Purchasing Department

Annual Report

District Board Meeting

August 21, 2013

Table of Contents

Executive Summary................................................................................3

Cost Containment & Revenue Generation Activities.............................3

Profit and Loss Statement......................................................................4

Purchasing Savings Relative to Department Operating Cost….…………..5

E-Procurement and Spend Data.............................................................6

Procurement Organization & Staffing Levels..........................................7

“Ghost Card” and Procurement Performance Metrics……………………….8

Financial Performance Metrics.........................................................9-13

Cooperative Purchasing Network…………………………………………………….14

2013 WTCS Purchasing Survey……………………………………………………15-16

NWTC Purchasing Mission Statement …..............................................17

NWTC Involvement in Public Procurement Activities………………………17

Purchasing Division's Goals--2014 and Beyond...................................18

3

Executive Summary

The information in this report outlines the

general activities of the NWTC Purchasing

Department over the past 12 months and

details the goals we will be striving to

accomplish over the coming 12 months and

beyond. Financial reports for FY 2013 were

not fully closed out when this report was

prepared, so some of the data in this report

applying to FY 2013 is not yet finalized.

While significant progress has been made in

making the procurement process efficient, the

Purchasing Department continues to seek

additional improvements to the procurement

process by becoming more involved with

internal customers and by gaining a better

understanding of their needs; analyzing

district-wide and departmental spend data;

and recommending purchasing programs that

increase efficiency, lower costs, and meet the

needs of NWTC’s customers and taxpayers.

Cost Containment and

Revenue Generation Activities

The Purchasing Department measures the

effectiveness of its cost savings programs to

national norms and benchmarks. A Profit and

Loss (P&L) reporting system was established in

2007 to record purchase cost expenses,

savings, and revenue (income) generation

activities attained by the department. The

purpose of developing an annual Purchasing

Profit and Loss reporting system is to quantify

the value the Purchasing Department brings to

the procurement function and to measure the

cost savings and revenue generated from

procurement systems and activities.

The annual goal of the Purchasing

Department is to produce and document

sufficient cost savings and additional

revenues that significantly exceed the

department's total operating costs and

produces an acceptable ROI.

In FY 2012, the Purchasing Department

operated at a net savings (after expenses) of

$2,185,463. A total of $800,206 was realized

from competitive bidding activities, and

$1,385,257 was realized from cooperative

purchasing and revenue generating activities

such as P-Card rebates, sale of surplus

property, rebates from group purchasing

organizations, etc.

The net savings per purchasing employee

exceeded $500,000 in FY 2012. Each

purchasing position returned substantially

more in savings to the district than the cost of

the position itself.

4

Cost Savings from Competitive Bidding (Nat'l Std Calc Method):

Operational Budget: $160,041

Capital Budget: $640,165

Total Savings from Competitive Bidding: $800,206

Cost Savings from Cooperative Purchases & Negotiation:

Operational Budget: $773,360

Capital Budget: $490,020

Total Savings from Cooperative Purchases & Negotiations: $1,263,380

Rebate "Revenue" & Savings from "Other" Means:

P-Card Rebates $111,006

Revenue of Sales from Disposable Assets $13,480

Rebates from Suppliers & Cooperative Purchasing Organizations $3,981

Savings from eProcurement $95,681

"Other" Savings (ie: Owner Purchases Sales Tax Savings, Value Analysis, etc.) $135,920

Total Revenue from Rebates & "Other" Means $360,068

Net Savings Gain/Loss from WTCS Consortium Purchases:

Savings to NWTC from WTCS Purchasing Consortium Contracts: $467,363

Annual Fees Paid to the WTCS Purchasing Consortium: ($14,500)

Net Cost Savings from WTCS Purchasing Consortium: $452,863

Grand Total Savings & Revenue from All Department Operations: $2,876,517

Direct & Indirect Expenses: (Purchasing, Accts Payable, Mail, Receiving)

Salaries and Fringe $612,759

Travel, Training, Memberships $4,151

Supplies, Tools, Equipment Repairs $14,045

Software, Maintenance, Rentals, Minor Equipment: $22,216

Postage, Printing, Advertising, Telephone, & "Misc Other" $7,883

eProcurement Fees $30,000

Total Department Expenses: $691,054

Net Savings Gain/Loss from All Department Operations: $2,185,463

Northeast Wisconsin Technical College

Purchasing Department Profit & Loss Statement

2012 Fiscal Year

5

As systems developed over the years, cost savings attained relative to

the total cost to staff and operate the Purchasing, Mail, AP, &

Shipping Departments has dramatically increased.

