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Canadian Public Procurement Council

Empowering Ontario’s Public Institutions to do Business Empowering Ontario’s Public Institutions to do Business BETTERBETTER

Forum 2007Calgary, Alberta

Stephen Whittaker, Vice President Operations

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Today’s Agenda

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The Vision

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The Vision“Contributing to the highest standard of educational services through supply chain excellence”

The Opportunity$100 million savings available to improve front line service delivery*

* Annually by 2009/10 assuming the active commitment of 25 institutions to group purchasing and the e-marketplace. Achieved through price reductions ($50M) and process efficiencies ($50M).

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Background

OntarioBuys – Encourage adoption of leading iSCM practices throughout broader public sector - Health Care and Education

OECM is a not-for-profit corporation created by the Education Sector and supported financially through OntarioBuys - Ministry of Finance

OECM Focus:

A single electronic service portal to manage common purchasing for Ontario Publicly Supported Educational Institutions (PSEI)

A single electronic service portal to manage common purchasing for Ontario Publicly Supported Educational Institutions (PSEI)

Strategic sourcing is an organized and collaborative approach to leveraging spend within and

across institutions

Strategic sourcing is an organized and collaborative approach to leveraging spend within and

across institutions

e-Marketplace Strategic Sourcing

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OECM Vision … transformation and professional excellence

OECM Marketplace• Ariba Modules

• Registered Vendors

• Contracted Suppliers

• Catalogues

• Data Warehouse

• Professional Sourcing Services

OECM Marketplace• Ariba Modules

• Registered Vendors

• Contracted Suppliers

• Catalogues

• Data Warehouse

• Professional Sourcing Services

PSEI’s:Change leadership

Select product sets

Share spend and contract data

Lead configuration and ERP integration

Manage Ariba licensed users

Drive supplier participation

Adapt procurement and payment processes

Manage proprietary suppliers and catalogue content

Participate in OECM sourcing events

Manage compliance and utilization

OECM:Contract and manage CGI/Ariba

Secure funding and PSEI participation

Develop configuration and ERP integration processes

Source OECM shared suppliers

Co-source PSEI proprietary deals

Manage OECM shared relationships and catalogues

Provide training

Assist with change management

Consult to supplier relationship management

Supplier ombudsman

Provide professional Sourcing servicesCGI:Source and manage Ariba

Create processes and

Provide technical resources for configuration and ERP integration

Load PSEI and OECM catalogues

Host and manage marketplace applications and systems

Run helpdesk

Co-manage costs

Collect transaction fees

Continuous improvement

Stakeholder Roles

OECM Guiding Principles

Objectives

Increase service quality

Re-invest savings in education, research

More time for education, research

Professionalism in Sourcing and Procurement

Minimize manual processes

Increase visibility and control

Strengthen supplier relationships

Reduce risk

Key Performance Indicators

1.User satisfaction

2.Measurable benefits

3.Visibility for Sourcing and Procurement activities

4.Actionable data

5.Increased compliance

6.Operational excellence

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Focus on business needs to accelerate acceptance

“Quality and convenience”

“Support the business of education”

“Visibility and control” “Predictable

results”

Source-to-Pay Technology

&

Strategic Sourcing

“Shop

pers”

Procurement

Fina

nce

Managem

ent

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Project Status

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Where is OECM Today?

OECM concept analysis completed in 2006 resulting in current phase to identify solution and prepare business and funding case

Business model presented to School Boards, Colleges and Universities as well as suppliers with positive response

E-marketplace solution and service provider identified

Business model being finalized and funding application under final preparation

Commitment from early adopters reaffirmed

Presently finalizing: Outsource Services Agreement with CGI

Funding Agreement with the Ministry of Finance

Institutional Services Agreement, and

The Supplier Participation Agreement

Wave 1 institutions planned to go live in 1st half of 2008

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OECM as a Business

Not-for-profit corporation – Established August 2006

Board of Directors comprised of representatives from nine participating institutions

Permanent management team and project management office in Mississauga, Ontario

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Value Proposition

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What’s in it for Members?

