It's Time to Realize Procurement's Potential
If you ask leaders in higher education about the role the procurement department plays in higher education, one thing is clear: As a business function, procurement's potential is largely under-utilized. While numerous, well-known institutions have proven that a more strategic approach delivers significant benefits, many continue to manage their spending just as they did before the advent of the Internet.
During these challenging economic times, it is crucial that our leaders realize the role procurement can play in their efforts to generate savings, accomplish more with the same resources, and work more efficiently. Few functional areas have the potential to make a greater impact, not just on the bottom line, but on faculty, staff, and the pursuit of academic excellence.
Colleges and universities are facing unprecedented financial challenges. Costs continue to escalate, funding remains static, and tuition isn't able to fill the gaps; however, higher education must do more than clear financial hurdles to succeed. It must be capable of embracing new opportunities as they arise while supporting core educational goals. This requires a support and service-oriented infrastructure with the technologies, people, and processes in place needed to address changing needs.
Secrets in Plain SightTo fully appreciate the impact procurement can make when the right technologies, people, and processes are put in place, one must first ask "Why do schools still rely on outdated approaches that handicap them in an increasingly competitive marketplace?" For the answer, one has to first look back. For decades, procurement was the department that administrators and faculty did their best to circumvent--the office that required just enough paperwork and signatures to make the experience tedious.
Unfortunately, this "red tape" reputation often held true. Limited by the tools at their disposal, many procurement professionals had little time to pursue strategic goals. For many, processing purchase orders and routing approvals through the chain of command was an all-encompassing task. Those on the outside knew little of the value-rich activities, including contract negotiations, occurring behind the scenes.
In recent years, radical improvements in technology, such as electronic procurement solutions that automate the entire purchasing process, have transformed not only the role procurement plays, but also the very nature of the profession. Freed from processing tasks, procurement's ranks are now filled by a new breed of professional--individuals whose business acumen and negotiation skills are more often associated with the Fortune 500 than higher education.
With these new technologies and people in place, procurement has a new label and role. It is the strategic partner--the leading edge of institutions' efforts to deliver millions of dollars to the bottom line without the pain of budget cuts. Costly and time-consuming paperwork is, for the most part, eliminated and savings can be dramatic.
With the latest eProcurement technology, purchases made by faculty and staff members--often the single greatest expenditure behind payroll and spending on capital projects--can be managed with precision. This, in turn, provides procurement and financial departments with real-time visibility over all purchases. The resulting information not only improves service, but can then be used to negotiate far more favorable terms and conditions with suppliers.
These can include volume discounts, longer payment terms, and special shipping and handling agreements--even rebates for purchases made with P-Cards. In total, negotiations made by procurement professionals armed with detailed insight into institution-wide spend can routinely result in savings of 10 to 50 percent on most of what an institution purchases.
Making an Impact in New AreasWhile it is tempting to fixate on the savings that result from a more strategic approach to procurement, it's important to realize the impact in other areas as well. Indeed, its value extends far beyond the margins of a ledger sheet and can play an important role in enabling institutions to achieve their core missions.
At Yale, for instance, groundbreaking research is consistent with the university's efforts to attract and develop some of the world's greatest thinkers. Researchers have great potential to influence Yale's funding and prestige in an increasingly competitive global market. Ironically, in the tight competition to attract top research talent, procurement has emerged as an unlikely but powerful competitive advantage at Yale.
For instance, the arch enemy that researchers face is time. Speed is crucial to making groundbreaking discoveries, winning grants, getting published, and acquiring tenure--all within a few short years. The pressure is significant and to move quickly researchers must have fast and easy access to materials and supplies as experiments evolve. When one considers the complexity of the modern lab, it's clear that searching paper catalogs, filling out purchase orders, and manually walking them through the approval process isn't viable.
Today, many of the top researchers consider procurement processes as a key factor in determining where to work. The best researchers look for institutions with the technologies, people, and processes in place required to ensure a nimble approach. For the researcher, this translates into fast and easy access to the materials they need. A service-rich approach, as all employees know, is also the hallmark of a great place to work.
While the university has saved multiple millions of dollars since overhauling its procurement processes, technology, and systems four years ago, an equally important benefit for Yale is that the speed of business is now significantly accelerated.
Case in point, the system Yale implemented with SciQuest allows researchers (and faculty and staff members) to quickly find and purchase the materials they need in a familiar, online shopping environment instead of getting bogged down by paper catalogs, bureaucratic red tape, or lengthy reimbursements for purchases.
Buying occurs with the click of a mouse and reimbursements are processed in hours--not in days or even months as is typically the case. This provides an unprecedented level of customer service that not only enables employees to do their best work, but also frees them from a common, yet needless source of stress and discontent often found among researchers in higher education.
A Powerful Tool in the Pursuit of a Higher MissionAnother shining example of procurement's value and ever-evolving role can be seen in Yale's acquisition of its Bayer Campus two years ago. Countless additional purchases were required to complete its transformation and begin operations. In the past, a tactical approach to purchasing would have slowed this process down. Instead, Yale's procurement department served as a powerful arm of an increasingly high-performance administrative infrastructure that empowered the university to immediately begin acting on its plans.
Procurement's contribution to Yale's recruitment efforts and its development of the Bayer Campus might be overlooked or unappreciated had Yale not developed this function to be a strategic ally--with the right technologies, processes, and people in place--that can accelerate these goals, rather than hinder and slow the pace of progress.
Yale has been able to realize the potential of procurement to impact far more than the bottom line. Procurement delivers value every day as a service that helps Yale's staff, faculty, and researchers succeed. As the challenges in higher education continue to escalate, it's incumbent upon all leaders to ask, "What additional value can established business functions deliver?" In the case of procurement, the answer is "a lot more."