PROCUREMENT ANALYSIS PROJECT Current Situation Analysis November 30, 2000

1. PROCUREMENT ANALYSIS PROJECT Current Situation Analysis November 30, 2000 Advanced Data Concepts LLC

2. Agenda • Project History • Solicitation Process • Deliverable One • Common Themes and Important Findings • Best Practice - No change Recommended • Best Practice - Improvement Recommended • Areas Requiring Change/Benefits • Overview of Deliverables II & III

3. Deliverable One State of Wisconsin Management Team A D C S E R V I C E S A D C S E R V I C E S Current Situation Analysis • Data Collection • Interviews • 130 staff • 4 vendors • Maps • Process • Systems • Validate • Best Practices State Agencies and UW Campuses

4. Common Themes & Important Findings • Purchasing Process • The creation, routing and approval of requisitions and purchase orders is largely a manual process • The mix of manual and automated purchasing and financial systems result in redundant processes and non-value added tasks • Multiple levels of approval add time and complexity to informal purchasing process • Lack of standardization and consolidation of commodities is costing the State money

5. Common Themes & Important Findings • Data Management • WisMart currently does not adequately support the procurement and related functions • Lack of standard commodity coding system inhibits accurate reporting of purchases • No Data Warehouse to capture purchasing spend data • Professional Development • Procurement staff are not in a continuous improvement program • Cross-training does not exist

6. Six Purchasing Systems: PurchasePlus TIPs Rapids Proteus WisMart PeopleSoft SixAccounting Systems: FARs EAPS FOS FMS PeopleSoft WisMart Common Themes & Important Findings Existing Automated Systems

7. Common Themes & Important Findings

8. Common Themes & Important Findings

9. Common Themes & Important FindingsBEST PRACTICES SUMMARY

10. Best Practice - No Change Recommended • Organization of State Procurement • Best Practice is a combination of centralized and decentralized models • Dollar Thresholds • Best Practice is to delegate low volume purchases to the end-user • P-Card • Best Practice is to use P-cards • Vendor Payment • Best Practice is instituting a prompt payment act

11. Best Practice - Improvement Recommended • Informal & Formal Bid • Leveraging Purchasing Volumes • Procurement Audits • VendorNet • Minority Business Program

12. Best Practice - Improvement Recommended • Informal and Formal Bid • Best Practices: • conduct an informal bid within one to five days • use formal bid for high dollar, high volume purchases • automated workflow • one approval per transaction • Multiple approvals negate the benefit of informal purchases and slows the formal process • State should consider: • Reducing the number of approvals per transaction

13. Best Practice - Improvement Recommended • Leveraging Purchasing Volumes • Best Practice is to use statewide contracts and intergovernmental procurements • SBOP has no data on how often or how many of the municipalities and school districts use statewide contracts • State should consider: • Use cross functional teams to increase participation in statewide contracts • Capturing the volume from other municipalities and school districts for statewide contracts

14. Best Practice - Improvement Recommended • Procurement Audits • Best practice suggests the elimination of all tasks that are not core competencies • Audits are not core competencies nor value added services • State should consider: • Outsourcing • Spot checks • Roundtables or procurement groups

15. Best Practice - Improvement Recommended • VendorNet • Best Practice is to have an automated bidders list & electronic notification • State’s official bidder’s list - 1,600+ vendors • Non-VendorNet vendors routinely receive bid notification • State should consider: • free registration • fee for automated services (may want to lower to under a $100) • Charge more for multiple commodity codes & out-of-state vendors

16. Best Practices include: formal policy support from highest level program coordinator performance ratings of purchasing staff targeted solicitations training monthly and annual reports State should consider: holding all procurement staff accountable for reaching a 5% goal innovative programs, such as: Identify the number of solicitations to MBEs by dollar volume. Target Market Program. Bidding is limited to certified MBEs. Best Practice - Improvement Recommended Minority Business Program

17. Areas Requiring Change/Benefits of Change • Paper or standalone purchasing systems • Commodity Codes • Standardization and Consolidation • Move Procurement from an ordering function to a strategic asset function

18. Areas Requiring Change/Benefits of ChangePaper or standalone purchasing systems • Best practices: • Automate purchase requisition to end user • Automated Workflow • One approval signature for requisition and purchase order • A more synergistic approach would offer operational efficiencies and cost savings • Current Situation • Six independent purchasing systems • Existing systems environment include mainframe, client-server and web-based • Database environment is just as diverse, which includes DB2, IMS, VSAM, Oracle and SQLServer

19. Areas Requiring Change/Benefits of ChangePaper or standalone purchasing systems • Problems created by current situation • Significant re-keying of information to various systems • Time consuming manual routing of documents to multiple layers of management staff • Minimal data integration and standardization across platforms, systems and databases • Increased staffing requirements due to maintenance and support of multiple platforms, systems and databases.