Streamlined purchasing makes complex processes more user-friendly, less costly

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Time is MoneyTask and Effort Comparison, Traditional Process vs. E-Procurement Process

Sourcing OrderingSupplierActivity Receiving Invoicing FIS/Admin Filing E-Procurement

7 Steps20 Minutes$12

Traditional Process29 Steps3 Hours, 28 Minutes$129

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What’s in it for Members? (cont’d)

Empowers end-users while improving control, accountability, transparency

Better buying experience for teachers, administrators, researchers

Single point of access to thousands of pre-qualified suppliers

On-line catalogues, maintained by suppliers, are always up-to-date

Automated approval workflow; respects institutional policies

24/7 access for end users

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What’s in it for Members? (cont’d)

Maintain and improve existing commercial relationships

All efficiency and strategic sourcing savings remain with institution to be reinvested in front-line, core services i.e., teaching, research

Ministry of Finance investing in infrastructure and start-up costs that institutions could not bear individually

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How will OECM do this?

OECM will provide tools and services to … streamline commercial relationships between member institutions

and their suppliers

… facilitate collaboration both within the institution and across the sector towards adoption of leading spend management practices

… reduce costs by automating paper-based manual processes, increase bargaining leverage and contract compliance

… enable buyers to shift from tactical focus to strategic focus

“Data challenged” Information rich

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Traditional purchasing…a shift from tactical to strategic focus

OECM tool set

Today… Tomorrow…

Placing low value orders Strategic sourcing

Writing RFQ, RFP RFQ, RFP Collaboration tools, reusable template

Manual evaluation of bid responses Contract Compliance

Writing contracts Contract authoring tools, templates,

clause bank

Getting approvals Administer automated workflow rules

Managing supplier performance Managing paper

Full, secure, transparent audit trail Maintain audit trail

Process stewardship/monitoring Policing

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OECM Product Set – “The Tools”

Spend Visibility – Data enrichment and reporting to identify and enable center-led strategic sourcing

Sourcing (eRFx) – Standardized, streamlined processes

eProcurement “Punch-out” to supplier-hosted catalogues with member’s contract

pricing

Catalogue hosting services for small-to-medium suppliers

“Quick Quotes”

Contract Management, Compliance

Supplier Performance Management – KPI/Scorecards, Surveys

Auctions (Asset Disposal)

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How will it work?

CataloguesProprietary | OECM Shared

Requisition | PO’s

BuyersBuyers

Catalogues

Order Management

System

OECM Marketplace

Spend Management Tools

Sourcing Tools

Data Warehouse

Ariba/CGI

Professional BuyersProfessional Buyers

Catalogues

Receipt Management

Sourcing ToolsSpend

Management System

FinanceFinance

Approval Workflow

G/L Interactions& Funds Management

Audit Trail

Payment System

VendorsVendors

Self Registration

Suppliers w/CataloguesSuppliers w/Catalogues

Catalogues

& Proprietary

OECM SharedOrder

Management System

Suppliers w/o CataloguesSuppliers w/o Catalogues

Order Management

System

Browser

Browser

Transactions & EnterpriseApplication Integration

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ERP Integration Strategy

“Connectors”

GLFixed Assets

Funds Verification

etc.

GLFixed Assets

Funds Verification

etc.

Batch file transfer to/ from ERP Systems

SAP, BAS, Oracle, etc.

ERP Systems

Purchase OrderPurchase Order

ReceiptsReceipts

InvoiceInvoice

Funds CheckingFunds Checking

WorkflowWorkflow

RequisitionsRequisitions

Adaptor

Adaptor

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Strategic Sourcing & Professional Services

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An extension to the institutions’ operations or processes, providing people to support core processesFeasible that work can be performed by the PSEICannot differentiate whether services are being provided by the PSEI or the outsourcerManagement by the PSEI is on a “minute-by-minute” basis

Mission-critical to the PSEI’s ability to provide educational services for competitive advantageGenerally not feasible that the work is performed by the PSEILimited ability to “easily” replace the supplierRelationships are tightly managed

“Commodity” or lower risk relationshipsSelected through a structured sourcing event for an on-going relationshipSome on-going supplier management is required

“One-off” or lower risk purchases Generally lots of competition in the marketplaceSupplier not subject to management

Order placementTrackingReceipt/3-way matrix matching

“Source-To-Pay” Professional ServicesIn “services” organizations, such as Education and the Public Service, Strategic Sourcing is emerging from Procurement departments as a “value-added” professional discipline.

Outsourcing

Strategic Suppliers

Preferred Suppliers

Vendors

Transaction ProcessingP

urc

hasi

ng

Str

ate

gic

Pro

cure

ment

Str

ate

gic

Sourc

ing

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Strategic Sourcing Professional Services Mission

1. To generate measurable business value by creating an accessible “centre-led” professional services organization in order to maximize financial and non-financial benefits from third party relationships.

2. To establish a “trusted advisor” relationship with PSEI’s, based on transparency and trust by consistently working collaboratively to deliver measurable results.

