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eProcurement: Think Globally, Spend Locally

An expanded excerpt of "Spending Smart"

Higher education institutions have long incorporated eProcurement systems to coordinate among departments in order to help leverage their buying power with suppliers and forge better vendor relationships. Consortia have pushed the envelope even further by aggregating spend among several institutions using an eProcurement solution. And now, institutions and suppliers are realizing the mutual benefits of “buying local”--colleges and universities can use eProcurement applications in support of local vendors and economic inclusion.

At the University of Pennsylvania, one of the largest dollar-volume purchasers in the city of Philadelphia, regional economic development is an institutional priority and a commitment the university supports with its actions on the procurement front. Marie Witt, Penn’s vice president of business services explains, “Penn really tries to leverage its position as a large institution to help foster economic development in the local/regional area and support smaller [local enterprises] through consortia relative to economic inclusion efforts.” Through the Philadelphia Area Collegiate Cooperative (PACC), Penn partners with smaller schools in the area that may not purchase at the level Penn does.

Smaller suppliers in the region may not yet have the technological capabilities or throughput to work with a very large institution like Penn, but PACC can bring them in, to begin working with the consortium’s smaller schools first--with the potential of expanding their capabilities in order to meet the demands of much larger customers in the future. Penn also partners with the Pennsylvania Minority Business Enterprise Center in Philadelphia, which plays a key role in getting fledgling businesses up to speed with the technology competencies they’ll need to work in what locals refer to as the “Penn marketplace.”

Ralph Maier, chief procurement officer at Penn explains, “Being in a totally paperless environment--we have a full eProcurement application with Oracle and SciQuest--the challenge we have is not finding suppliers who are interested in doing business, but finding suppliers who have the eBusiness capabilities to match our eProcurement environment and the skills and capabilities to interact with us electronically.” Maier adds, “Penn is a large and decentralized purchasing environment that has significant eBusiness requirements. Our critical concern when we implemented technology is that we didn’t want to leave small and diversity suppliers by the wayside--and hoped that not only would they continue to be able to participate, but that they would actually prosper. From a technology perspective, that has been one of the major benefits of our eProcurement application. We now can get smaller suppliers on a level playing field with larger competitors through the eProcurement application. If we are able to take a small, local supplier and help them to build the capability to develop electronic catalog content, it enhances their ability to grow business here at Penn, and grow it quickly in a very cost-effective manner.”

Maier comments on the role of the Pennsylvania Minority Business Enterprise Center: “It is a state-funded agency that is charged with helping small suppliers—diversity suppliers—build skills and capacity. They work with the local entrepreneurs to help them develop their skills and capabilities. If they need other resources to support them, if it comes to financing, or technology skills development, they work with other organizations in the region and the local entrepreneurs to help them either gain those skills or identify places where they can go to get those skills. The key is to build supplier capacity and capability to be successful in a new electronic procurement environment. We started working with the Pennsylvania Minority Business Enterprise Center about two and a half years ago. It has been very successful. We’ve been able to develop a number of major contractual relationships with local diversity suppliers, either on a direct basis or in partnership with some other major corporations like an Office Depot.”

Maier says that eProcurement makes it possible for Penn to “e-enable” a diverse supplier base that reflects the local community and allows local businesses to prosper and develop new clients through the consortium. He explains, “The suppliers use the local consortia, our PACC, to not only do business with Penn, but then to take what they’ve developed here at Penn and leverage that for business opportunities at the other schools participating in our cooperative.” Inclusion of local businesses is one of the major components of PACC’s collaborative buying initiative, so with fourteen member institutions (soon to be seventeen) in PACC, suppliers will be able to find opportunities beyond their relationship with Penn and leverage their technological capabilities with eProcurement.

Maier explains how the PACC consortium works to achieve economic inclusion goals along with other benefits of eProcurement: “What PACC has done as a group is to identify what our business requirements and our institutions’ major business objectives are. Economic inclusion is a top priority for Penn, but it is for other schools as well in the local community. Drexel University is next to Penn here in west Philadelphia, and they have a growing interest in doing more and more business with the local community. So, it’s really about identifying a shared vision and shared priorities and making sure that they are addressed through the procurement activities that we do as a group. The primary objectives are economic inclusion and cost containment, but PACC also works at taking best practices and being able to leverage them across all of the institutions. It’s allowing each organization to be more productive and produce more without adding resources and headcount. So, it’s a significant productivity enhancement for each organization.”

CT asked Maier whether there was any difficulty in developing useful, transferable skill sets among rising diversity suppliers given several possible eProcurement providers and platforms. He notes, “One of the challenges that we have is that some of the other members of PACC are PeopleSoft customers, or some have their own home-grown technologies, so I think there are certain core competencies that the supplier needs in order to be successful, regardless of which eProcurement application a particular customer is using. A skill like being able to develop electronic catalog content is a requirement that a supplier has to have, regardless of whether their customer is using an Oracle, SciQuest, PeopleSoft, or homegrown system. What we try to do is build the skills and capacity that can be leveraged by the supplier across a wide customer base. They need the skills and capacity to really support a wide range of eProcurement applications that various customers may have. So in Penn’s case, we are not looking to help a supplier build skills specific for Oracle or SciQuest, but to develop those skills that are scalable and can be leveraged across a wide array of platforms, whether that means platforms like an Oracle, or something that’s homegrown by a particular institution.”

We asked Maier about the role of the eProcurement vendors and how they respond to the notion of economic inclusion initiatives: “The eProcurement providers do understand that their higher education customers have a wide range of requirements, plus they understand that economic inclusion is a major objective of a lot of potential customers. So, they know they need to be accommodating to meet the needs of the buyers, and that they also have to be cognizant of our requirement to make sure that economic inclusion continues to be a successful part of our overall procurement strategy. For example, in the area of catalog content development, SciQuest has been a very proactive partner with us, in helping us provide training and support for some of our economic inclusion suppliers.”

CT asked Maier to reflect on any differences between economic inclusion in higher education versus industry: “Economic inclusion efforts have been around for a long time. I think the one thing that separates higher education from the corporate side is that we have a vested interest in the success of the local community. If the community deteriorates, we can’t pack up and leave. We can’t shut our plants down and move to another location. Our long-term success as an institution is tied in part to the success of the local community and the local economy. So I think we have a more serious and focused approach to economic inclusion than many private sector companies.”

Maier also points out the impact local spend can have on the region’s workforce: “Another component of our purchase activity is working with local suppliers that we’re doing business with, encouraging them to hire from the local community. So obviously our dollars have a positive impact, but we want that to translate to workforce development and the hiring of local residents for jobs with local companies. That’s a more recent component of our economic inclusion initiatives. So, if we’re awarding a contract to a local supplier and they are going to have to create new positions in support of that contract, we are strongly encouraging those suppliers to hire qualified residents from the local community to fill those new positions.”

Penn purchases nearly 3.5 billion dollars worth of goods and services from Pennsylvania suppliers annually, and this spending factors significantly into high-level institutional strategy. Maier sums up the importance of eProcurement in his institution’s strategic objectives: “eProcurement is a tool that allows us to accomplish a lot of our strategic objectives. For us, not only is it a major obligation, but also a major business objective to make sure that we continue to do business with local businesses as well as diversity-owned businesses in the Philadelphia area.”

[Editor's note: Excerpted and expanded from "Spending Smart," by Mary Grush, from the November 2009 issue of Campus Technology magazine.]

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