Presented by Procurement for the FY 2015 Budget Recommendation April 2, 2014

Project Approved by the Board of Supervisors in June 2014

SAP-ARIBA AUTOMATION

PROJECT RECOMMENDATION

PROJECT OVERVIEW

The term eProcurement means conducting all or some of the procurement functions over the internet; it implies that point, click, buy, and ship internet technology is replacing paper-based procurement and supply management business processes.

Increasing Transparency;

Achieving Value and Promoting Competition;

Expanding the Supplier Base;

Maintaining Financial Controls and Measuring Performance;

Promoting Efficiency in Workflow and Approval Authority.

BACKGROUND

1. County acquired SAP as the Enterprise Resource Planning (ERP) system and went live in July 2003 by implementing the Financial Management (FM) and Materials Management (MM) modules;

2. The plan was to subsequently implement the Supplier Resource Management (SRM) Module to automate the entire procurement process. Procurement did not opt to implement SRM for business and technical reasons;

3. Valley Medical Center (VMC) acquired McKesson’s Pathway Materials Management (PMM) Module as an ERP system and went live in July 2003;

4. VMC continued to use their financial system and selectively utilized SAP for certain purchasing and accounting functions.

PROBLEM

1. No interface between the two ERP systems for both the purchasing/contracting and accounting functions;

2. Significant overspend on established term contracts;

3. Operational inefficiencies due to manual processes;

4. Loss of both hard and soft cost savings;

5. Non-compliance of laws, policies and procedures;

6. Lack of control of our Object 2 – Supplies & Services expenditures.

COLLABORATIVE

SOLUTION

1. Initiated Discussions with SAP for solutions – September 2013;

Procurement, Information Services Department, Finance, Health and Hospital System (HHS) Finance, HHS Facilities, and HHS Product Management

2. Initiated SAP/Ariba Purchasing & Contracting Workflow Project and invited stakeholders from all departments – October 2013;

3. 300 County staff touching various aspects of the purchasing and payment functions attended the sessions to provide their input;

4. SAP provided a procure to pay end-to-end solution to address the County’s purchasing/contracting and accounts payable functions.

STAKEHOLDER CONSENSUS

ENDORSEMENT FROM

1. Procurement staff;

2. Finance Controller-Treasurer’s Office, & Information Services Department

3. HHS – Contracts, Finance and Facilities;

4. Law & Justice – Office of the Sheriff, Department of Corrections, Pretrial, Probation;

5. Health & Human Services – Drug and Alcohol Department, Public Health, Mental Health, Social Services Agency, Probation;

6. Roads, Parks, Facilities and Fleet.

PROJECT DETAILS

1. Recommendation for a five year agreement for a Procure-to-Pay solution in the cloud with an option to continue (similar to SAP and Office 365);

2. Received proposal for software/implementation services;

3. Project cost exclusive of internal resources is $30 million;

4. eProcurement Automation team has successfully negotiated a fixed price cost of 49% of proposal cost;

5. County internal resources projected at $14 million;

LEARN ABOUT BENEFITS

1. Automation of Procure-to-Pay Functions in the Cloud;

2. Amazon Like Shopping Experience – Gain Countywide Efficiency in Purchasing Catalog/Non-Catalog Items;

3. Truly Automate the Service Agreement & Board Contract Process and Reduce Cycle-Time Countywide;

4. Streamline via Electronic Sourcing to Contract Management;

5. Streamline the Payment Process via E-Invoicing & Matching;

6. Reduce Invoice Processing Cycle-Time.

LEARN ABOUT BENEFITS

CONT.

7. Ability to Differentiate Between Contracted & Non-Contracted Items;

8. Ability to Conduct Limited Sourcing for Small Dollar Purchases;

9. Supplier Information & Performance Measurements;

10. Spend Visibility, Reporting & Transparency.

SAVINGS

1. Operational Efficiencies via Catalog Ordering in All Departments;

2. Compliance of Bidding/Sourcing Increase in Cost Savings;

3. Elimination of Shadow Systems such as SAP, PMM and Excel Spreadsheets in the Long Term;

4. Efficiency w/ Service Agreement & Board Contract Processing Eliminating Retroactive Agreements;

5. Paying Negotiated Contract Pricing Consistently;

6. Depts. Should See Reduction in Object 2 (Supplies & Services Budget)

AS IS – MANUAL

PROCESS

Needs Assessment

Acquisition Planning

Sourcing & Contract

Development

Administration & Contract

ManagementReceiving Invoicing Payment

Overall Procurement & Contracting Process

Each Segment is a Manual & Paper Intensive Process with Ad-hoc Workflow Processes

AS IS – MANUAL

PROCESS

Contracting Process – Manual At Each Touch Point Between All Parties Involved

Demand & Prioritization

Define Need & Business

Case

Evaluate Proposals

Rollout & Embed

Service Delivery

Performance

Options Appraisal

Plan DesignDevelop Response

Transition Operate Exit

Procurement Planning

Solicitation Strategy &

Preparation

Solicitation Execution

Implementation & Transition

Contract & Supplier

Management

Renewal/Termination

AS IS – DISPARATE SYSTEMS

(SAP & PMM)

Master/Transaction Data Material Numbers –

8,000 Vendors – 30,000 Contracts – 650 Requisitions & POs –

16,000 Invoice Payments –

190,626

Master/Transaction Data Material Numbers –

48,500 Vendors – 5,000 Contracts – 235 Requisitions & POs –

11,000 Invoice Payments

Processes Contracts CR. POs, Std. POs,

PPOs Inventory Invoicing/Payments

Processes Contracts CR. POs, Std. POs,

PPOs Inventory Invoicing/Payments

Interfaces1. Daily Invoice File2. Daily Payment File

GPO - ContractsBids Posted 250

Insurance

PMM

A FTER – P ROCURE T O PAY PROCESS IN

AribaP2P

System generates POs from approved reqs

Central and/or end user receiving is performed –sign off on services performed

Suppliers create electronic invoices which are routed via the Ariba Network

Approvals are routed to managers and/or purchasing agents based on business rules

End-users create requisitions for goods & services from electronic catalogs

User

Goods are shipped / Services are performed by the supplier

POs routed to suppliers via the Ariba Network

Supplier

Supplier

Supplier

Supplier

Supplier

Supplier

Portal

XML

Fax

EDI

AS2

CSV

Email

Suppliers send back acknowledgements and/or Advanced Ship Notices

2, 3, and/or 4-way invoice matching and reconciliation is done using POs, receipts, and contracts - payment is approved by Accounts Payable dept

OK-To-Pay

OK-To-Pay sent to ERP and Suppliers are paid via ERP Accounts Payable system

End User

Payment

User User

SIPM

Sourcing

Contracts

Catalogs

Create contract using sourcing terms from sourcing

UserUser

Pre-filled info in tender

Capture profile from tender

After – Procure to Pay Process in the CloudConceptual Diagram