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Joined-up e-Procurement – an enlightened approach to SME inclusion

Joined-up e-Procurement – an enlightened approach to SME inclusion. Peter Duschinsky The Imaginist Company . Joined-up e-Procurement. The Joined-up e-Procurement vision Low investment - high payoff for both buyers and suppliers The path to progress, One-Step-at-a-Time

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Joined-up e-Procurement – an enlightened approach to SME inclusion

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  1. Joined-up e-Procurement – an enlightened approach to SME inclusion Peter Duschinsky The Imaginist Company

  2. Joined-up e-Procurement • The Joined-up e-Procurement vision • Low investment - high payoff for both buyers and suppliers • The path to progress, One-Step-at-a-Time • e-Contract Management and collaboration - where the real benefits lie

  3. The Imaginist Company • Imaginist was set up in 2002 to help small companies survive and thrive in e-business • Our experience with e-procurement stems from running the BuyIT e-Procurement Network 2000-2002 • We managed the National e-Procurement Project - Supplier Adoption 2003-4 for the Office of Deputy Prime Minister • We are leading The Imaginist Consortium, an informal group of specialist companies who together offer a joined-up approach to e-procurement

  4. The Imaginist Consortium Coding International - Product classification service Comensura – Vendor-neutral e-procurement for temp staff Compucares - E-contract management @UKPLC - e-Commerce solution provider offering Kick Start Evalue Limited - Hands-on e-procurement Exor Management Services - Supplier accreditation service Local Futures - Mapping of economic and social change ProcurementInline - e-Procurement implementation SpikesCavell&Co - Supplier and impact analysis SPS - Best practice in e-procurement

  5. National e-Procurement Programme • Purpose of National Programme • To support a methodology and infrastructure to enable councils to take full advantage of e-procurement • To raise the profile of procurement in all councils and support the development of a strategic capacity in this area • Programme: Oct 2002 - March 2004 • Getting the story right • Standards • Change management guidance and support (preparing for e-P) • Technical support • Supplier adoption and economic development • National and Regional solutions

  6. The Vision: Joined-up e-Procurement • The UK government is looking for more than £1bn savings from Procurement and e-Procurement – that means radical process streamlining and supplier rationalisation • But e-Procurement must be beneficial to both purchasers and suppliers or it is not sustainable • That means taking cost out of the whole supply chain, not just out of the purchaser’s processes and prices (and passing them to the suppliers) • And Local Authorities have a duty to their local community – they can’t chase efficiency at the cost of local jobs

  7. The Vision: Joined-up e-Procurement -2 • That means taking an intelligent approach - not just: aggregation of demand = aggregation of supply • An impossible balance? No! • We are advocating a 3-tier approach to supplier adoption: • National: you can’t negotiate with Dell etc, leverage off OGC • Regional: collaborate and buy in consortia for better value • Local: retain important local SMEs & increase % of BMEs • Best Value must come first: benchmark prices and use local suppliers where they add real value

  8. e-Procurement raises the sophistication required to trade with the public sector • Its not just e-technology…it means: • More pressure on margins – need to optimise cost-effectiveness • Need to change systems and processes = new skills • New ways of finding out about work, bidding & winning it • Fewer, larger contracts means more OJEU tenders and greater risk/cost to win business • More emphasis on pre-qualification compliance • Pressure to improve delivery and to reach out further (to accommodate consortia buying)

  9. The world has changed in favour of the SME supplier over the past year • The Better Regulation Task Force Report – May 2003 • The National Procurement Strategy for Local Government – October 2003 • The Priority Services Outcomes consultation paper – Feb 2004

  10. Priority Services Outcomes Priority Area 5: e-Procurement • To support business improvement through costeffective and efficient purchasing of goods and services through corporate implementation of e-procurement • Working with local suppliers to equip them to take advantage of e-procurement activities Shared Service / National Priority: • promoting the economic vitality of localities “Excellent” e-government outcome: • Inclusion of SMEs in e-procurement programme, in order to promote the advantages of e-procurement to local suppliers and retain economic development benefits within local community

