Procure-to-Pay Process Procure-to-Pay Process Enhancement Project Enhancement Project
March 15, 2006
Purchasing ServicesPurchasing Services
What’s New in Purchasing?
– New Sourcing Managers
– Contract Suppliers
– Penn Marketplace Suppliers
– Spend Analysis Initiative
– Equipment Maintenance Program
– Online Competitive Bidding
Purchasing related news and announcements are listed at: http://www.purchasing.upenn.edu/news/
New Sourcing TeamNew Sourcing Team
Jim Graham Associate Director
– Professional Services
Colleen Reardon Sourcing Manager
– Facilities & Operations
David Staskin Sourcing Manager
– Technology
Tom Cantiello Sourcing Manager
– Research
http://www.purchasing.upenn.edu/about/staff.php
Contract & Marketplace SuppliersContract & Marketplace Suppliers
Preferred contract suppliers provide the most commonly ordered products and services at “least total cost”
The Penn Marketplace provides product visibility and easy ordering from the University’s most commonly used suppliers
Supplier information is available on the web at:
http://www.purchasing.upenn.edu/buyinfo/suppliers/
Spend Analysis InitiativeSpend Analysis Initiative
A formal review of School or Center purchasing activity across all buying methods:
– Purchase Order
– Purchasing/Fleet Card
– C-Form
The business objectives include streamlining the buying process, increasing compliance with approved methods and suppliers, reducing the cost of required products and services, and reducing risk for the institution
http://www.purchasing.upenn.edu/about/spend_analysis.php
Equipment Maintenance ProgramEquipment Maintenance Program An innovative alternative to traditional "Original
Equipment Maintenance (OEM)" annual equipment maintenance agreements
Offers a significant cost savings opportunity to departments without negatively affecting the service provider or the quality and timeliness of equipment repair and service.
A wide range of equipment is eligible under this program, including research, technology, office, facilities and operations, and security related equipment (excluding copiers)
Equipment can be added or deleted from this equipment service program as needed throughout the fiscal year.
http://www.purchasing.upenn.edu/buyinfo/emp.php
Online Competitive BiddingOnline Competitive Bidding
eBay in reverse – goal is to drive down the cost of products and services
Reverse auction is an online competitive bidding tool that creates competitive pricing pressure between bidders
Utilizes traditional supplier selection process, RFP requirements, and supplier bid evaluation
Bidding tool can be used for most product and service requirements
http://www.purchasing.upenn.edu/about/bidding.php
Receive & ProcessInvoices
Receive Goods
Pay Supplier &
Finalize Transaction
ProactivelySource
Goods & Services
Monitor SupplierPerformance
Procure-to-Pay Process OverviewProcure-to-Pay Process Overview
An Effective and Efficient Process Requires a Great Deal of An Effective and Efficient Process Requires a Great Deal of Coordination Between Suppliers, Purchasing, Schools/Centers and Coordination Between Suppliers, Purchasing, Schools/Centers and
Accounts PayableAccounts Payable
Order Goods& Services
Supplier
Procure-to-Pay Process Overview-VolumesProcure-to-Pay Process Overview-Volumes
FY05 – Monthly Averages21,700 PO Invoices
6,800 C Forms
1,700 Requisitioners
900 PO Managers
15 APReps
Efficient and Timely Processing of These Transaction Volumes Requires Teamwork and Full Compliance with Process Steps and Policies
Our Business ProblemOur Business ProblemSuppliers Are Not Paid Within Terms Suppliers Are Not Paid Within Terms
FY 2006 YTD July – JanNon-EDI PO Invoice Payment – Supplier Terms 30 Days
AgingInvoice Count
% of Total
Invoice Dollars
% of Total
Total 91,882 100.00% $302,379,178 100.00%
30 Days or Less 55,124 60.00% $116,821,973 38.64%
31 to 60 Days 25,794 28.07% $121,821,809 40.29%
61 to 90 Days 5,282 5.75% $41,344,833 13.67%
Over 90 Days 5,682 6.18% $22,390,563 7.40%
YTD approximately 40% PO PO invoices or were not paid within supplier terms 88% of PO invoices were paid within 60 days
Process ExceptionsProcess Exceptions
Our initial review has identified these key reasons for late payments:– PO Invoice Holds – PO Invoices Not Received in AP– PO’s Created After Invoices Are Received– PO Invoice Rejections – Use of C Forms Versus PO’s
Process Exception Statistics Process Exception Statistics
Statistics for February 2006: – 911 (42%) PO invoices on hold greater than 30 days – 2,848 or 21% of total PO invoices processed not were not
received and entered in BEN Financials within 30 days of the supplier invoice date
– 2,222 or 16% of total PO invoices processed where PO’s were approved after the invoices were received
– 950 PO Invoice Rejections – C Forms still represent approximately 30% of transactions
processed in AP
Process Improvement Goals & ActionsProcess Improvement Goals & Actions Develop baseline measurements for process exceptions:
– Invoice Matching Holds on hold for more than 30 days– PO Invoices not entered into BEN Financials within 30 days of the
supplier invoice date– PO’s created or approved after the supplier invoice date
Work with Schools/Centers to identify Buyers with significant exceptions and work with them to reduce the exceptions
Partner with 2 to 3 Schools or Centers to perform an end-to-end P2P process review– Communicate lessons learned to all schools and centers
Continue to develop measurements for invoice rejections and C forms
Communicate progress on improvement metrics to Schools, Centers and Executive Management
Process Improvement Goals & ActionsProcess Improvement Goals & Actions Process Improvement Goals
– Invoice Matching Holds on hold for more than 30 days Clear all holds >30 days by June 1, 2006
– PO Invoices not entered into BEN Financials within 30 days of the supplier invoice date
Reduce Avg. Monthly FY05 Exceptions by 50% with June 2006 PO invoices– PO’s created or approved after the supplier invoice date
Reduce Avg. Monthly FY05 Exceptions by 50% with June 2006 PO invoices Schools/Centers
– Run detail reports for their Org codes and identify PO Managers with significant exceptions
– Work with PO Managers to reduce exceptions Communicate
– Supplier or purchasing issues– AP processing issues– Other business issues causing exceptions
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