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California Educational Data Processing Association |
DataBus - Vol. 38, No. 2
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Tutorial: Internal purchasing process improvements can generate significant cost savings.
Ted Cole, Waltrip & Associates, Inc.
School districts and individual schools spend a lot of money and time purchasing goods and services to accomplish the task of educating our children. The procurement budget of even a medium sized school district can be in the millions of dollars and these dollars have become very scarce in recent years.
Process improvement in the purchasing areas of many school districts would virtually eliminate the very high volume of paperwork generated by the process and reduce expenditures by as much as 20 percent. That has been the experience of both Government and commercial entities who have converted their purchasing activity to an all-electronic, competitive bidding environment using an Internet World Wide Web-based purchasing system. Such a system requires almost no capital investment and provides significant advantages over the current paper-based and personal contact type of purchasing activity.
So, how does it work? There are now tools available to allow buyers to advertise the commodities and services they require and to receive electronic bids back for evaluation. The buyer's workflow is totally automated on a series of Web browser screens and enforces business rules for soliciting, bidding and awarding purchase orders to vendors. Individuals within school district offices or at the various schools within the district can submit requisitions for approval and submission to the central buying activity without the need to fill out the requisite forms and wait for them to flow through internal mail systems to the district office. Systems of this type also provide a feedback mechanism to provide purchasing information to requisitioners and to the financial and inventory systems that currently may be online at the district. Full inquiry, procurement history, and purchasing activity reporting information is also available. In addition, all transactions with your suppliers are in the American National Standard Institute (ANSI) X12 format used by more than 100,000 suppliers in the United States. This allows you to communicate in a standard format with an ever-growing community of suppliers through a Multiple Value Added Network Gateway Hub and their existing Value Added Networks or over the Internet directly. Many suppliers are already registered to do business with buying sites and more register daily.
The benefits to such a system are enormous. Buyer productivity increases as much as ten fold as the requirement to obtain telephone quotes and to fill out all of the paperwork required for a single procurement are eliminated. Goods are purchased more rapidly because suppliers respond electronically rather than by phone or mail and purchase orders are delivered to suppliers electronically. The cost of goods purchased is reduced by as much as 20 percent because suppliers know they are in an intense, price competitive situation and because all purchase prices are publicly announced to all interested suppliers once the purchase order is issued. In business terms, the return on investment for such a purchasing system can be expected to be at least 5 to 1.
All of this is available over the Internet from either a server owned and operated by your district or via a server operated under monthly service contract. Monthly fees generally depend upon the number of buyer accounts and the monthly volume of activity. Normally, all your district has to provide is the local personal computer, Internet browser (Microsoft Explorer 3.0 or Netscape 2.0) and the Internet connectivity required to connect to the server. Training and daily support are provided under the service contract.
Your district can join in a 21st century purchasing system that will pay for itself within the first 18 to 24 months of operation and thereafter contribute to the reduction of purchasing costs and the recovery of purchasing funds for other district and school needs.
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