Affairs should approve the RFP. 7. The team should establish policies and procedures for the procurement cards. September 1998 October The procurement card vendor should be selected. November The Director of Purchasing/Warehouse should identify a staff member to manage the card program. 10. The procurement card staff member should conduct a needs assessment to determine which employees will be issued cards. 11. The Clay County School District should pilot the program with several campuses and departments. 12. Districtwide training on the use of procurement cards should be conducted. 13. The district should implement the procurement card program throughout the district. December 1998 December 1998 January 1999 January 1999 March 1999 FISCAL IMPACT This recommendation should be implemented at no cost to the district. Efficiency savings will be realized in the reduction of invoices processed by the Accounts Payable staff. The Clay County School District currently uses cooperative arrangements for purchases of fuel, building materials such as asphalt and concrete, and paper. Formerly, the district maintained more frequent use of cooperative purchasing arrangements, but the decentralization of many county and city purchasing departments has made such arrangements difficult and time consuming for Clay County School District staff. MGT of America, Inc. Clay Page 12-5

6 RECOMMENDATION Recommendation 12-2: Research cooperative purchasing arrangements though the Internet and other sources. The district should use the Internet to search for cooperative purchasing opportunities. In addition, the district should use school affiliations and other school organizations and local consortia to share and exchange cooperative purchasing information. Through such sources, the district could announce purchasing agreements in which other local entities could participate, in addition to announcing Clay County School District needs. Another useful source of such cooperative information is current district vendors. IMPLEMENTATION STRATEGIES AND TIMELINE 1. The Assistant Superintendent for Business Affairs and the Director of Purchasing and Warehouse should meet to discuss opportunities for sharing resources for cooperative purchasing arrangements. 2. The Director of Purchasing and Warehouse should research local opportunities for cooperative purchasing arrangements through the Internet and through local contacts such as state associations meetings, current district vendors that may be aware of purchasing arrangements entered into by neighboring school districts, and other community meetings. May 1998 Ongoing FISCAL IMPACT This recommendation can be implemented with existing resources Warehousing Warehousing is an essential function of efficient supply operations in any district. Without an efficient warehousing function, cost savings that result from buying in large quantities can not be realized. CURRENT SITUATION The Clay County School District maintains almost 11,000 square feet of warehouse space for stocking materials, equipment, and supplies for all schools and district divisions and departments; the items are delivered by suppliers to the central warehouse where they are received, tagged, added to the inventory records, and stocked. Schools, centers, and administrative offices throughout the district order from warehouse stock. The Warehouse performs several primary functions. These functions include: MGT of America, Inc. Clay Page 12-6

7 ordering; receiving; inventorying; and distributing supplies, materials, and equipment throughout the district. In addition to tasks related to the warehousing function, the Warehouse provides for the pick-up and delivery of interoffice mail, delivers classroom and library books, and delivers and picks up testing materials. The district requires that all suppliers of food products used for cafeteria operations be delivered on a just-in-time basis to each school; the district, thus far, does not maintain large stocks of food items. The June 30, 1997 supply inventory totaled $370,597. Exhibit 12-3 shows inventory balances for the last two fiscal years. The district also maintains inventories of maintenance, automotive, and print shop supplies that do not fall under the responsibility of the Purchasing/Warehouse Department. EXHIBIT 12-3 YEAR END INVENTORY FOR THE SUPPLY WAREHOUSE IN THE CLAY COUNTY SCHOOL DISTRICT YEAR YEAR END INVENTORY IN DOLLARS PERCENT CHANGE $407,333 NA $370, % decrease Source: Clay County School District, Purchasing and Warehouse Department, 1998 The district maintains 11,000 square feet of warehouse space used for stocking educational, office, and custodial supplies. In addition, surplus space in the warehouse is used by other departments in the district for temporary storage of large items. An inspection of the warehouse facilities indicted that the physical structure was sound, and that all goods and supplies are kept well-organized and clearly labeled on supply shelves. The warehouse is kept clean and free of clutter. During non-business hours, the warehouse is kept locked, in addition to keeping the surrounding fence locked. Over the past 20 years, the warehouse has experienced only one break-in. COMMENDATION The Clay County School District maintains an efficient warehouse operation. MGT of America, Inc. Clay Page 12-7

