Gary Richardsongary.richardson@rbwm.gov.uk

13th September 2006

eProcurement – Fast but is it safe…

Content of Presentation

• Who am I?• What is Procurement• Few facts…• Sourcing v Buying• What is eProcurement• Procurement is changing - drivers• Case study• 2005 Exercise Results

Who am I?

• Slough

• IDeA– IDeA:marketplace– Zanzibar

• Royal Borough of Windsor and Maidenhead

• South Eastern Centre of Excellence

What do we mean by procurement?

“Procurement” is the process of acquiring goods, works and services, covering both acquisition from third parties and from in-house providers. The process spans the whole cycle from identification of needs, through to the end of a services contract or the end of the useful life of an asset. It involves options appraisal and the critical “make or buy” decision which may result in the provision of services in-house in appropriate circumstances.

  National Procurement Strategy for Local Government October 2003

Few Facts…

• Councils spend £25bn (plus housing and capital) each year.

• Savings are there for the taking.

• Commodity spend is typically 30% of councils spend.

• Variation in Price is minimum of + 5%

Few Facts…(2)

• Gershon/Spending Review 2004– 21.5 bn across all government– 6.45bn Local Government

• 50% Cashable

• 50% Non-Cashable

Sourcing v Buying• Sourcing (Contracting)

– Make or Buy– Specification– Evaluation– Negotiation– Implementation– Contact management– PFI – Transfer of risk/Value for Money

Sourcing v Buying• Buying (Shopping)

– Standard commodity items– Delivery– Requisitions– Orders– Delivery address– Standing Orders– EU Regs

So what’s eProcurement?

e-Procurement is a tool to E enable procurement activities, including sourcing, ordering, commissioning, receipting and making payments for the whole spectrum of an authority’s activities.

The prime objective is to e-enable the management of the supply chain that can be achieved by stand alone, shared or integrated software tools.

The Benefits of

e-ProcurementLocal e-Gov - National e-Procurement Project

So what’s eProcurement?

So what’s eProcurement?

Sourcing is the process by which an authority identifies, selects, and manages its suppliers. (e-tendering and e-auctions)

Buying goods and services is the transactional process executed by many members of the authority during the day to day delivery of services. (e-purchasing and procurement cards).

e-Procurement is a collective term for a range of technologies that can be used to automate the internal and external processes associated with sourcing and buying.

Procurement is changing…Drivers For change (1)

1. Every council should have implemented an appropriate e-Procurement solution as part of its Government program by December 2005 (National Procurement Strategy).

2. Every council should be using an appropriate e-Marketplace by the end of December 2006 (National Strategy).

3. To promote the development of e-procurement in the region, in collaboration with the National e-Procurement Project. (Core function of the Centres of Excellence) 

Drivers For change (2)

4. Every Council shall have an appropriate e-Procurement solution in place including at the minimum paperless ordering, invoicing and payments” by the end of December 2005 (Priority Outcome).

5. Every Council shall engage in Regional co-operation on e-procurement by the end of March 2006 (Priority Outcome).

6. An optional “stretch target” for high-achieving councils is to have established access to a virtual e-Procurement “Marketplace” (Priority Outcome).

 

Drivers For change (3)

     

7. There are Performance Indicators to measure the Percentage of corporate spend through electronic orders, invoices received electronically, corporate spend through electronic sourcing, orders raised electronically and invoices paid electronically. (Local Performance Indicators).

 

Case study – RBWM • Gershon/SR ‘04

– 6.45bn (national)– 2.09m (RBWM)

• 50% Cashable

• 50% Non-Cashable

Few Facts…

Variation in Price is + 5%

20

21

22

23

24

25

26

27

28

29

30

RBWM[Worst]Best

£25m as average

Few Facts…cont

Variation in Price is + 5%

20

21

22

23

24

25

26

27

28

29

30

RBWM[Worst]Best

£23.75m

Few Facts…cont

Variation in Price is + 5%

20

21

22

23

24

25

26

27

28

29

30

RBWM[Worst]Best

£23.75m

£1.25m Potential; Saving

£25m

Few More Facts…

• Stationary/Computer Consumables - – £287,500 spent

– Average Value = £110

• Spend with 6 suppliers of Stationary/Computer Consumables = £228,851 (over £400k incl Schools)

• Variation in Price on just printer cartridges is 30% - 40% below current costs

What we did!

• Phase 1 is to grab the low fruit

• Where the “Best” are available on Framework agreements we use them.

• How:– Via Agresso/IDeA:marketplace - looks like…

paper

“Product Description”

“Supplier ID”

“Item Code”

“Manufacturer”

“Qty” “Unit Price” “Total Price”

What we had to do?

• We needed to build the link between Agresso and IDeA:marketplace

• It looks like this…..(for illustrative purposes and not to be read on screen)

1a

SupplierOnline Catalogue

Supplier

AuthorisationWorkflow

AuthorisationWorkflow

AccountsPayable

Bank

BACSPayment

Cheque

Remittence

InvoiceManager

PaperInvoices

ImageServer

TIFFImage

InvoiceScanning

XML Invoice

GoodReceipt

DelveryNote

POP

XMLPurchase

Order(eBIS)

Web Req

PunchOut

PostBack

XML Schema

Paper Document

eMail

XMLOrder

XMLInvoice(eBis)

IDea Catalogue

IDea Supplier Management and PO processing IDea Invoicing

Supplier

PunchOut

PunchBack

XMLOrder

Fax or email

Order

XML Invoice

Online Invoice

IDeA:marketplace

AGRESSOBusiness World

1 2

3

3a

4

5 6

7

6a

8

9

10

1a

AGRESSO Process

IDeA Process

What are we going to do?

• We needed to build the link between Agresso and IDeA:marketplace

• We now have access to numerous Framework Agreements one of which is the Stationery contract which was our “lowest fruit”

• At first buyers were be able to purchase as existing

BUT

BUT

• We needed to stop people buying without using the Agresso system– Suppliers were told NOT to accept telephone orders

except in an emergency or by special arrangement– Use MI from Agresso to inform managers of maverick

activity

• We needed to stop people buying from “expensive” suppliers

• The next step was to “extract” the efficiency savings

1st Steps (work packages)

• Data analysis• Comparison• Negotiation with supplier• Commodity Champion and Departmental

Representatives• Establish new Supplier• Communications• Roll-out and Training

ALARM National Conference Exercise (2005)• Your organisation uses eProcurement or is

about to – List the risks inherent in this new way of purchasing?

• Give each a rating 1-5 (5 is high) for1. the probability of them occurring

2. the impact on the organisation if they occur

3. what you would recommend to either stop the event occurring or mitigate its effects.

Exercise Results

Risks Prob’ty Impact Action

Staff resistance, not adapting to change

5 5 Training and

Comms

IT System failure/Breakdown

5 5 Back-up systems

Inability to use local supplier

5 5

Exercise Results

Risks Prob’ty Impact Action

Breaches in security (eg. Passwords) Lack of audit trail/fraud

4 4 Password protocols

Discipline procedure

Restricted delivery address

Exercise Results

Risks Prob’ty Impact Action

Human error 4 3 Training and audit

Loss of control 4 5 Build in checks

Impact on local business sustainability

4 5

Exercise Results

Risks Prob’ty Impact Action

Unauthorised purchasing

4 4 Segregation of duties

Different levels of access

Exception reports

Exercise Results

Risks Prob’ty Impact Action

Product not fit for purpose

4 4 ???

Lack of control over suppliers

(Automatic payment)

4 2 Processes Training

Checks

Maverick spend 4 2 ???

Thank you…