Procurement project is estimated to save Penn State $45M in annual cost-savings

September 29, 2020

UNIVERSITY PARK, Pa. - The Resource Optimization Initiative (ROI) announced the launch of the Strategic Procurement Transformation (SPT) project, which is designed to save Penn State approximately $45 million in annual cost-savings and further leverage SIMBA, the University's new financial management tool. 

"This transformation is just one part in our long-term strategy to increase how we efficiently manage Penn State's resources," said Nicholas Jonesexecutive vice president and provost"The COVID-19 crisis has further accelerated this process."

Jones and David Gray, senior vice president for finance and business/treasurer, are executive sponsors for the Resource Optimization Initiative and the Strategic Procurement Transformation project.   

In April 2018, University leaders and the Board of Trustees engaged the Huron Consulting Group to conduct a study to identify areas, themes and opportunities where additional insight, data and analysis could be valuable in achieving greater operational efficiencies across the University. As a result of these findings, President Barron established 11 workstreams to drive implementation, gather data and develop further recommendations.

Four of these workstreams — Information Technology Modernization, Health and Fringe Costs, Procurement/Strategic Sourcing, and World Campus Roadmap for Student Success: Value for the Student and the University — have been identified as "high priority" and are estimated to save the University over $100 million annually by the fiscal year 2023. The SPT project is a part of the implementation phase of the Procurement/Strategic Sourcing workstream.

"We are looking to innovate our procurement strategy to better leverage the University's $1 billion in annual spend and drive greater value to our buyers," said Kurt Kissinger, associate vice president for finance and business and working sponsor for the SPT project. "Through a collaborative multi-stakeholder approach, the Strategic Procurement Transformation will modernize Penn State's sourcing practices to align with best industry practices and better support our highly complex institution."

The SPT project will implement several recommendations identified in the recent external reports done by Huron Consulting and the procurement consulting agency AArete. Most notable among the recommendations are: 

  • Create a centralized procurement model and office to increase synergy and collaboration over University contracts and purchases.
  • Implement category managers to build a relationship management standard of practice connecting suppliers to end-users and negotiating the best possible pricing strategies.  
  • Add specialists in communication, compliance and data management to better manage and support each category strategy. 
  • Develop new processes that create less dependence on Purchasing Cards and non-PO Invoice Payments (formerly known as SRFCs), which are the least cost-effective purchasing methods

The SPT project has already begun implementing a central procurement office model to manage University contracts and purchases. The office that resides under Auxiliary & Business Services will be renamed and strategically moved within central Finance and Business. Starting Nov. 1, the new unit will report directly to Gray.

"To properly position the procurement office and build effective relationships within our supply chain is critical for the University,” said Gray. “By making this move, we can further leverage and maximize the tremendous buying power of our Institution."  

An Executive Steering Committee (ESC) led by several key University stakeholders will lead the recommendations' implementation. As the project progresses, the ESC will provide crucial guidance to the Project Management (PM) team and four working groups. Each working group is assigned several recommendations to analyze and create procurement solutions. The working groups include Organizational Alignment, Category Management, Policy and Guideline Updates, and Compliance and Business Intelligence/Analytics.

"The working groups bring a cross-functional perspective for influencing change, efficiency, savings, and compliance to the procurement processes that exist at the University," said Duane Elmore, director of procurement services and a member of the SPT project's PM team. "Tapping into their diverse knowledge and experiences at the operational and strategic levels of procurement makes this a genuinely collaborative project that will benefit the University for many years to come."

 

Last Updated September 29, 2020