20. Change Automation of purchasing function Benefit Real time procurement information to all system users Manual requisition budget checking eliminated Elimination of duplicative data entry Reduction in transaction process time Areas Requiring Change/Benefits of ChangePaper or standalone purchasing systems

21. Change Standardization of platforms, systems and databases Benefit Reduction of cost of system maintenance Seamless integration of business & system processes is key to E-procurement initiatives Standardized data management with decentralized stewardship facilitates accurate reporting Areas Requiring Change/Benefits of ChangePaper or standalone purchasing systems

22. Areas Requiring Change/Benefits of ChangeCommodity Codes • Best Practice: • A single product classification system to provide a uniform view of the State’s spend data • Helps to identify true volumes of commodities allowing for vendor volume discount • Current Situation • State uses two commodity code schemes • Maintenance is handled by all agencies • Problems created by current situation • The state cannot generate enterprise-wide reports on its purchases and their cost • SBOP is unable to comply with statutory requirements for managing and reporting purchases • Lack of information inhibits agencies’ ability to manage procurement function

23. Areas Requiring Change/Benefits of ChangeCommodity Codes • Benefits of Change • Allow SBOP to create required reports using accurate data • Improve agencies’ ability to manage purchases and budgets • Facilitate cooperative purchasing efforts across agencies and other municipalities

24. Areas Requiring Change/Benefits of ChangeStandardization and Consolidation • Best Practice: • Develop Standardization and Consolidation Program • Establish a standard quality for needed items • Leverage economies of scale (large volume for lower cost) • Fewer items to service • Increased purchasing efficiency (fewer orders to place) • Position State to begin e-commerce and strategic sourcing programs

25. Areas Requiring Change/Benefits of ChangeStandardization and Consolidation • Current Situation • Inconsistent use of standards committees • No clearly defined goals for successful procurement • Lower quantities of many items • Inability to identify commodities purchased • Problems created by current situation • Cost savings missed • statewide contracts provide a laundry list of agencies needs instead of a consolidated standards list • Agencies failing to participate in statewide contracts that have consolidated purchases • Spend data not reliable

26. Areas Requiring Change/Benefits of ChangeStandardization and Consolidation • Benefits of Change • Reduce cost of goods by obtaining best pricing on high volume items • Positions agencies to receive “preferred customer” status from vendors • Simplify the preparation of bid documents • Simplify inventory and storeroom management • Facilitate the use of strategic sourcing methodologies

27. Areas Requiring Change/Benefits of ChangeStrategic Asset Function • Best Practice • Move Purchasing from an ordering function to a strategic asset function • Current Situation • Emphasis on processing transactions rather than improving processes • No accurate spend data • Problems Created by Current Situation • Unreliable historic spend data • Management strategies cannot be developed • Value added purchasing techniques cannot be planned • Discounts and preferred pricing cannot be negotiated • Vendor performance cannot be monitored without performance measurement requirements

28. Areas Requiring Change/Benefits of ChangeStrategic Asset Function • Change: • Standardize on a commodity code • All bidders should reside on VendorNet • Maintain one vendor table • Automate purchasing reporting activity • Increase use of the Standards Committees • Improve the mission of the Standards Committees • Use cross-functional teams • Develop measurable performance standards for all contracts • Implement a training program for SBOP and agency procurement staff • Automate all manual purchasing activity • Initiate e-procurement solutions

29. Areas Requiring Change/Benefits of Change Strategic Asset Function • Benefits of Strategic Asset Purchasing • Provides accurate information for management and taxpayers • reduces costs • obtains discounts or rebates • meets end users quality requirements • meets end users delivery requirements • insures procurement process legality and integrity • minimizes delays and paperwork

30. Overview of Deliverables II & III

31. Approach State of Wisconsin Management Team A D C S E R V I C E S A D C S E R V I C E S Desired Future Situation Model Detailed/Global Recommend. • Detailed Requirements • Data Schema • Vendor Management • Impact • Cost • Implementation time • Politics • Reengineered Business Processes • Performance Metrics • Data Model • Vendor Analysis State Agencies and UW Campuses

32. Process Recommendations – Sample Format Conduct Process Reengineering that: • Utilizes cross-functional teams comprised of end-users, buyers, procurement support personnel and management • Finalizes a new “To-Be” process design, which streamlines non-value added tasks • Facilitates utilization of Internet based Purchasing solutions • Calibrates appropriate authority levels • Maximizes efficiency and serves the end-user • Facilitates a refocusing of time to strategic purchasing activities • Purpose • A reengineering team will validate “As-Is” process maps and work to refine the “To-Be” process maps which identify the steps that should be streamlined, eliminated, reorganized, or reallocated to achieve maximum performance improvement. This new process design will be coordinated with the introduction of internet based enabling technology that will allow CPS to utilize automated controls and supplier catalogs when possible to replace outdated inefficient manual, paper based procedures. • Approach • Create cross-functional teams comprised of end-users, buyers, procurement support personnel and management • Run workshops to create CPS ownership for the “As- Is” and “To-Be” process • Agree the most effective use of internet based technology and where changes in organizational structure can be utilized to streamline or eliminate certain manual tasks • Develop a risk management strategy • Determine where certain forms or procedures can be standardized to attain maximum efficiency • Test the implementation of the streamlined process and refine as necessary Sample Template • Benefits • Quicker response time to all aspects of the requisition to payment process • Elimination of low or non-value added tasks • Increase in efficiency of CPS projects • Improved supplier communication and satisfaction • Reduction in overall processing time delivers significant process savings • Improved vendor qualification and vendor management process • Improved electronic tracking of procurement transactions throughout the process • Facilitates better assessment of supplier performance • Frees up time of buyers to focus on large spend items

33. Question & Answer Session