Strategic purchasing recommended by administrative excellence teams

May 22, 2012

by Greg Bump

New recommendations will provide a new strategic purchasing direction for UW–Madison and save nearly $14 million over five years, according to estimates by teams working on the Administrative Excellence project.

The findings of the work teams – Computer Bundling, Office Supplies, Scientific Supplies, and Maintenance, Repair and Operations (MRO) Supplies – come after months of data confirmation and stakeholder engagement related to the university’s purchasing practices. Summary versions of the business cases can be viewed at http://adminexcellence.wisc.edu/project-areas/.

The work of the teams supports the university’s new framework for strategic purchasing, says Alice Gustafson of the Office of the Vice Chancellor for Administration. Gustafson serves as the campus project manager for Administrative Excellence.

“These four teams have helped to support an overall new vision for campus procurement,” Gustafson says. “They provided solutions that will allow us to move forward, and they all presented opportunities for cost savings.”

A Web chat for members of the campus community to ask questions and give feedback on the recommendations is set for 1:30 to 2:30 p.m. on Thursday, May 31.

The work teams’ recommendations include technology needed to support e-commerce and a new structure for purchasing that leverages the university’s size. The framework will also simplify the purchasing process for the campus community, Gustafson says.

“There will be less time spent by individuals searching for things they need to purchase. That work will be done for them,” Gustafson says. “This new way of purchasing goods and services will provide the tipping point for savings to follow.”

The Computer Bundling team collected internal and external transaction data from vendors used by the university over the past year and a half. The team found that UW–Madison spent more than $8.7 million on the purchase of approximately 7,500 desktop and laptop computers in the 2011 fiscal year.

While some departments and divisions currently use bundling practices, there is no explicit institutional policy requiring bundling, the team found. The university also lacks a policy requiring purchases from vendors who have established relationships with the university, and there are no standards in place to determine a common set of desktop and laptop computers that would be most appropriate for campus use.

The Computer Bundling team recommends that UW–Madison establish a two-vendor policy for computer purchases, with a clearly defined primary vendor. The secondary vendor would be a purchasing option provided a need for that brand is demonstrated.

An estimated $745,000 could be saved in the first year of the new policy, and a savings of $4.3 million is possible over five years, the Computer Bundling team found.

The Office Supplies team estimates the campus could save $883,000 in the first year and $4.7 million over five years by standardizing the selection of some office items, and by substituting some supplies for lower-cost alternatives.

The team checked transaction data from five vendors who made up 96 percent of the university’s office supply purchases over the previous year. Paper, toner, binders, pens and notepads account for 50 percent of the total office supply expenditures by the university, with the campus spending a total of approximately $6 million on office supplies in the 2011 fiscal year.

While office supply purchases are typically done with a few contract vendors, the team found product proliferation does exist. For example, UW–Madison spent about $100,000 on at least 94 different SKUs, or unique products, of 1.5-inch binders last year. Unit prices for those binders varied widely.

Similarly, the Scientific Supplies team found that unlimited choice in vendor selection, product choice and purchasing channel leads to significant product proliferation and inefficiency, and reduces institutional negotiating power. UW–Madison spent more than $9.5 million on scientific supplies in the 2011 calendar year, according to the team’s findings.

The team recommends strategic purchasing for scientific supplies, which could save approximately $500,000 in the first year and nearly $4 million over five years.

The MRO Supplies team’s list of recommendations includes standardizing the purchase of such products as paper towels, toilet tissue and trash liners, as well as replacing paper towels with high-velocity hand dryers in some select high-volume restrooms. The team also recommends additional training for facilities staff and the creation of user groups of supervisors to hold quarterly meetings and training sessions.

For the 25 percent of campus MRO supply purchases the team reviewed, approximately $1 million over five years could be saved by standardizing purchasing practices, the team found.

Findings from three more Administrative Excellence teams – Data Aggregation, Email and Calendaring, and Classsroom Space Utilization – will be posted to http://adminexcellence.wisc.edu/ prior to a web chat scheduled on Monday, June 18.

Questions or comments can be directed to aefeedback@vc.wisc.edu. Also, organizers want to hear from those who are interested in serving on future Administrative Excellence teams.