Procure-to-Pay Process Procure-to-Pay Process Enhancement Project Enhancement Project

March 15, 2006

Purchasing ServicesPurchasing Services

What’s New in Purchasing?

– New Sourcing Managers

– Contract Suppliers

– Penn Marketplace Suppliers

– Spend Analysis Initiative

– Equipment Maintenance Program

– Online Competitive Bidding

Purchasing related news and announcements are listed at: http://www.purchasing.upenn.edu/news/

New Sourcing TeamNew Sourcing Team

Jim Graham Associate Director

– Professional Services

Colleen Reardon Sourcing Manager

– Facilities & Operations

David Staskin Sourcing Manager

– Technology

Tom Cantiello Sourcing Manager

– Research

http://www.purchasing.upenn.edu/about/staff.php

Contract & Marketplace SuppliersContract & Marketplace Suppliers

Preferred contract suppliers provide the most commonly ordered products and services at “least total cost”

The Penn Marketplace provides product visibility and easy ordering from the University’s most commonly used suppliers

Supplier information is available on the web at:

http://www.purchasing.upenn.edu/buyinfo/suppliers/

Spend Analysis InitiativeSpend Analysis Initiative

A formal review of School or Center purchasing activity across all buying methods:

– Purchase Order

– Purchasing/Fleet Card

– C-Form

The business objectives include streamlining the buying process, increasing compliance with approved methods and suppliers, reducing the cost of required products and services, and reducing risk for the institution

http://www.purchasing.upenn.edu/about/spend_analysis.php

Equipment Maintenance ProgramEquipment Maintenance Program An innovative alternative to traditional "Original

Equipment Maintenance (OEM)" annual equipment maintenance agreements

Offers a significant cost savings opportunity to departments without negatively affecting the service provider or the quality and timeliness of equipment repair and service.

A wide range of equipment is eligible under this program, including research, technology, office, facilities and operations, and security related equipment (excluding copiers)

Equipment can be added or deleted from this equipment service program as needed throughout the fiscal year.

http://www.purchasing.upenn.edu/buyinfo/emp.php

Online Competitive BiddingOnline Competitive Bidding

eBay in reverse – goal is to drive down the cost of products and services

Reverse auction is an online competitive bidding tool that creates competitive pricing pressure between bidders

Utilizes traditional supplier selection process, RFP requirements, and supplier bid evaluation

Bidding tool can be used for most product and service requirements

http://www.purchasing.upenn.edu/about/bidding.php

Receive & ProcessInvoices

Receive Goods

Pay Supplier &

Finalize Transaction

ProactivelySource

Goods & Services

Monitor SupplierPerformance

Procure-to-Pay Process OverviewProcure-to-Pay Process Overview

An Effective and Efficient Process Requires a Great Deal of An Effective and Efficient Process Requires a Great Deal of Coordination Between Suppliers, Purchasing, Schools/Centers and Coordination Between Suppliers, Purchasing, Schools/Centers and

Accounts PayableAccounts Payable

Order Goods& Services

Supplier

Procure-to-Pay Process Overview-VolumesProcure-to-Pay Process Overview-Volumes

FY05 – Monthly Averages21,700 PO Invoices

6,800 C Forms

1,700 Requisitioners

900 PO Managers

15 APReps

Efficient and Timely Processing of These Transaction Volumes Requires Teamwork and Full Compliance with Process Steps and Policies

Our Business ProblemOur Business ProblemSuppliers Are Not Paid Within Terms Suppliers Are Not Paid Within Terms

FY 2006 YTD July – JanNon-EDI PO Invoice Payment – Supplier Terms 30 Days

AgingInvoice Count

% of Total

Invoice Dollars

% of Total

Total 91,882 100.00% $302,379,178 100.00%

30 Days or Less 55,124 60.00% $116,821,973 38.64%

31 to 60 Days 25,794 28.07% $121,821,809 40.29%

61 to 90 Days 5,282 5.75% $41,344,833 13.67%

Over 90 Days 5,682 6.18% $22,390,563 7.40%

YTD approximately 40% PO PO invoices or were not paid within supplier terms 88% of PO invoices were paid within 60 days

Process ExceptionsProcess Exceptions

Our initial review has identified these key reasons for late payments:– PO Invoice Holds – PO Invoices Not Received in AP– PO’s Created After Invoices Are Received– PO Invoice Rejections – Use of C Forms Versus PO’s

Process Exception Statistics Process Exception Statistics

Statistics for February 2006: – 911 (42%) PO invoices on hold greater than 30 days – 2,848 or 21% of total PO invoices processed not were not

received and entered in BEN Financials within 30 days of the supplier invoice date

– 2,222 or 16% of total PO invoices processed where PO’s were approved after the invoices were received

– 950 PO Invoice Rejections – C Forms still represent approximately 30% of transactions

processed in AP

Process Improvement Goals & ActionsProcess Improvement Goals & Actions Develop baseline measurements for process exceptions:

– Invoice Matching Holds on hold for more than 30 days– PO Invoices not entered into BEN Financials within 30 days of the

supplier invoice date– PO’s created or approved after the supplier invoice date

Work with Schools/Centers to identify Buyers with significant exceptions and work with them to reduce the exceptions

Partner with 2 to 3 Schools or Centers to perform an end-to-end P2P process review– Communicate lessons learned to all schools and centers

Continue to develop measurements for invoice rejections and C forms

Communicate progress on improvement metrics to Schools, Centers and Executive Management

Process Improvement Goals & ActionsProcess Improvement Goals & Actions Process Improvement Goals

– Invoice Matching Holds on hold for more than 30 days Clear all holds >30 days by June 1, 2006

– PO Invoices not entered into BEN Financials within 30 days of the supplier invoice date

Reduce Avg. Monthly FY05 Exceptions by 50% with June 2006 PO invoices– PO’s created or approved after the supplier invoice date

Reduce Avg. Monthly FY05 Exceptions by 50% with June 2006 PO invoices Schools/Centers

– Run detail reports for their Org codes and identify PO Managers with significant exceptions

– Work with PO Managers to reduce exceptions Communicate

– Supplier or purchasing issues– AP processing issues– Other business issues causing exceptions