eProcurement

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eProcurement

• University of Toronto
• HERUG 2002
• Melbourne Australia

Campus Business Connect
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Agenda

• Background
• Where we are today
• The Project
• Things to watch out for

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University of Toronto

• 175th Anniversary
• 29 Colleges/Faculties/Divisions
• 278 Hectares 262 Buildings
• 3 Campus Locations
• 2,979 Faculty
• 10,000 Total Staff including 3,000 academics
• 4,000 affiliated academics
• gt55,000 students
• 12th Largest employer in Greater Toronto Area
• Annual budget of gt1 billion
• 370,000 alumni

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Background

• SAP R/3 Since 1995
• Financials 1995
• Funds Management 1996
• HRIS 1998
• Plant Maintenance 1999
• SAP Version 4.5B
• SRM 3.0

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Problems for Purchasing

• 8,615 Suppliers
• 44,816 items (many duplicates)
• 280,000 purchases annually
• 195,000 purchase order transactions
• 85,000 renegade buys
• 15-27 higher cost
• SAP purchasing difficult for casual users

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University Non Salary Expenditures ( thousands)
Materials Supplies 112,659 Services
(e.g. Utilities) 64,918 Ancillary Services
54,823 Non Capital Repairs Maintenance
32,554 Other Expenses 28,498 P-Card
Purchases 6,738 TOTAL
300,190
68 Million
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Investing for Savings
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eProcurement Philosophy
"Our goal is for eProcurement to become the
purchasing method of choice for the University of
Toronto. This will be achieved by creating the
optimal purchasing experience for users while
creating the optimal marketing channel for
suppliers."
S. Whittaker, Director of Procurement Services
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Objectives

• Best value using University leverage
• Relevant content selected by user teams
• Simple intuitive user interface
• Better information
• Integration with SAP R/3
• Funds Management the evil step-child
• Ability to define and apply local business rules

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This MeansEnd user buy in

• No incremental costs, no transaction fees
• Engage users in solution definition, selection,
  configuration and testing
• Solution has fewest touch points
• Eliminate need for shadow systems
• Initial focus on repetitive, non-strategic
  purchases

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User Involvement

• Focus Group
• 40 U of T participants
• Across all campuses
• Business officers/researchers/management
• Workshops and interviews
• Review sessions
• Constant feedback

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Supplier buy-in

• Get CEO buy-in to allocate resources
• Leverage vendors existing eCommerce investment
• Profile Founding partner
• Detailed project plan with milestones
  collaborate, communicate, monitor
• Exclusivity for non-strategic commodities
• Terms of engagement eProcurement pre-qualifier
• Universal standards OCI,XCBL
• Payment terms

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Savings and Benefits

• Estimated 7 - over 4.76M annually
• Reduce vendors, items
• Guide purchaser to prime vendor
• Value Assured
• Streamline administrative tasks
• Savings directly to departments
• Improved accountability
• More time devoted to academic pursuits

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Savings and Benefits

• Easy to use
• 24 by 7 availability
• Eliminate requirement for multiple quotes
• Eliminate spending limits
• Alternative to traditional purchasing processes

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Touch Points
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Initial Plan

• Aspect Development to provide
• Single unique university catalog
• Aggregation of items and vendors
• Proved costly
• Transaction fees
• University staff
• Many vendors developing their own catalogs

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New Direction

• Not to use a unique UofT catalog
• Use vendors catalogs
• UofT subset with UofT pricing
• Leverage the vendors investment in eCommerce
• Get access quickly to many catalogs with little
  investment by UofT
• Concentrate on the end-to-end solution

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Vendor Selection

• After RFP Process selected SAP SRM
• Commerce One EBP
• Provided best end to end solution
• Understood integration issues with SAP and FM
• Other vendors did not have a good track record,
  only been in business a short time

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Timeline
RFP to select vendor
Decision to use SAP SRM Aug/01
Config. Version 2.0 Oct/01
First Transaction Dec 19/01
Upgrade to Version 3.0 Jan/02
Pilot Group Live April/02
2001
2003
2002
20 Suppliers
7 Suppliers
500 Users
200 Users
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Upgrade to Version 3.0

• Tax code functionality within the shopping basket
• Funds Management
• Selection of the proper fund
• Funds availability checking
• Fix some bugs
• Improve user friendliness

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Implementation Team(Over a 3 months)

• SAP Consultants 3.7
• AMS Staff 3.0
• Procurement Services 1.5
• Financial Services .5
• Others
• Business Officer .25
• Researcher .25

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Budget

• Consulting 381,000
• SAP and Clockwork
• Hardware 200,000
• Training 29,500
• Miscellaneous 30,000
• Total Pilot Costs 640,500

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Hardware Overview
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Important Notes

• even though the whole EBP table structure
  changed between version 2 and 3, this was one of
  our smoother upgrades
• Gains from the upgrade
• Tax code functionality
• Validation of FM objects added
• bugs fixes

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Things to Watch Out For

• Lack of experience on part of consultants
• Modifications
• Vendor Negotiations
• Policy Requirements
• Business Process
• On-going maintenance

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Consultants

• Few experienced consultants
• SAP sub contracted for the project
• Consulting firms had the technical knowledge but
  had not implemented end to end solutions
• Funds Management knowledge lacking

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Modifications

• Workflow
• Not set up for independence of researchers
• Set up UofT rules and approvals tables
• Taxes
• Tax codes not passed to the PO from EBP
• Funds Management
• Defaults and pick lists need to be developed for
  researchers
• Funds availability checking not done at shopping
  basket
• Rejected Invoices
• Rejected invoices parked price matching

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Vendor Negotiations

• UofT ahead of vendors
• Vendors not ready with XML documents, to a large
  extent OCI compliant
• Developed with UofT
• Vendors eager to participate
• Tax Codes an issue
• POs must be returned with the correct tax codes
• Pricing, freight and other additional charges
• Configuration of tolerances
• Delivery addresses an issue

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Business Process Policy

• Audit requirements moving from paper to
  electronic documents
• Policies on approvals, source documents, account
  reconciliations, documented procedures
• New processes required in many areas
• Org. structure maintained in SRM
• Invoices arriving before goods receipt
• Monitoring processes

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On-going Maintenance

• Significant requirement
• Maintenance of
• User set up and changes
• Org. Structure changes HR responsibility?
• Monitoring process who does it? Fixes?
• Delivery addresses

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In Summary

• SRM was a good choice
• Savings are achievable
• User community committed
• Vendors committed
• Provides good foundation for further eProcurement
  initiatives
• Catalogs for small vendors
• UofT providing a Marketsite for other Cdn
  Universities and Colleges

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UofT Contacts

• Graham Kemp graham.kemp_at_utoronto.ca
• Pat Heslin Project manager
  pat.heslin_at_utoronto.ca
• Anne Joiner Manager Technical
  Services anne.joiner_at_utoronto.ca
• Steve Whittaker Director Procurement
  Services s.whittaker_at_utoronto.ca
• Eddie Jin - Procurement Services eddie.jin_at_utr
  onto.ca

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