  11. The Traditional Procure-to-Pay Process • 1. Sourcing • Including: • use of a preferred suppliers list • Invitation to Tender and formal pre-qualification • lower value informal request for quote 2. Selection 7. Payment 3. PO requisition, approval and ordering 6. Invoice receipt & processing matching 4. Contract management 5. Delivery/completion and buyer sign-off

  12. The Supplier Relationship Cyclestarts earlier and finishes later than the procure-to-pay process • 2. Supplier recruitmentvia a web supplier portal with features such as: • self-registration of interest • notification of forthcoming contracts • self-accreditation to standard criteria • help on achieving qualification standards • 3. Sourcing • Including: • use of online supplier portal for accredited suppliers • e-ITT and verified pre-qualification • e-RFQ • 1. Supplier development prior to ITT • Impact assessment analysis to identify local SMEs at risk • encouragement and education of local suppliers • KickStart signposting to sources of e-commerce information and services • developing a pool of willing suppliers • ‘how to trade with us’ information on website • ‘reach-out’ programme to raise % of BMEs 4. Selection based on standardised weighted criteria 10. Feedback to supplier and back into sourcing process 5. PO requisition, approval and ordering 9. Payment including BACS 8. e-Invoicing 6. Contract management including online SLAs, KPIs, risk management 7. Delivery/completion and buyer sign-off

  13. The Requirement:a cheap and easy route to e- • A simple to use, self managed web site • No technical knowledge required • Automatic integration with online merchant facilities • Integrated catalogue management • Automatic submission to search engines • Additional channels to new business

  14. The Kick StartTM Model • Developed by Bristol City Council with @UK PLC • Enhanced by Thurrock District Council • Now being adopted by councils across UK • Dedicated team/individual within Council, close to buyers • Identify key local suppliers, telephone contact • Invite to workshop at local college • Log on and design your own e-commerce site there and then • Telephone help-desk, @Assistance

  15. The Message:Why Should You Change? • Evolutionary Changedriven by technology • Your Buyers are Changingall implementing eProcurement • Your Business is under threatand the early birds are already getting the worms Up to 100% sign up across all suppliers

  16. What suppliers get • Online catalogue editing • Detailed statistics • Traffic and purchase tracking • Multi-currency • VAT Calculation • Integration with Barclays ePDQ or Natwest Streamline • Security • eInvoicing • Customer database • Account management • Multi Level Pricing • Hosting • Sage Line 50 Integration

  17. The Costs • Alpha 1 ecommerced product £48 p/a • 5Live 25 ecommerced products £96 p/a • 200e 200 page ecommerced catalogue £240 p/a • 2000e 2000 page ecommerced catalogue £480 p/a • Integration with Sage accounting systems £99 p/a

  18. One Step at a Time: low investment - high payoff for both buyers and suppliers • The secret of success? Management Information: Who is buying what, at what price, from whom • That means carrying out a supplier and spend analysis • You must include an impact assessment to identify local suppliers at risk to avoid unintended longer-term consequences • We reckon this ‘snapshot’ will identify savings of at least 1%

  19. Typical supplier profile Typically, only 25% of FMS listed suppliers are ‘real’

  20. United Kingdom £185,980,471 (100%) Northern England £143,642,921 (77%) Midlands £120,638,817 (65%) East Midlands £99,363,989 (53%) Nottingham & Neighbours(Gedling, Ashfield, Rushcliffe and Broxtowe) £73,007,432 (39%) Nottingham £44,375,209 (24%) Typical spend distribution

