Project Logic LBL eProcurement Wave 2

1
National eProcurement Project London Borough of
Lambeth Case Study for eProcurement
2
Lambeth eProcurement - Background

• Before eProcurement Project
• Many different processes per department, highly
  manual
• No visibility or control of spend leading to
  maverick transactions
• Poor supplier management, best pricing not being
  obtained
• Oracle Financials 11i implemented in 2002, Oracle
  Purchasing used for ordering
• Business Case
• A business case was set out at the beginning of
  2004 following a feasibility study with
  Procurement
• The business case mainly rested on the bottom
  line savings in 2004-05 which were validated over
  a period of three weeks with more than 50
  different members of the management team
• The need to report on eProcurement to
  Comprehensive Performance Assessment, National
  Procurement Strategy and Best Value Indicators
  also drove sponsorship
• Project
• The project then started in March 2004 with core
  project team set up by April 2004
• Technical solution chosen was Oracle iProcurement
  with subsequent punchout to London Marketplace

3
Making the Business Case
Below are the savings areas that were built into
the business case for eProcurement. Also shown
are the actual Year 1 savings for each of these
areas.
Compliance 181k 2004-05

• 181k simply from review of 3 areas Stationery,
  IT Hardware, Furniture
• Benchmarking carried out to support savings at
  invoice level
• Success through combination of user interaction,
  sponsorship and system control

Review of Procure to Pay Process 362k 2004-05

• Review of Accounts Payable process uncovered high
  quantity of unclaimed credit memos and duplicate
  payments
• Historic lack of control and management
  information meant that this was not known until
  detailed review was carried out

Supplier Negotiation 188k 2004-05

• Settlement and pricing discounts negotiated with
  preferred supplier alongside adoption to the
  eProcurement process
• Catalogues managed with suppliers to eliminate
  unnecessary items

Automation 24k 2004-05

• All processes converted to electronic format such
  as e-mail or XML purchase ordering and electronic
  billing
• Automation of processes saved sundry costs such
  as postage, invoice scanning

Headcount Reduction 0k 2004-05

• Despite significant number of hours saved in
  2004-05 due to streamlined processes headcount
  was hard to drive out
• Headcount savings are anticipated in future years
  once full roll out has bedded down and the time
  to process transactions starts to decrease across
  all spend areas

4
Project Lifecycle
Phase 1
Phase 2
Phase 3
Phase 4
Phase 5
Scoping Business Case
Category Spend Analysis
Review of Procure to Pay
Rapid Implementation
Change Management
Est.Duration
3-4 weeks
2-3 weeks
3-4 weeks
8-10 weeks
20 weeks

• Clear definition of savings and resources is
  essential in order for to gain buy in
• Clear scope and benefits of the project need to
  be agreed at all levels including the top.

• Firm up financial support to business case
• Identify target areas for project and potential
  quick wins
• Use as basis to carry out process review

• To identify where improvements and time savings
  can be made in the current process
• To ensure best fit of technology to be
  implemented
• Identify potential control weaknesses

• To have technology up and running to support new
  process as soon as possible
• Act as proof of concept to the business shortly
  after selling the business case
• Achieve National Procurement Strategy requirements

• To leverage the maximum benefit by full roll out
  of the solution
• Ensure ongoing success of the project by user
  interaction

Purpose

• High level spend analysis by department
• Review of overall purchasing activities
• Initial assessment of requirements and best fit
  technology

• Obtain available system data and non-system data
• Perform analysis by vendor
• Categorise by reference to line item detail

• Kick off project at rapid pace with
  Implementation readiness review workshop.
• Set up new software and configure
• Ensure project success by focusing on key
  functionality deliverables
• Hold Conference Room Pilot and User Testing

• Map end to end processes in each department
• Identify and document issues, potential
  improvements and quick wins
• Understand roles and responsibilities
• Compare requirements to technology choices

• Review Issues with implementation
• Continue to hold roadshows, user testing and
  training
• Review issues for first commodities that are live
• Ensure roll out to all areas
• Review compliance and ensure reporting and system
  control is in place

Key steps taken

• Scoping document
• Agreed key requirements
• Business Case document

• Spend by vendor
• Potential maverick suppliers
• Buyer driven spend who buys what

• Current and future state procure to pay
• Issues list and quick wins
• Selection evaluation of technology to support new
  process

• Rapidly implemented system
• Identified areas for refinement.

