e-Procurement in Scotland

Steve Murray April 2005

www.eprocurementscotland.com

steve.murray@scotland.gsi.gov.uk

• 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.

Procurement Issues2000

• 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

Approach to e-Procurement in Scotland

• 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)

Scope/Targets

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

• 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.

Service Includes:-

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)…

• A big IT project

• A marketplace

What e-Procurement Scotl@nd is NOT:-

• Changing the way we do business

• Improving services

• Obtaining and Adding Value

It is about :-

• Keeping it simple and easyKeeping it simple and easy

• How we presently do something ………the How we presently do something ………the “Process”“Process”

• How we improve – step by stepHow we improve – step by step– How to simplify and make more robust solutions How to simplify and make more robust solutions

…. “Business Process Re-engineering”…. “Business Process Re-engineering”

• How we overcome the ‘we’ve always done it How we overcome the ‘we’ve always done it that way’ ….. Change Managementthat way’ ….. Change Management

Making Progress

• 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

Expected Benefits

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

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

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

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

Example

The cost of processing a €40 million The cost of processing a €40 million subsidy paymentsubsidy payment

is the same as processing a paper invoice is the same as processing a paper invoice and payment for the hire of a meeting and payment for the hire of a meeting

room and coffees at €85...room and coffees at €85...

It takes the same time, resource and It takes the same time, resource and efforteffort

Payment Costs

Payments

• 10% of Expenditure “Transactional 10% of Expenditure “Transactional Purchasing” which previously accounted for Purchasing” which previously accounted for 95% of paper invoices...95% of paper invoices...– Stationery, Business Travel, Catering, Temporary Stationery, Business Travel, Catering, Temporary

staffstaff

• 90% of expenditure accounted for 5% of paper 90% of expenditure accounted for 5% of paper invoices...invoices...– Policy Initiatives, Fisheries Protection vessel etcPolicy Initiatives, Fisheries Protection vessel etc

The Scottish Public Sector receive “millions” of paper The Scottish Public Sector receive “millions” of paper invoices:invoices:

• Local Authorities 20,000,000 invoices per annumLocal Authorities 20,000,000 invoices per annum

• Health 4,000,000 invoices per annumHealth 4,000,000 invoices per annum

• Central Govt 2,000,000 invoices per annumCentral Govt 2,000,000 invoices per annum

………………..these in the main are processed manually..these in the main are processed manually

Estimated Cost of processing a paper invoice:-

€15

Estimated cost of automated / integrated p-card within eProcurement Solution

€0.16

Approval

Approval

33% administrative cost PURCHASE TO 66% administrativeordering PAY PROCESS cost invoicing

Place Purchase Orders

Suppliers

Receive PaperInvoices

AccountsPayable

Old way…..

Business Travel and Electronic Consolidated Invoice

Approval

Place Purchase Orders

Supplier Consolidated Invoice1 x Electronic File to be checked and loadedonto Finance System

AccountsPayable

New way

For…business travel - eliminated For…business travel - eliminated 18,683 invoices, saving over 18,683 invoices, saving over

€200,000 per annum€200,000 per annum

For… temporary staff - eliminated For… temporary staff - eliminated 14,560 invoices, saving over 14,560 invoices, saving over

€160,000€160,000 per annumper annum

e.g.

Implementation in one organisation:-

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)

• 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!!)

Issues 2005

In Summary…

e-Procurement benefits are about ‘change’….

Process change (the full purchase to pay process)Culture changeUsing best tools and resources available… …..and making them work together

Continuous improvement – not big bang!

End