8 On a daily basis, two warehouse drivers make rounds to every school in the district delivering requisitioned goods from the warehouse and district mail. On payday, drivers deliver paychecks to each school. During their rounds to each school, drivers also pick up mail and other items to be delivered to other areas of the district. District policy states that upon receipt of supplies from the district warehouse, the school principal or an authorized representative has the responsibility to acknowledge the receipt of goods immediately upon receipt by signing the applicable receiving documents. District employees report that due to time constraints, the acknowledgment of the receipt of goods sometimes does not take place immediately. Occasionally, school sites will report that items are missing, yet warehouse records show that delivery of the items had taken place. RECOMMENDATION Recommendation 12-3: Reduce the frequency of deliveries of supplies made to schools. Limiting the delivery schedule to schools and consolidating the requisitioning of goods to once weekly will save time. Drivers will continue to visit schools daily to pick up and deliver mail, but each school should have supply deliveries made weekly. Staggered delivery schedules will save time for the drivers and will be more efficient for warehouse employees. In addition, by making fewer supply deliveries, school personnel should have more time to actually inspect delivered goods and to properly acknowledge the receipt of goods. IMPLEMENTATION STRATEGIES AND TIMELINE 1. The Purchasing/Warehouse Coordinator should instruct the Warehouse Manager to develop a weekly delivery schedule for warehouse drivers. 2. The Purchasing/Warehouse Coordinator should issue a memo to all schools and departments notifying them of the change in delivery schedule and requisition procedures. 3. The Purchasing/Warehouse Coordinator should issue a memo to all district personnel responsible for receiving goods explaining the necessity of following Board policy on the proper receipt of goods in the district. 4. The Warehouse Manager should implement the new requisition/delivery schedules. May 1998 June 1998 Summer 1998 August 1998 MGT of America, Inc. Clay Page 12-8

9 FISCAL IMPACT The implementation of this recommendation will result in time and efficiency savings, allowing district personnel to devote more time and attention to the proper receipt of goods. School sites and department heads requisition supplies from the district warehouse by entering requisition orders into the automated computer system. Board policy states that requisitions must be approved by either the principal or the department head prior to issuance of the goods. Currently, there is no mechanism for approval of supply requisitions. RECOMMENDATION Recommendation 12-4: Improve the control of the supply requisition process by implementing a mechanism for principal approval. When implementing the new TERMS system, the Purchasing/Warehouse Department should ensure that there be a mechanism for on-line approval of requisitions by principals. IMPLEMENTATION STRATEGIES AND TIMELINE 1. The Director of Purchasing/Warehouse and the Purchasing/Warehouse Coordinator should meet with the Director of Information Services to discuss programming features for the new TERMS requisition system. 2. The Director of Information Services should ensure that the new TERMS requisition system feature on-line approval capabilities. 3. The Purchasing/Warehouse Coordinator should instruct all district personnel of the requirements for proper authorization of requisitional goods. May 1998 July 1998 July 1998 The Clay County School District currently does not operate a recycling program. As a result, the district is paying for trash hauling services that could be avoided if paper and other products were diverted to recycling efforts. MGT of America, Inc. Clay Page 12-9

10 RECOMMENDATION Recommendation 12-5: Implement an extensive recycling program in the Clay County School District. By diverting waste products that could be recycled from the landfill, the district should reduce its current trash hauling expenses. The warehouse should coordinate a districtwide recycling program. A recycling program implemented in the Lee County School District, a Florida district almost twice the size of Clay County, resulted in savings of almost $170,000 in trash hauling fees annually. In addition, Lee County generates approximately $12,000 annually from the sale of recyclable materials. To encourage recycling in schools, Lee County has established an incentive program whereby any school saving $5,000 or more as a result of recycling is paid a cash award. In fiscal year , the district paid over $70,000 in incentive awards to schools. IMPLEMENTATION STRATEGIES AND TIMELINE 1. The Assistant Supervisor for Business Affairs should direct the Purchasing/Warehouse Coordinator and the Warehouse Manager to develop a district-wide recycling program. 2. The Purchasing/Warehouse Coordinator should contact local recycling companies to investigate recycling opportunities within the local community. 3. The Warehouse Manager should develop a recycling program including promotional literature and posters to be distributed throughout the schools and department sites, recycle bins, procedures for the district to follow including the types of materials to be recycled and how they must be sorted, and develop a schedule of collecting recycled products from all district locations and delivery of the recycled goods to the appropriate handler in the community. 4. The Purchasing/Warehouse Coordinator should develop an incentive and reward plan for all schools and departments. 5. The Warehouse Manager should instruct the warehouse drivers to begin collecting recycled products from all district facilities. May 1998 Summer school year school year September 1998 MGT of America, Inc. Clay Page 12-10

11 6. Based on the activity of the recycling program, the Warehouse Manager should evaluate the option of hiring a part-time driver to assist with the recycling program. June 1999 FISCAL IMPACT The district will have some initial costs in starting a recycling program. These include the cost of: printing informational and promotional materials; and acquiring cardboard recycling bins. The savings associated with the recycling effort will result from reduced trash hauling fees. In addition, the district may also receive additional revenue from the sale of recycled products. Using the Lee County School District s recycling program savings of $170,000 annually as a model for this fiscal impact, Clay County, a district about half the size of Lee County, should generate an estimated $75,000 to $85,000 in trash hauling fees on an annual basis. This estimate does not account for actual revenue received from the sale of recycled goods; therefore actual savings to the district may be higher. In addition, until district personnel can be educated about recycling efforts, the program will not achieve maximum savings potential until the program is well established. Recommendation Establish a Recycling Program ($1,500) $65,000 $80,000 $80,000 $80,000 MGT of America, Inc. Clay Page 12-11