Canadian Public Procurement Council

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Canadian Public Procurement Council
Forum 2007 Calgary, Alberta Stephen Whittaker,
Vice President Operations
Empowering Ontarios Public Institutions to do
Business BETTER
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Todays Agenda
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The Vision
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• The Vision
• Contributing to the highest standard of
  educational services through supply chain
  excellence
• The Opportunity
• 100 million savings available to improve front
  line service delivery

Annually by 2009/10 assuming the active
commitment of 25 institutions to group purchasing
and the e-marketplace. Achieved through price
reductions (50M) and process efficiencies (50M).
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Background

• OntarioBuys Encourage adoption of leading iSCM
  practices throughout broader public sector -
  Health Care and Education
• OECM is a not-for-profit corporation created by
  the Education Sector and supported financially
  through OntarioBuys - Ministry of Finance
• OECM Focus

e-Marketplace
Strategic Sourcing
A single electronic service portal to manage
common purchasing for Ontario Publicly Supported
Educational Institutions (PSEI)
Strategic sourcing is an organized and
collaborative approach to leveraging spend within
and across institutions
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OECM Vision transformation and professional
excellence
PSEIs Change leadership Select product
sets Share spend and contract data Lead
configuration and ERP integration Manage Ariba
licensed users Drive supplier participation Adapt
procurement and payment processes Manage
proprietary suppliers and catalogue
content Participate in OECM sourcing
events Manage compliance and utilization
OECM Contract and manage CGI/Ariba Secure
funding and PSEI participation Develop
configuration and ERP integration
processes Source OECM shared suppliers Co-source
PSEI proprietary deals Manage OECM shared
relationships and catalogues Provide
training Assist with change management Consult to
supplier relationship management Supplier
ombudsman Provide professional Sourcing services
Stakeholder Roles

• OECM Marketplace
• Ariba Modules
• Registered Vendors
• Contracted Suppliers
• Catalogues
• Data Warehouse
• Professional Sourcing Services

CGI Source and manage Ariba Create processes and
Provide technical resources for configuration
and ERP integration Load PSEI and OECM
catalogues Host and manage marketplace
applications and systems Run helpdesk Co-manage
costs Collect transaction fees Continuous
improvement
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OECM Guiding Principles

• Objectives
• Increase service quality
• Re-invest savings in education, research
• More time for education, research
• Professionalism in Sourcing and Procurement
• Minimize manual processes
• Increase visibility and control
• Strengthen supplier relationships
• Reduce risk

• Key Performance Indicators
• User satisfaction
• Measurable benefits
• Visibility for Sourcing and Procurement
  activities
• Actionable data
• Increased compliance
• Operational excellence

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Focus on business needs to accelerate acceptance
Support the business of education
Quality and convenience
Shoppers
Procurement
Source-to-Pay Technology Strategic Sourcing
Finance
Management
Visibility and control
Predictable results
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Project Status
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Where is OECM Today?

• OECM concept analysis completed in 2006 resulting
  in current phase to identify solution and prepare
  business and funding case
• Business model presented to School Boards,
  Colleges and Universities as well as suppliers
  with positive response
• E-marketplace solution and service provider
  identified
• Business model being finalized and funding
  application under final preparation
• Commitment from early adopters reaffirmed
• Presently finalizing
• Outsource Services Agreement with CGI
• Funding Agreement with the Ministry of Finance
• Institutional Services Agreement, and
• The Supplier Participation Agreement
• Wave 1 institutions planned to go live in 1st
  half of 2008

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OECM as a Business

• Not-for-profit corporation Established August
  2006
• Board of Directors comprised of representatives
  from nine participating institutions
• Permanent management team and project management
  office in Mississauga, Ontario

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Value Proposition
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Whats in it for Members?