• Full documentation of user training and handover
• Full roll out of technology

Key Deliverables
5
Accounts Payable Workflow
The Lambeth Solution End to End
Oracle Approvals Management
LBL Oracle System
Oracle Accounts Payable General Ledger
Oracle XML Gateway
Electronic Invoicing
Purchase Order Approval Workflow
Oracle Purchasing
INTERNET
Supplier
Requisition Approval Workflow
Electronic Ordering
Punch-Out via Exchange
Firewall(s)
Load Balancer(s)
Intrusion Detection
Router(s)
LDAP Server
Firewall
Supplier uploads catalogues invoices
iProcurement Users
London Marketplace
6
Integration to Marketplace

• Punchout the Key Benefits
• Who maintains the catalogues? 15 catalogues live
  on Oracle iProcurement by 1st February 2005
• A highly controlled process and full roll out
  required accurate pricing
• Potential for collaboration with other local
  authorities
• Make use of marketplace functionality, XML
  ordering and invoicing
• End to end integrated solution what is on
  marketplace ends up in General Ledger
• Implementation Timetable
• In December 2004 a business case for Punchout was
  drawn up and initial meetings held
• This then resulted in an evaluation and selection
  process against Lambeths key requirements
• Vantage were seen to be best fit due to local
  government experience and Oracle functionality
  appointed at beginning of 2005
• By 1st February 2005 Punchout to marketplace was
  live across Lambeth Council total technical set
  up time was 4 days
• Electronic ordering is now ready to go live,
  electronic invoicing is planned for go live in
  May
• Key Success Factors
• Requirements for a Punchout solution were clearly
  defined up front
• Right team - Experienced Oracle Consultants
  managed the technical implementation
• Right Partner Vantage provided the right level
  of business and technical support from Day 1

7
Project Outcomes
Project Outcomes
Examples
How Gained

• Efficiencies
• Electronic ordering replacing print, sign twice
  and post
• Receipting replacing several invoice approval
  steps
• Automatic invoice matching
• Management Information
• A pen previously was coded to 52 different
  subjectives, now coded to 1 subjective
• 25 maverick suppliers have been switched off and
  purchases being investigated by Internal Audit
• Supplier and catalogue reporting has enabled us
  re-negotiate core list with Office Depot
• Financial Control
• Up front ordering and authorisation now
• inherent in the procure to pay process
• Bottom Line Savings
• 70k saved on switching 3 maverick IT suppliers
  off and channelling spend in Housing to Dell
  contract
• Internal Profile
• First project to achieve hard savings from
  process re-engineering, now model for eGovernment

• Efficiencies
• Streamlined procure to pay process
• Electronic transmission
• Staff time reduced from 35 hours to
• 15 hours per transaction
• Management Information
• Correct coding and classification of
• spend
• Reporting relevels of compliance
• Maverick and unusual spend chased up
• Supplier pricing by item or service for
• Negotiation
• Financial Control
• Up front ordering and authorisation now
• inherent in the procure to pay process
• Bottom Line Savings

• Efficiencies
• Implementation of Oracle iProcurement
• Enhancement of existing system for
• electronic processes
• Business process re-engineering
• Management Information
• Configuration of Oracle iProcurement to
• Control coding input
• Spend Analysis and defined reports
• Catalogue control and review by
• Procurement
• Financial Control
• Business Process Re-engineering
• Bottom Line Savings

8
Key Success Factors
Spend Analysis
Sustained sponsorship

• A properly resourced review of the spend base
  will not only give visibility of some of the
  supplier issues but also will help build a real
  business case
• Spend analysis can drive the scope high volume
  areas may be good to tackle first

• Issues such as compliance to preferred contracts,
  use of system and process should be sponsored
  from the highest level
• Sponsorship from a combination of departments,
  Finance, Procurement, eGovernment and IT is
  required
• Buy in to the benefits is therefore required from
  many different levels

Use a proven project management process

• The more structured the project is the more
  chance it will succeed
• The project may lose its users and sponsors if
  there is unnecessary slippage of timetables

Change Management

• Most projects underestimate how much change
  management eProcurement involves
• Invest in communicating, training, testing and
  validating with users via as many channels as
  possible
• Constantly review and look for feedback to drive
  further developments

Success
Validate processes

• There is normally never just one process to
  purchase in a local authority, detailed
  validation with users will reap rewards at go
  live
• Involve departments and users in process design
  right from the start they must own the end
  result
• The to be process isnt the end constantly
  review and improve following go live

Focus on what the requirements are

• The requirements of the Council will drive what
  kind process and technology will work this
  needs to be assessed up front
• A structure must be put in place to support this,
  for example if the key requirement is achieving
  savings then these should be tracked and reported
  monthly

• Build a strong team
• Ensure there are experts on the team who have the
  right eProcurement skills
• Internal resource must be dedicated to the
  project at the start so as to apply day to day
  knowledge of process to the approach and lead the
  roll out at later stages