  21. Suppliers at risk

  22. Suppliers at risk Risk Category (Composite) Data Risk Category A Risk Category B Risk Category C Grand Total Locality Nottingham Supplier Count 30 51 52 133 Job Count 163 313 412 888 Elsewhere Supplier Count 47 68 97 212 Job Count 484 643 1,117 2,244 Total Supplier Count 77 119 149 345 Total Job Count 647 956 1,529 3,132

  23. But most of what you spend is not cataloguable • NePP research suggests 2.8% average savings from e-Procurement in Local Authorities • This is primarily derived from online ordering of low value high volume commodity goods and services • However these account for no more than 15% - 20% of local authority spend • The rest is spent on complex services • These need a different approach

  24. i before e- Procurement Research Project • Research project in West London, led by Brent Council, involving 6 Boroughs • 2 avenues of research: • The opportunity: investigate the scope for savings in complex service areas - we chose Roads Maintenance and Council Housing Renovation • The technology: look at what tools are available, specify and develop case study demo of what’s required and how it would work

  25. The Opportunity • What costs are Construction suppliers passing on? • Having to hold large inventories • Having to build in capacity ‘buffers’ • Having to employ premium skills at short notice • Having to buy supplies inefficiently at short notice • What could we do about it? • Improve forward demand planning • Share forecasts with each other and with suppliers • Standardise products and materials • Source aggregated requirements direct from materials suppliers; provide call-off arrangements for contractors… etc.

  26. The Opportunity • But to do that we would need detailed planning information: • Standardised spending schedules • brought together and aggregated • and shared with suppliers. • Today we don’t have that information. • It is buried under a ton of paper in a lot of offices across the councils, who don’t even talk to each other

  27. Research Results • We looked for – and found - potential savings opportunities in road maintenance & council house renovation • We identified potential for savings of 10-15%pa from consolidation across boroughs and closer working with suppliers • This will take a number of years to come into full effect due to existing term, pfi and other framework arrangements in place, but even 5% in the short-term is better than e-procurement is achieving • The most important opportunity is not materials consolidation (15% of spend) but labourdemand and local capacity planning • Similar opportunities are available in other complex service areas, eg Social Services care provision

  28. But do we have the tools? • We looked for - and found – an online contract management tool that will: • Create a contract register and provide online diarisation of contract renewal • Embed best practice and regulations into contract management workflow, ensuring consistent, auditable performance improvement • Save tender handling time, raise quality of evaluation, automate building of SLAs, KPIs • Enable sharing of data across councils for collaborative forward planning

  29. Benefits from Contact Management: Woking Council Case Study • Time from tender creation to lodgement fell by 61% • Time to handle tender response receipting, data entry and data analysis dropped by 80% • Overall time to process tenders was reduced by 58% • This represents an efficiency cost saving of £6,000 per average tender • Plus savings in printing, production and distribution • Suppliers also found the process saved them time in completing questions by as much as 25%

  30. Collaborative Forward Planning • Contract Management tools would bring you efficiency savings within 6 months • Using these tools would enable you to share forward planning data with your neighbouring councils • This could lead to 10-15% savings opportunity in Construction and Housing materials • But much more significant is the ability it would provide to forecast and develop sustainable local labour capacity to meet needs • And a similar opportunity exists in Social Services That’s what I call Joined-up e-Procurement!

  31. SUMMARY:Joined-up e-Procurement • Key messages: • Collaboration and community sustainability must lie at the heart of pubic sector e-Procurement programmes • One Step at a Time approach = ‘quick win’ savings • Most of Local Authority spend is on complex services – needs separate strategy Commodity purchases (15% of spend) Complex services (85% of spend) Spend and supplier analysis (incl. impact assessment) Contract Management toolsto embed best practice = rapid pay-back (av. £6k per tender) e-Ordering, online catalogues = up to 2.8% savings (NePP) Collaborative forward planning= 10-15% savings and community benefits Kick Start project to e-enable local SME suppliers Are you doing this today? The real opportunity?

  32. Thank you All the slides and related materials can be found on: www.imaginist.co.uk

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