Leveraging Purchasing Technologies and Strategic Initiatives to Produce ROI

1. Leveraging Purchasing Technologies and Strategic Initiatives to Produce ROI The Next Level Conference March 3, 2003

2. Presentation Agenda • Purchasing Overview • Business Objectives • Purchasing Technologies • Strategic Purchasing Initiatives • Key Accomplishments • Critical Success Factors • Contact Information • Conclusion

3. Purchasing Overview • Decentralized purchasing environment with purchase requisition creation delegated to the point-of-demand • Over 1,700 purchasing system users in 12 schools and 20 business centers • Over 1,400 MasterCard P-Card cardholders • Purchase order approval for transactions <$5,000 delegated to authorized purchasing system users in the schools and centers • Fiscal year 2002 purchase activity: • 155,000 purchase transactions for $505M • 105,000 P-Card transactions for $20M • Purchasing staff consists of 10 professional and 2 non-professional positions

4. Business Objectives • Provide administrative excellence in support of Penn’s educational and research mission • Make purchasing easy for faculty and staff • Reduce time and effort related to purchase order creation and related activities • Provide easy access to supplier content for most commonly ordered products • Enhance the effectiveness of the purchasing organization • Increase purchasing activity from “preferred contract suppliers” • Consolidate supplier database • Reduce maverick buying • Identify new cost savings opportunities

5. Oracle Purchasing System (BEN Buys) • Implemented Oracle Financials (Purchasing, Payables & General Ledger) in July 1996 • Introduced Oracle’s iProcurementelectronic requisition to the campus community in January 2002 as part of upgrade to Oracle Financials Release 11i • Provides integration to the Penn Marketplace • Delegates item shopping and requisition creation to the point-of-demand • Enables multi-supplier ordering using a single electronic requisition • Oracle workflow used for requisition routing, encumbrance, regulatory requirements, and purchase order approval

6. The Penn Marketplace • Penn’s private online supplier exchange for most commonly ordered products and services • Catalog content hosting and management services provided by Global Exchange Services (GXS) • SciQuest provided additional content services to GXS/Penn to cleanse, enrich, categorize, & format a number of scientific supplier catalogs utilized within the Penn Marketplace • Contains over 550,000 products from 31 suppliers with Penn specific contract pricing • Supports strategic purchasing initiatives by making it easy to order from preferred contract suppliers • Consistent content presentation across commodities and suppliers • Robust search tools enables customers to quickly and easily find desired products and services

7. Related Purchasing Technologies • Electronic Data Interchange (EDI) services provided by Global Exchange Services • Outbound purchase & change orders • Inbound supplier invoices • Integrated document imaging system from 170 Systems • EDI invoices are imaging electronically • Paper invoices are imaged upon receipt in Accounts Payable • Procuri, Inc provides an online bidding tool to enable reverse auction events • Used for competitive bidding of Penn and local cooperative buying group requirements • Electronic payment of supplier invoices using Electronic Funds Transfer (EFT) to be implemented in 2003

8. Strategic Purchasing Initiatives • Supply Chain Management • Focus on marketing acceptance of strategic suppliers and new pricing agreements • Expand use of long term and sole source supplier contracts whenever possible • Recruit suppliers and manufacturers for the Penn Marketplace • Reduce supplier database and multiple sources for products • Streamline distribution channels to maximize University buying power • Enforce financial policies, use of approved buying tools and suppliers to reduce maverick buying

9. Strategic Purchasing Initiatives (cont) • Purchasing Cost Savings • Formal cost savings program launched in July 1996 with implementation of Oracle Financials • $64.8 Million in documented hard dollar product and service cost savings since 7/96 • $4.7 Million in negotiated savings for Penn Marketplace supplier recruitment • Cooperative Buying • Participation in Philadelphia Area Collegiate Cooperative (PACC) created for regional pricing agreements • E & I contract benchmarking initiative to take advantage of E & I competitively bid agreements

10. Strategic Purchasing Initiatives (cont) • Strategic Marketing • Promote benefits of business initiatives and key supplier relationships to faculty and staff • Promote value of and create support for new strategic purchasing initiatives • Provide internal marketing opportunities for strategic suppliers and manufacturers that support Penn’s purchasing and technology initiatives • New Supplier Promotion Module hosted by SciQuest and integrated into Penn’s BEN Buys purchasing system to be launched in March 2003 • Generate awareness of purchasing department accomplishments throughout all levels of the institution

11. Key Accomplishments • Campus wide use of a fully integrated paperless electronic purchase-to-pay process • Reduced order creation and approval cycle resulting in 92% of all orders created, approved and transmitted to suppliers in less than 1 hour • 550,000 items in the Penn Marketplace exceeds first year project goal of 400,000 • 53% of all purchase orders created in 2002 were issued to the 31 participating marketplace suppliers exceeding first year project goal of 40% • Deactivation of 220 suppliers in 2002 resulted in increased business opportunity for preferred suppliers • Penn Marketplace suppliers realized a 16 to 42% increase in business during 2002 • $64.8M in documented hard dollar cost savings • 45% of supplier invoices were processed via EDI during 2002

12. Critical Success Factors • Consistent and on-going senior management support for business initiatives and technology projects • Collaboration between central administration and Schools and Centers • Faculty and staff involvement in focus groups, commodity teams, and IT project teams • Strong internal IT support for the development, implementation and on-going maintenance of new purchasing technologies • Staff buy-in to changing role of purchasing • Training of faculty and staff on new technologies • Internal marketing of the value and benefits of new technology investments and purchasing initiatives • Support from key strategic suppliers

13. Contact Information • Ralph Maier Associate Director, Purchasing Services E-Mail: maierr@pobox.upenn.edu • Vira Homick eProcurement Manager, Purchasing Services E-Mail: homickv@pobox.upenn.edu • Penn Purchasing Services www.purchasing.upenn.edu • eProcurement Project Overview www.naeb.org/E_Procurement_Stories/Purchasing_Made_Easy.htm

14. Conclusion Questions?