$0

$500,000

$1,000,000

$1,500,000

$2,000,000

$2,500,000

$3,000,000

2007 2008 2009 2010 2011 2012

$477,253 $519,421 $550,522 $541,507 $604,289

$691,054 $692,218

$1,000,849

$876,977

$1,648,688 $1,649,390

$2,876,517

Purchase Savings Attained Relative to Total Purchasing, Mail, AP, & Shipping/Receiving Operation Cost

(2007 to 2012)

Dept Cost Dept Savings

6

E-Procurement and Spend Data

In fiscal 2013 the district issued 502 purchase

orders for a total value of $13.9 million dollars in

support of the district’s 33 departments. In total,

taking into account vouchers, purchase orders

and credit card transactions, approximately 40

million was spent by the college on goods and

services monitored by the Purchasing

Department in 2013.

The Purchasing Department interacts on a daily

basis with over 261 requisitioners and over 76

“department approvers” who request and

approve orders for items and services required to

carry out their department's mission.

The Purchasing Department manages the

college’s eProcurement system called

“CollegeCart” that is hosted through SciQuest and

is used by many major universities around the

country. The system creates a "spend

management" system that steers purchase

requests from all departments at the college to

preselected electronic price catalogs with

suppliers on approved state and cooperative

purchasing contracts.

NWTC WAS THE FIRST PUBLIC AGENCY IN

WISCONSIN TO IMPLEMENT AN ePROCUREMENT

SYSTEM. Since implementing in 2011, NWTC has

made numerous presentations of its system to

other agencies, including the UW system.

One of the purposes of implementing an

eProcurement system is to streamline the

ordering process for low dollar - high volume

supplies and services which are ordered

repeatedly by college departments. The

eProcurement system allows the college's

requisitioners access to over 20 online catalogs

and access to over 1.7M commonly used

contracted items.

All items in the eProcurement catalogs are on

competitively awarded contracts from State,

Federal, or other public agencies.

District staff utilize online electronic catalogs to

shop and compare prices from various suppliers

for items they wish to purchase, with proper

online approvals being obtained before an order

is electronically transmitted to the supplier over

the internet, with most orders being received by

suppliers within 24 hours.

In FY 2013, 99.8% of all purchase orders issued

were transmitted electronically, thereby

eliminating postage cost and time otherwise

spent by staff to follow-up and confirm supplier

order receipts and acknowledgements.

The district has realized a significant return on

investment (ROI) from the eProcurement system

since implementation in FY 2012. In FY 2012 the

district realized over $95,000 in administrative

cost savings from the auto sourcing feature of the

system. Savings are based on an Aberdeen

research group study that quantifies a savings of

$32 per purchase transaction that is processed by

an eProcurement system based on a defined set

of rules that do not require direct involvement by

the purchasing function. For FY 2012 and 2013,

the district has realized over $160,000 in

administrative cost savings.

7

PROCUREMENT ORGANIZATION AND STAFFING LEVELS

In 2013 the Procurement Department consisted of 4.25 FTE’s (3.25 FTE’s in Purchasing, 1.0 FTE in Accounts

Payable). In addition to purchasing activities, The NWTC Purchasing Department also handles the activities

of Fixed Asset Disposals and Sales, Public Construction Bidding, and Lease/Contract Management for the

College. These additional functions are not consistently assigned to Purchasing Departments at other

WTCS districts. For FY 2014, a transfer of 0.5 FTE was made from the Mail Department to the Purchasing

Department. The current FTE organizational chart for the Purchasing Department for FY 2014 is as follows:

President

CFO

Purchasing & Distribution Director

Shipping & Receiving

(2 FTE)

Procurement Manager

Mail Center(2 FTE)

Accounts Payable/

Purchasing(.75 FTE)

Purchasing, Leases & Systems (.75 FTE)

Purchasing, Fixed Assets & Construction

(.75 FTE)

Accounts Payable(1 FTE)

Through new development programs and systems that have made the Procurement Department more

efficient and effective, the FTE levels of the Procurement Department have remained fairly stable over the

years despite increasing purchasing workload and other responsibilities being added to the department.

