Online purchasing at Penn is a snap

by Larry R. Humes

Procurement made easier. The University of Pennsylvania uses a dandy application to put purchasing power into the hands of campus staff.

January 2006

For 2,000 faculty and staff at the University of Pennsylvania, "Penn Marketplace" is more than just an online portal that enables them to order goods and services. It's made purchasing everything from test tubes to computers as easy as a few keystrokes.

[Purchase orders below $5,000] make up 92 percent of our transactions. Meanwhile 136 suppliers are getting almost 70 percent of our transactions, though we have 29,000 suppliers in the database." - Ralph Maier, Director of Purchasing, University of Pennsylvania.

"Our reputation and credibility with faculty, administrators and vendors is at an all-time high," says Ralph Maier, Penn's director of purchasing. "They see purchasing as satisfying needs, not as a necessary evil. And the university sees our purchasing department as a valuable contributor to the bottom line."

A valuable contributor, indeed. Annual procurement disbursements at Penn run over $1 billion, roughly a quarter of the university's annual operating budget. Annual cost savings tallied as a result of an improved procurement system are $7.5 million.

The engine powering Penn Marketplace is a hosted solution called SciQuest. Through it employees connect with 136 suppliers in thousands of transactions daily with very little paperwork and ready access to real-time data reporting.

Bill Burns is a business administrator for Penn's School of Engineering and Applied Science. When asked what he likes, Burns responds, "I can get Penn pricing on any materials I need. More importantly, so can our staff. I'm no longer a middleman in the purchasing process. I don't have to deal with the vendor on each person's purchase. I rarely have to be involved determining what a staffer needs. Each person shops through the marketplace and orders the necessary product, at the best price."

Different users, different needs

Maier says the university began its journey to the ideal system in 1996. Intermediate stops included Oracle financials in 1996 and TPN Register in 2002. "By then we were sold on the marketplace concept. We would use a third party partner to help us aggregate and host content and we'd present it to our users integrated with our financial application's purchasing system," Maier recalls.

After considering nine different applications, the university chose SciQuest and went operational in January 2004. Maier says the system took five months to implement.

"Several things appealed to us about SciQuest," he says. "We liked its ease of use, which we believed would be a critical success factor. About 500 of our 2,000 users are what we call super users - using the system daily. But a significant challenge are those that use it only once or twice a month. They lack repetitiveness. What you implement has to be easy and efficient for them."

Log onto Penn Marketplace, and you can review past purchases and search over five million individual products and services listed in the database. For preferred vendors like Office Depot and Dell Computer, users can fill a shopping cart while browsing the retailers' web sites, then bring the shopping cart back to the university's marketplace for Penn's pricing.

"Purchase orders below $5,000 can be created by designated users and routed to suppliers directly," says Maier. "They make up 92 percent of our transactions. Meanwhile 136 suppliers are getting almost 70 percent of our transactions, though we have 29,000 suppliers in the database."

The debits, the credits

Burns says he still has to "touch" each order to apply the accounting aspect to the purchase. However, the purchasing staff are saving as much as 70 percent of their former processing time. "Regrettably, less than half our users enter orders themselves," Burns adds. "A lot of them still want the easy way out by telling us: 'Just order me what I used last time.' Meanwhile, I have tools that recall favorite things people buy, so it becomes like a 'quick pick' with very little searching."

Another feature Burns enjoys is the ability to give accounts "nicknames," which eliminates entry of a lot of 26-digit account numbers. "research related purchases often must be tracked to a particular grant. With SciQuest, you can search for the nickname and save time."

The higher education marketplace

Maier says SciQuest makes it obvious that higher education is one of its primary markets. Much of their product's functionality meets the unique needs of colleges and universities. "They told us it is a customer-driven application, and they do engage their customer base for product direction, features and functionality. That really impressed us.

Many large higher education clients make major investments in ERP, but haven't taken advantage of the tools available to enhance efficiency." - Suzanne Miglucci, VP of Marketing and Strategic Alliances, SciQuest.

Another benefit, Maier says, is that SciQuest has helped the university take control of moving contract purchases from one supplier to another with a 100 percent assurance of compliance. "We can demonstrate the value of our business decisions, the value of the relationships we've developed with suppliers, and the benefits to each user. We've also been able to help our suppliers realize that by digging deeper into their discounts, what they lose in profit margin, they make up in significant volume increases."

Most of Penn's purchasing administrators worked previously in private industry. They try to benchmark their services to some of the best corporate examples, like Wal-Mart, GlaxoSmithKline, State Farm, and Sunoco, not just other universities.

"Before we bring a supplier onboard, we make sure we have a newly negotiated contract so that we maximize the value of that spend through that supplier before adding them to the system," Maier says. Since the marketplace has been operational, we have not had a single supplier decide to bail out." Burns says he would like to see more suppliers in the system. For items not found in the marketplace, users can make free-form purchases, which can be tedious.

SciQuest is scalable in terms of the number of transactions, vendors and users it can serve. SciQuest supports 56 campuses, including the Universities of Notre Dame and New Mexico as well as Pace, Yale and Yeshiva Universities.

"Many large higher education clients make major investments in ERP, but haven't taken advantage of the tools available to enhance efficiency," says Suzanne Miglucci, SciQuest's VP of marketing and strategic alliances. "Universities large and small are bringing great customer service to their vendors on campus through e-procurement solutions."

Miglucci says SciQuest customers pay a one-time implementation fee as well as annual fees for licensing and for the number of suppliers in their system. She says the fee schedule is based on the size of the institution.

Maier says more colleges and universities are moving toward e-procurement. "Our philosophy is that it's the responsibility of faculty and staff to decide what product or service best meets their need. Once that decision has been made, then we make the decision on the distribution channel," Maier summarizes.

Making it easy helps. With SciQuest we give Penn purchasers the best process, the best service, the best suppliers and the best pricing. Our users say: 'Gee, this makes my life easy. Why wouldn't I want to do it the right way?'"