• Streamlined purchasing makes complex processes
  more user-friendly, less costly

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Time is MoneyTask and Effort Comparison,
Traditional Process vs. E-Procurement Process
SupplierActivity
E-Procurement 7 Steps 20 Minutes 12
Sourcing
Ordering
Receiving
Invoicing
FIS/Admin
Filing
Traditional Process 29 Steps 3 Hours, 28
Minutes 129
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Whats in it for Members? (contd)

• Empowers end-users while improving control,
  accountability, transparency
• Better buying experience for teachers,
  administrators, researchers
• Single point of access to thousands of
  pre-qualified suppliers
• On-line catalogues, maintained by suppliers, are
  always up-to-date
• Automated approval workflow respects
  institutional policies
• 24/7 access for end users

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Whats in it for Members? (contd)

• Maintain and improve existing commercial
  relationships
• All efficiency and strategic sourcing savings
  remain with institution to be reinvested in
  front-line, core services i.e., teaching,
  research
• Ministry of Finance investing in infrastructure
  and start-up costs that institutions could not
  bear individually

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How will OECM do this?

• OECM will provide tools and services to
• streamline commercial relationships between
  member institutions and their suppliers
• facilitate collaboration both within the
  institution and across the sector towards
  adoption of leading spend management practices
• reduce costs by automating paper-based manual
  processes, increase bargaining leverage and
  contract compliance
• enable buyers to shift from tactical focus to
  strategic focus

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Traditional purchasinga shift from tactical to
strategic focus
Today
Tomorrow
? Data challenged
? Information rich
? Placing low value orders
? Strategic sourcing
? Writing RFQ, RFP
? RFQ, RFP Collaboration tools, reusable template
? Manual evaluation of bid responses
? Contract Compliance
? Writing contracts
? Contract authoring tools, templates, clause
bank
? Getting approvals
? Administer automated workflow rules
? Managing supplier performance
? Managing paper
? Full, secure, transparent audit trail
? Maintain audit trail
? Process stewardship/monitoring
? Policing
OECM tool set
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OECM Product Set The Tools

• Spend Visibility Data enrichment and reporting
  to identify and enable center-led strategic
  sourcing
• Sourcing (eRFx) Standardized, streamlined
  processes
• eProcurement
• Punch-out to supplier-hosted catalogues with
  members contract pricing
• Catalogue hosting services for small-to-medium
  suppliers
• Quick Quotes
• Contract Management, Compliance
• Supplier Performance Management KPI/Scorecards,
  Surveys
• Auctions (Asset Disposal)

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How will it work?
Buyers
Vendors
Catalogues
Self Registration
OECM Marketplace
Browser
Order Management System
Catalogues Proprietary OECM Shared
Professional Buyers
Suppliers w/Catalogues
Requisition POs
Catalogues Receipt Management Sourcing Tools
Catalogues Proprietary OECM Shared
Spend Management Tools
Spend Management System
Browser
Sourcing Tools
Order Management System
Data Warehouse
Finance
Transactions EnterpriseApplication Integration
Approval Workflow G/L Interactions Funds
Management Audit Trail
Suppliers w/o Catalogues
Order Management System
Ariba/CGI
Payment System
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ERP Integration Strategy
Connectors
ERP Systems
GL Fixed Assets Funds Verification etc.
Adaptor
Adaptor
Batch file transfer to/ from ERP Systems SAP,
BAS, Oracle, etc.
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Strategic Sourcing Professional Services
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Source-To-Pay Professional Services

• In services organizations, such as Education
  and the Public Service, Strategic Sourcing is
  emerging from Procurement departments as a
  value-added professional discipline.

An extension to the institutions operations or
processes, providing people to support core
processes Feasible that work can be performed by
the PSEI Cannot differentiate whether services
are being provided by the PSEI or the
outsourcer Management by the PSEI is on a
minute-by-minute basis Mission-critical to the
PSEIs ability to provide educational services
for competitive advantage Generally not feasible
that the work is performed by the PSEI Limited
ability to easily replace the
supplier Relationships are tightly
managed Commodity or lower risk
relationships Selected through a structured
sourcing event for an on-going relationship Some
on-going supplier management is
required One-off or lower risk purchases
Generally lots of competition in the
marketplace Supplier not subject to
management Order placement Tracking Receipt/3-way
matrix matching
Outsourcing
Strategic Sourcing
Strategic Suppliers
Preferred Suppliers
Strategic Procurement
Vendors
Purchasing
Transaction Processing
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Strategic Sourcing Professional Services Mission

• To generate measurable business value by creating
  an accessible centre-led professional services
  organization in order to maximize financial and
  non-financial benefits from third party
  relationships.
• To establish a trusted advisor relationship
  with PSEIs, based on transparency and trust by
  consistently working collaboratively to deliver
  measurable results.
• To support, train and assist PSEIs in strategy
  to up-skill internal Sourcing and Procurement
  resources.