0.00

0.50

1.00

1.50

2.00

2.50

3.00

3.50

2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013

FTE

NWTC Purchasing Dept. FTE Levels (2002 to 2013)

8

“GHOST CARD” AND PAYMENT MANAGEMENT SYSTEMS

The NWTC Purchasing Department is one of the few WTCS districts that implemented a “Ghost Card”

payment program to more efficiently pay supplier bills while at the same time generate additional revenue

for the college. A “Ghost Card” is a method for purchases made with suppliers to be paid with a “hidden”

credit card account number rather than be paid by a check issued from the Accounts Payable Department.

This is a more efficient system that significantly reduces time and effort in Accounts Payable, and also

increases the P-Card rebate paid to NWTC by the bank for every purchase charged to a “Ghost Card”.

The college also uses other programs and features offered by the bank (state contract) such as “Payment

Analytics” and “Order Management” to insure greater internal controls and accountability for payments

made to suppliers for much lower administrative cost.

Purchases charged to a “Ghost Card” have resulted in a significant increase in P-Card rebate “revenue” to

the college.

PROCUREMENT PERFORMANCE METRICS

Procurement performance metrics have been established to measure the ongoing effectiveness of the

Procurement Department’s initiatives related to business goals, process efficiency, effectiveness, and

compliance with district, state, and federal procurement policies. Utilization of specific performance

metrics enables the Procurement Department to quantify results of business goals such as cost

containment, contracting compliance, use of technology, effectiveness and efficiency, and other tangible

benefits that result in a favorable Return On Investment (ROI) for the District.

The Procurement Department measures the outcomes of procurement activities in order to:

Identify areas for improvement

Contribute to better planning for all college departments

Ensure procurement activities contribute to the district’s overall objectives

Demonstrate the “value added” from procurement activities

Support collaborative working relationships with other WTCS districts and public agencies

Stay focused and directed towards “adding value”, improving quality of services, and delivering

“cashable” savings having a positive impact on the affordability of education and impact on district

tax levels.

9

FINANCIAL PERFORMANCE METRICS

Total Addressable Spend: Total annual dollar value of PO’s, Vouchers, and P-Card purchases

accounted for by the Purchasing Department for state audit purposes.

Annual Purchase Order Spend: Dollar value of purchase orders issued between FY2009 and FY2013

$20

$31

$40 $39 $40

$0

$5

$10

$15

$20

$25

$30

$35

$40

$45

2009 2010 2011 2012 2013

Mill

ion

s

Total Addressable Spend

$11,033,793

$11,877,856

$13,036,406 $12,320,783

$13,921,892

$0

$2,000,000

$4,000,000

$6,000,000

$8,000,000

$10,000,000

$12,000,000

$14,000,000

$16,000,000

2009 2010 2011 2012 2013

Total Dollar Value of Purchase Orders Issued

10

Department Administrative Cost (to process PO’s): Despite a trend of increased purchases, there

has been a noticeable and substantial decrease in purchasing administrative cost to issue and manage

purchase orders. The steep decrease noted for FY12 and FY13 is largely attributable to eProcurement.

$22,746 $21,675

$15,657

$10,787 $10,764

$0

$5,000

$10,000

$15,000

$20,000

$25,000

2009 2010 2011 2012 2013

Admin Cost Per PO 2009 to 2013

0

5,000

10,000

15,000

20,000

25,000

30,000

2009 2010 2011 2012

Transaction Migration of Vouchers (paid by check) to P-Card for Increased Efficiency

Purchase Orders P-Card Transactions Voucher Transactions

11

P-Card Spend

In 2013 the college had 147 P-Card holders. P-Cards are primarily used by the Purchasing Department as a

method of payment (in lieu of issuing checks), rather than as a method of purchase. Total purchases made

(and supplier invoices paid) with a P-Card has increased steadily and has resulted in significant

administrative cost savings for the department:

P-Card Transactions:

$3,833,996

$4,778,551

$5,831,778

$9,166,381 $9,294,213

$0

$1,000,000

$2,000,000

$3,000,000

$4,000,000

$5,000,000

$6,000,000

$7,000,000

$8,000,000

$9,000,000

$10,000,000

2009 2010 2011 2012 2013

Total P-Card Spend (and eProcurement "Ghost" Card Purchases)

16,213 17,207 18,014

25,991

30,440

0

5,000

10,000

15,000

20,000

25,000

30,000

35,000

2009 2010 2011 2012 2013

Total P-Card Transactions (including eProcurement "Ghost" Card Purchases)

12

P-Card Rebates:

NWTC’s P-Card program is under the State Contract and the college earns a rebate for every dollar charged

to a P-Card. This rebate produces “revenue” for the college and has steadily increased over the years.

