Purchasing Process Improvements

A University-wide Program to

Reduce both Capital and Operating Costs

REM Associates of Princeton, Inc. recently completed an assessment of procurement activities and developed recommendations for process improvements for a major mid-western university.  Objectives were to:

• Reduce cost of products purchased
• Reduce purchasing process costs
• Improve service to campus customers
• Reduce inventory investment.

Results of this work:

This work resulted in a plan for:

• Consolidation and centralization of key purchasing activities
• A reduction in staffing costs approaching 20%
• A reduction in procurement costs of more than 5%
• A reduction in commodity costs of over $10 million
• An improvement in product availability and inventory and customer service and service quality.

Existing Situation:

Prior to the implementation of any process improvement recommendations:

• More than 100 staff members in purchasing and user departments purchased in excess of $170 million of commodities and services per year for a major mid-western university with a main campus and three satellite campuses
• All procurement, except computers, was managed by each campus independently
• A procurement card was available but not used to the extent possible by all departments at all campuses
• No purchasing data analysis was used to segment services and commodities and provide the opportunity to focus at the high end and “routinize” at the low end.

Recommendations being Implemented:

Following an in-depth analysis, which included interviews of Purchasing and user department staff at all campuses, the following recommendations were developed and are in the process of being implemented:

• Analyze combined data for the four campuses to identify high dollar and transaction volume products and services
• Employ commodity specialist, under the direction of Central Administration, to negotiate service, quality and price for the high volume items
• Maintain Purchasing departments at each campus to handle lower volume and campus-unique items and provide a liaison with campus users
• Encourage equipment standardization to reduce cost and increase volume by providing lower costs and service contracts for user departments
• Increase the bid and procurement card limits with a monetary incentive for departments to use the procurement card.

 If your current environment in any way resembles the “Existing Situation”, contact REM Associates to develop an action plan for process improvements directed at achieving similar results.