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Strategic Sourcing service offerings
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Strategic Sourcing Benefits
Detailed spend analysis found that strategic
sourcing benefits for SCU institutions would be
significant, approaching 100M if 25 institutions
participated in 25 categories.
Current analysis completed in March 2007 (AT
Kearney) has identified four categories (office
supplies, janitorial supplies, computer hardware
and furniture) for initial implementation.
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Does it really work?
e-Virginia (eVA) and Virginia Partners in
Procurement are government-sponsored supply chain
shared services serving the State of Virginia.

• eVA e-Marketplace results
• 120 Million in savings to date
• 39 Million in annual savings and cost avoidance
• 1.05 Million transactions
• 5 million items available and 983 catalogues
  on-line
• 33,000 vendors
• 10 Billion in orders
• 9,200 registered users
• Up to a 70 reduction in processing time from
  Solicitation to Award
• Up to a 25 reduction in delivery time
• 171 state agencies
• 494 local government agencies
• Solution managed by CGI

• Virginia Partners in Procurement
• group purchasing results
• 158 Million in savings to date
• Computer Hardware 12 (price reduction)
• Janitorial Supplies 11
• Lab Supplies 13
• Office Supplies Paper 18
• Computer Software 8
• Off-Road Equipment 6
• Enterprise Storage Devices 15
• Temporary Services 32
• Uniforms 17
• Hotels 31
• Heavy Trucks 20
• Storage Media 30
• School Buses 3
• Printers and Accessories 15
• Maintenance, Repair, and Operating Supplies (MRO)
  13

eVA data, March 2005. All figures CAD converted
at 1.05 CAD 1 USD
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Value Proposition for Suppliers

• Market growth opportunity
• Single point of access to 4 billion market
• Improve competitive position
• Suppliers of all sizes, geographic locations can
  compete on a level playing field
• Low entry costs for eCommerce enablement
• Improve cash flow shorter transaction cycles
• Lower cost of doing business
• eBusiness suppliers report higher average order
  size
• Reduced order errors, returns, billing points,
  paper
• Ability to integrate with order
  processing/fulfillment systems

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Funding
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How will OECM be funded?

• Three funding sources
• Ministry of Finance through OntarioBuys
• Start-up costs
• Institutions
• Annual fee
• Transaction or volume-based fee
• Percentage of strategic sourcing savings
• Suppliers
• Volume-based participation fee

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Project Timeline
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Key Dates

• CGI/Ariba selected as service provider Apr 2007
• Conclude Agreements with Q4 2007
• CGI
• Wave 1 Institutions (5)
• Wave 1 Suppliers
• Secure Government funding for Implementation Q4
  2007
• Wave 0 Implementation begins Q4 2007
• Wave 1 Implementation begins Q1 2008
• Begin planning for Wave 3 (30 inst) Q1 2008
• Wave 1 Go-live Q2 2008
• Wave 2 Implementation begins (2) Q2 2008
• Wave 3 Implementation begins Q3 2008

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Challenges Mitigation
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Challenges and Mitigation

• Challenges

• Mitigation

Members lack of familiarity with new technologies
Standardized product sets and support services
Standardized integration offerings with key
functionality residing in e-Marketplace Member
pays for customization
Connectivity with various back-office systems,
deployment models
Staged deployment
Change management associated with new capabilities
Experienced permanent executive team in
place Using consultants to assist in build-out
of operations and business streams
Scarcity of experienced staff
Governance Transition from operational,
start-up focus to managing ongoing business of
OECM
Strategy under development to identify and
attract sector leaders and subject matter
experts Center-led ? operational committees
staffed with member functional leaders
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Q A