P-Card Average Transaction Dollar Amount: NWTC’s average P-Card transaction dollar amount is

within national averages, but has been increasing as more large dollar purchases and invoices are now

being charged to a P-Card as a method of payment.

2013 Top eProcurement Purchases by Commodity Type

NWTC’s eProcurement system has 20 different supplier electronic catalogs for end using departments to

choose from. Catalogs are negotiated for best prices by Purchasing before being authorized for general

college use.

$44,526 $49,352

$60,535

$77,002

$92,402

$111,006

$0

$20,000

$40,000

$60,000

$80,000

$100,000

$120,000

2007 2008 2009 2010 2011 2012

P-Card Rebates Received (2007 to 2012)

$236 $278

$324

$353

$305

$0

$50

$100

$150

$200

$250

$300

$350

$400

2009 2010 2011 2012 2013

Average Dollar Amount per P-Card Transaction

13

The migration (steerage) of college purchases to preferred contracted suppliers offering

the lowest cost has substantially increased under eProcurement.

IIT $605,900

Trades/Industrial $149,097

Office $118,781

Facilites & MRO $97,077

Science $42,153

Health Science $31,407

Security & Safety $11,705

Top eProcurement Catalogs by Commodity Type

IIT Supplies

Trades/Industrial Supplies

Office Supplies

Facilites & MRO Supplies

Science Supplies

Health Science Supplies

Security & Safety Supplies

2,106 2,578

7,767

10,926

0

2,000

4,000

6,000

8,000

10,000

12,000

2010 2011 2012 2013

Transactions Steered to Top 14 Contracted eProcurement Catalog Suppliers (before and after eProcurement

14

Cooperative Purchasing Network

The NWTC Purchasing Department networks with the WTCS Purchasing Consortium and other districts and

agencies on cooperative purchasing initiatives as illustrated below:

Five Member WTCS Purchasing Consortium

Board of Directors (Chair and 4 members) (CFO, IIT,

Learning VP, & Two Purchasing Representatives)

WTCS Purchasing Consortium Organization

16 District WTCS Purchasing Consortium Voting Members (One representative from

each district appointed by a President)

WTCS Purchasing Consortium Director and a

Coordinator

16 District WTCS Purchasing Committee (NWTC Chairs)

Federal, State, and Local Agencies

Professional Purchasing Organizations (Training,

Resources, and Development) – WAPP,

VALUE, NIGP

Federal, National, and Regional Purchasing Cooperatives (GSA, MHEC, NJPA, WSCA,

NASPO, etc.)

Group Purchasing Organizations

(GPO’s) – Amerinet, E&I, Provista, U.S. Communities, etc.

Cooperative Purchasing Resources

15

Benchmarking WTCS Districts’ Purchasing Departments:

In Feb 2013 NWTC formed a committee comprised of two other districts and the WTCS Purchasing Consortium

to conduct a procurement survey of the 16 districts. NWTC conducted earlier surveys of the districts’

purchasing functions in 2008 and 2011. The questions in the WTCS 2013 survey were selected from those

appearing in two national procurement surveys (National Institute of Public Purchasing – NIGP, and the

National Association of Educational Procurement – NAEP). The results of the survey indicated that the NWTC

Procurement Department is very progressive in utilizing nationally recognized best practices and technologies

to maximize the effectiveness of the procurement function. Overall in the five categories surveyed, NWTC

scored 97%. Results of the 2013 WTCS Procurement survey are as indicated below:

100% 100% 100%

91%

94%

99%

86%

88%

90%

92%

94%

96%

98%

100%

102%

Organization Cost Savings ProfDev/Training

Use ofTechnology

P-CardProgram

Total

2013 WTCS Purchasing Survey Results of “National Best Practices”

NWTC

16

Summary of 2013 WTCS Survey Results:

A. Purchasing Organizational Structure (5 questions, category weight = 20%):

The questions in this category were aimed at addressing the extent to which purchasing is a centralized or

decentralized function at the districts, and to what extent departments outside of purchasing are permitted to

negotiate and make purchases for the college independent of purchasing authorization or involvement. Also rated

was the reporting structure and if Purchasing is recognized and reports at a high enough level within the

organization to be effective. Also evaluated were the types of commodities and services purchasing is entrusted to

purchase for the college, and the extent to which purchasing conducts surveys of its customers (ie: departments) to

assess the needs of its customers and how well departments are being served.

