e-Procurement in Scotland

1

• e-Procurement in Scotland
• Steve Murray April 2005

www.eprocurementscotland.com steve.murray_at_scotlan
d.gsi.gov.uk
2
Procurement Issues 2000

• Lack of management information
• Lack of skilled resource
• Fragmentation and duplication of effort
• Off-contract buying
• Many different processes
• No strategic approach to procurement at a
  national level (and limited at a local level)
• Significant extra expense caused to business,
  particularly SMEs, by fragmented approach.

3
Approach to e-Procurement in Scotland

• Create single platform for whole of public sector
• Hosted service model
• Service not software (business not technical)
• Emphasis on collaboration
• No or Low cost for suppliers

4
Scope/Targets

• First implementation - March 2002
• Implement 50 organisations by end 2005
• 125 by end 2007
• Annual cost reductions of 290m by end 2007
• Exploit sourcing technologies (e-tender and
  e-auction)

5
Objectives

• To make Scotland the best place to do business
  electronically
• To be the first choice for e-procurement for
  public sector organisations in Scotland
• To obtain management information about
  procurement and use it to encourage good
  practices, collaboration and smarter working

6
Service Includes-

• Buying on-line - web hosted service
• Catalogue Management facilities
• Help with integrating to Finance Stock Control
  systems
• e-tendering and e-auction facilities and support
• Customer service centre
• Standardised approach to suppliers
• Forums for participation and collaboration
• P2P, Suppliers, user groups, new developments etc.

7
So far.

• 34 Government organisations using service
• Central, Local Government and Health Sectors
• e-orders placed with over 4000 suppliers
• 188m since 2001- 150m of orders placed in last
  12 months
• This represents 12 of potential for the 34
• 12m (12 of all orders through cXML links with a
  small number of suppliers (high volume/low
  value)

8
What e-Procurement Scotl_at_nd is NOT-

• A big IT project
• A marketplace

9
It is about -

• Changing the way we do business
• Improving services
• Obtaining and Adding Value

10
Making Progress

• Keeping it simple and easy
• How we presently do something the Process
• How we improve step by step
• How to simplify and make more robust solutions .
  Business Process Re-engineering
• How we overcome the weve always done it that
  way .. Change Management

11
Expected Benefits

• Transactional (Process) Savings
• Payments savings and efficient and on-time
• Catalyst for Change-
• Sourcing
• Reinforcing best practice
• Supplier Development
• Improved Supplier Relationships
• Management Information improved planning
• Collaboration/Sourcing

12
Example
A Local Council Improving internal ordering
and payment

• Issues with existing process
• Non standard ordering process
• Re-keying of data to stock management
• Issues over deliveries
• Duplicate orders
• Query resolution (lack of MI)
• Query on price
• Time taken to effect payment

13
Example

• Benefits after e-procurement-
• Standard purchasing process for internal and
  external suppliers
• Paperless, efficient transaction with management
  information
• Removal of journals and assoc. spreadsheets
• Reducing processing time from 4 days to 1
• Accurate and timely internal charging with full
  audit trail
• Best use of the investment made in ePS

14
Example

• Scottish Executive internal process
  improvements-
• Pertemps provide temporary admin staff to the 8
  core Departments
• A manual ordering and invoicing process was in
  place that involved several stages and multiple
  staff
• Solution Punch Out from ePS to Pertemps and
  electronic consolidated invoicing
• Change - HR Teams now order temps centrally 8
  weekly Departmental invoices rather than 1 weekly
  invoice per temp

15
Example
Benefits.. Punch Out provides HR Teams with
greater visibility control and much improved
management information Electronic Consolidated
Invoice has improved invoice accuracy and
allows fast and accurate data upload into the
finance system
16
Payment Costs
The cost of processing a 40 million subsidy
payment is the same as processing a paper invoice
and payment for the hire of a meeting room and
coffees at 85... It takes the same time,
resource and effort
17
Payments

• 10 of Expenditure Transactional Purchasing
  which previously accounted for 95 of paper
  invoices...
• Stationery, Business Travel, Catering, Temporary
  staff
• 90 of expenditure accounted for 5 of paper
  invoices...
• Policy Initiatives, Fisheries Protection vessel
  etc

18

• The Scottish Public Sector receive millions of
  paper invoices
• Local Authorities 20,000,000 invoices per annum
• Health 4,000,000 invoices
  per annum
• Central Govt 2,000,000 invoices per
  annum
• ..these in the main are processed manually

19
Estimated Cost of processing a paper
invoice- 15
Estimated cost of automated / integrated p-card
within eProcurement Solution 0.16
20
Approval
Approval 33 administrative
cost PURCHASE TO 66 administrative ordering
PAY PROCESS cost
invoicing
Old way..
Accounts Payable
Place Purchase Orders
Suppliers
Receive Paper Invoices
21
Business Travel and
Electronic Consolidated Invoice

Approval

New way
Place Purchase Orders
Supplier
Accounts Payable
Consolidated Invoice 1 x Electronic File to be
checked and loaded onto Finance System
22
e.g.
Implementation in one organisation-
Forbusiness travel - eliminated 18,683 invoices,
saving over 200,000 per annum For temporary
staff - eliminated 14,560 invoices, saving over
160,000 per annum
23
e-Procurement as a catalyst for change-
Planning and collaborating improves
sourcing e.g. Collaborative savings
opportunities identified in Health for
2005- Stationery (2m), non-sterile gloves
(2m), agency nurses (5m), travel (1m)
24
Issues 2005

• Limited Expertise Experience
• Reluctance to Change
• Slow Decision Making in Organisations
• Large no. of stakeholders (Finance, IT, HR,
  Audit)
• Large User and Supplier base (Communications!!)

25
In Summary
e-Procurement benefits are about change.
Process change (the full purchase to pay
process) Culture change Using best tools and
resources available ..and
making them work together Continuous improvement
not big bang!
26
End