3. To support, train and assist PSEI’s in strategy to “up-skill” internal Sourcing and Procurement resources.

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Strategic Sourcing service offeringsProposed Service Offerings

OECM Shared Contracts Accessible contracts for goods and services that offer lowest total cost of ownership, meet quality expectations and minimize risk

Strategic Sourcing Projects

Customized sourcing initiatives (cross PSEI and/or PSEI specific)

Supplier performance management

Contract and cost compliance audit

Supplier on-boarding

Intellectual Property and Sector-specific Research

Implementation support for policy and regulatory changes

Examples of Policies and standards

OECM developed Sourcing and category-specific templates

Industry analyst research

Executive presentations

Strategic Sourcing “Breakthrough” Services

Training

Source-to-Pay Process Improvement

Demand Management projects

Spend Diagnostic (entire or category specific G/L scrub)

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Strategic Sourcing BenefitsDetailed spend analysis found that strategic sourcing benefits for SCU institutions would be significant, approaching $100M if 25 institutions participated in 25 categories.

Current analysis completed in March 2007 (AT Kearney) has identified four categories (office supplies, janitorial supplies, computer hardware and furniture) for initial implementation.

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55

120

0

20

40

60

80

100

120

140

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Number of Categories

Pote

ntia

l Sav

ings

($M

)

Low

High 72

95

120

159

0

20

40

60

80

100

120

140

160

180

9 25

Number of Institutions

Pote

ntia

l Sav

ings

($M

)

Low

High

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Does it really work?

eVA e-Marketplace results

$120 Million in savings to date $39 Million in annual savings and cost

avoidance 1.05 Million transactions 5 million items available and 983 catalogues

on-line 33,000 vendors $10 Billion in orders 9,200 registered users Up to a 70% reduction in processing time

from Solicitation to Award Up to a 25% reduction in delivery time 171 state agencies 494 local government agencies Solution managed by CGI

Virginia Partners in Procurement group purchasing results

$158 Million in savings to date Computer Hardware 12% (price reduction) Janitorial Supplies 11% Lab Supplies 13% Office Supplies & Paper 18% Computer Software 8% Off-Road Equipment 6% Enterprise Storage Devices 15% Temporary Services 32% Uniforms 17% Hotels 31% Heavy Trucks 20% Storage Media 30% School Buses 3% Printers and Accessories 15% Maintenance, Repair, and Operating Supplies

(MRO) 13%

e-Virginia (eVA) and Virginia Partners in Procurement are government-sponsoredsupply chain shared services serving the State of Virginia.

eVA data, March 2005. All figures $CAD converted at 1.05 CAD : 1 USD

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Value Proposition for Suppliers

Market growth opportunity Single point of access to $4+ billion market

Improve competitive position Suppliers of all sizes, geographic locations can compete on a level

playing field Low entry costs for eCommerce enablement

Improve cash flow – shorter transaction cycles

Lower cost of doing business eBusiness suppliers report higher average order size Reduced order errors, returns, billing points, paper Ability to integrate with order processing/fulfillment systems

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Funding

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How will OECM be funded?

Three funding sources:

1) Ministry of Finance through OntarioBuys Start-up costs

2) Institutions Annual fee

Transaction or volume-based fee

Percentage of strategic sourcing savings

3) Suppliers Volume-based participation fee

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Project Timeline

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Key Dates CGI/Ariba selected as service provider Apr 2007

Conclude Agreements with: Q4 2007

CGI

Wave 1 Institutions (5)

Wave 1 Suppliers

Secure Government funding for Implementation Q4 2007

Wave 0 Implementation begins Q4 2007

Wave 1 Implementation begins Q1 2008

Begin planning for Wave 3 (30+ inst) Q1 2008

Wave 1 Go-live Q2 2008

Wave 2 Implementation begins (2) Q2 2008

Wave 3 Implementation begins Q3 2008

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Challenges & Mitigation

Challenges and MitigationChallenges Mitigation

Members’ lack of familiarity with new technologies

Standardized product sets and support services

Connectivity with various back-office systems, deployment models

Standardized integration offerings with key functionality residing in e-Marketplace

Member pays for customization

Change management associated with new capabilities

Staged deployment

Scarcity of experienced staff Experienced permanent executive team in place

Using consultants to assist in build-out of operations and business streams

Governance – Transition from operational, start-up focus to managing ongoing business of OECM

Strategy under development to identify and attract sector leaders and subject matter experts

Center-led operational committees staffed with member functional leaders

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Q & A