B. Cost Savings (6 questions, category weight = 26%) This category addressed the extent to which districts document, measure, and report cost savings attained from

negotiations and bidding, and record “revenue” received from sale of obsolete/surplus property, as well as rebates

received from P-cards and cooperative contracts. This category also addressed districts measuring purchasing

performance and return on investment.

C. Professional Development and Training (10 questions, category weight = 37%) This category dealt with how much training purchasing staff receive (hours and annual dollar investment) as well as

how much training purchasing provides to departments and to suppliers. This category also assessed the education

and purchasing certification levels of purchasing staff, and written policies pertaining to ethics for purchasing and

non-purchasing staff involved in buying decisions for the college.

D. Use of Technology & eProcurement (6 questions, category weight = 8%) This category assesses the degree to which districts use technology for competitive advantage and creating

efficiency in operations. Technology and best practices such as districts having an online requisitioning system

integrated with their ERP system, and using online bid posting systems to advertise bids and RFP’s, and using online

systems for property disposals and auctions, and using electronic systems to manage and keep track of planned

contract expirations and renewals, and the use of technology to receive bids from suppliers electronically and to

transmit purchase orders electronically to suppliers, were assessed.

E. P-Card Program (3 questions, category weight = 9%) This category addressed the degree and frequency of review and audit of P-card statements for internal controls,

and nature and type of training provided to P-Card users concerning rules, policies, and cardholder responsibilities.

17

NWTC Purchasing Mission

Statement: Acquire, pay, and manage materials

and services;

For the best quality, service, delivery,

and value;

At the lowest total cost to the college.

Our Values (www.nigp.org)

ACCOUNTABILITY – Taking ownership and

being responsible to all stakeholders for our

actions. This value is essential to preserve

the public trust and protect the public

interest.

IMPARTIALITY – Unbiased decision making

and actions. This value is essential to

ensure fairness for the public good.

ETHICS – Doing the right thing. This value is

essential to deserve the public’s trust.

PROFESSIONALISM – Upholding high

technical and ethical standards. This value

is essential to balance diverse public

interests.

SERVICE – Obligation to assist stakeholders.

This value is essential to support the public

good.

TRANSPARENCY – Easily accessible and

understandable policies and processes. This

value is essential to demonstrate

responsible use of public funds.

NWTC’s Involvement in Public

Procurement Activities

NWTC has continuously served in various

officer positions within the WTCS Purchasing

Consortium and the WTCS Purchasing

Committee since 2004.

NWTC was the first public entity in Wisconsin

to implement an eProcurement system.

NWTC is invited to present its eProcurement,

contract management, online surplus disposal,

and P-Card management systems to various

state, WTCS, and other public agencies.

By special invitation, the NWTC Purchasing

Department participates as a panelist on the

Green Bay Packers’ annual seminar/dinner for

local area small and minority businesses

wishing to learn how to do business with public

agencies.

SciQuest features NWTC in their national

marketing campaigns as a leading and

progressive user of eProcurement.

IonWave (Contract Management System) has

featured NWTC in its media releases as a

progressive user of its contract management

system.

The Purchasing Department is actively involved

in sustainability and “Green Procurement”

initiatives and the use of ecologically friendly

materials (recycled products, energy star rated

electrical items, etc.)

NWTC is involved with cooperative purchasing

groups and associations such as the WTCS

Purchasing Consortium, VALUE, WAPP, NIGP,

etc.

18

Procurement Department’s Goals

– 2014 and Beyond

Partner with technical colleges in

other states that fully embrace

eProcurement to have suppliers

design special price catalogs for

items used specifically by technical

colleges.

Strive to attain “best in class”

performance to National Purchasing

Institute (NPI) benchmarks and

standards.

Continue to save money and drive

NWTC’s purchasing costs down.

Install a college-wide electronic

travel and expense management

system (planned for FY14).

Continue to support and expand

sustainable “Green Procurement”

initiatives where possible.