Welcome to eProcurement – It’s Good For Business!

1. Welcome to eProcurement – It’s Good For Business! Moderators Dianne Lancaster: State of Oregon Jean Clark: State of Arizona Panel Ken McFarland, Periscope Holdings Eric Zoetmulder, SciQuest David Ottenstein, MSC Industrial Supplies Michael Muscara, Waxie Custodial Supplies Jim Chatfield, OfficeMax Robert Calvert, Hewlett Packard

2. The State of Oregon’s eProcurement Solution

3. ORPIN 2.0 PHASES • Phase I • ORPIN Replacement • Supplier Registration • User Registration • Posting and evaluation of solicitation events • Contract Enablement • Shopping Cart Experience • Supplier Catalogs • Punch-Outs • Hosted Catalogs • Agency Managed • Electronic POs and Invoicing • Phase II • Strategic Sourcing • Data Driven Procurement Decisions • Expand Functionality • Phase III • “Pay” Solution • Fully integrated procurement-to-pay solution

4. A Growing System to Meet Your Needs Supplier Management User Management Solicit and Award Electronic Bidding Reverse Auction Receiving 2 and 3 way match PO Closure Interface to Accounting System Online Ordering “Shopping Cart” Experience Credit Card Payment Electronic PO and Invoice

5. ProcureAZ The State of Arizona’s eProcurement & Sourcing Solution For AZ Public Entities & Vendors

6. Arizona’s Need for eProcurement Background • In 2009, the State of Arizona realized the need for state procurement modernization. At the time, the State: • Faced a $1.4 billion dollar budget deficit • Had zero statewide procurement unity • Lacked ability to view purchasing activity across state agencies • Had individual agencies manage purchasing manually or with agency specific systems • Failed to track and analyze spend by vendor • Lacked vendor performance history • Offered minimal collaboration with local agencies

7. Project Overview Arizona’s Need for Change • The State saw a need to implement a solution that was easy to use and would: • Eliminate waste & cut costs • Exude transparency • Increase productivity & process efficiencies • Decrease cycle time • Create vendor competition • Provide one-stop-shop for vendors to register and submit invoices • Drive business to local AZ vendors • Encourage contract spend and reduce maverick spend • Track the results needed to make strategic purchasing decisions • Make contracting with public entities easier • Provide multi-agency access • Needed 100% of spend in one solution

8. ProcureAZ Success Results • Implemented ProcureAZ in two phases on-time and on-budget • Eliminated manual vendor management system • Increased vendor access – over 23,000 vendors registered in system • Increased local co-op participation by 51% • Sourcing completed in one system by soliciting, evaluating and awarding bids within ProcureAZ • Reduced state spend on average 26% utilizing BuySpeed Sourcing • Decreased average cycle times by nearly half – went from 4 days to 2.3 days • Conducted over 500 online solicitations

9. ProcureAZ Functionality • State Contract/Catalog Search & Ordering • Easy for statewide users to access • Sourcing & Solicitation • Manage and award proposals in one online system • Vendor Management • One-stop-shop for vendors • Contract Management • Track and update contracts • Reverse Auction • Suppliers have visibility to offer lowest price • Requisition & Purchase Orders • Streamline ordering • Invoice & 3 Way Match Receipt • Speed-up payment approval • Integration into Financial System • Eliminates data entry and enhances budget controls • Business Intelligence • Enhances transparency • Inventory • Replenish stock directly within system

10. Select BuySpeed Clients • Arizona • 96 state agencies • 173 local governments • Increased co-op participation 51% • 23,000+ vendors • Maryland • 266 state departments & local governments • 21,000+ vendors • New Jersey • 15 statewide departments

11. Value For Vendors • One-Stop-Shop for Vendors • Vendor Management • Registration • Profile updates • Licenses & certificates • Solicitations • Contracts/Catalogs • eInvoicing • Contract Visibility • Paperless Process • Save time • Save postage • Save resources

12. Supplier Enablement in the Source-to-Settle Cycle • All phases need supplier enablement • Different resources per phase • Central point of contact for suppliers is important

13. eProcurement Impacts the Buyer Supplier Relationship 1. Supplier Business Relationship • Contract Manager • Day-to-Day management 2. eProcurement Relationship • Source to Settle Solution • Support SLA 3. Technology / Operational Support Relationship • On-line sourcing/contracting • Catalog • PO Delivery • Invoice integration State 2 1 SciQuest Supplier 3

14. Value of the supplier network • Enabling suppliers is a team effort • Technical side is typically not a core expertise for most customers • Suppliers that ‘have done it before’ enable faster • eProcurement vendor needs to stay involved for best results

15. Sellers Buyers Sourcing Sales/Mktg. Order Mgmt. Procurement Treasury/APFinance AR/Finance IT IT What is eProcurement? 3rd Party Marketplace • Connecting the touchpoints Lead Generation Source Sends PO Order Status Advanced Ship Notice Delivers Goods/Services Sends Invoice Credit Payment Support

16. Simple to Complex: Source to Invoice • Reasons Suppliers support eProcurement • “the customer made us”; “saves us time”; “competitive advantage”; “it’s strategic”” • Sourcing • Not all products and services are sourced the same • Invoicing impacts Source; Sourcing impacts Invoice • Multi Contract support adds complexity to Public Sector • Supplier Variances • Supplier capabilities are a function of their history; Not all suppliers are equal • Capabilities evolve from goods to services; • Services are still immature offering.

17. Bringing the sides together • It’s Important that Sellers sell what they have Sellers challenge themselves to grow and expand their capabilities. Buyers recognize that all Sellers don’t have the same flexibilities, the same speed to market, the same objectives, the same capabilities.

18. MSC, Industrial Supply Co. • Premier distributor of MRO and MW Supplies • 600,000+ SKU’s • Same Day Shipping Guarantee • 14+ years of eCommerce experience • MSCdirect.com • Integrated Solutions: CMI, VMI, Vending, etc.

19. MSC, Industrial Supply Co. • E-Procurement Benefits • Improved productivity, cut operating costs • Increased order accuracy, decreased returns • License to sell • Locked into procurement process • E-Procurement Pitfalls • Must be aligned on Scope of E-comm project • Lack of E-pro compliance- Executive Sponsorship • Utilizing Hosted Catalog Approach vs. Punch-out • E-pro experience must be =/> traditional method

20. E-Commerce Advantages Vendor Managed Systems-Full Catalog Contracts Order Process Cost Reduction Order Accuracy Increase-reducing back order fulfillment costs. Order size increases as accuracy is enhanced. Full access to contract cost reduction drivers and order size discounts. Ability to see live inventory. Immediate information on price adjustments. Ease of catalog price upload.

21. E-Commerce Advantages Third Party or Customer Managed Systems Full catalog contracts: Order Process Cost Reduction. Order Accuracy Increase-reducing back order fulfillment costs. More efficient proposal response and vendor-customer communication. Multiple vendor catalogs can be available for the same product groups.

22. E-Commerce Pitfalls Third party and customer managed systems have lacked the flexibility to present contract programs accurately. Average Contract Order Size falls, increasing transits, and negatively impacting the environment. (Catalog Shopping) Away from procurement operational costs rise through increased orders, smaller order size, proliferation of unapproved products. Catalog pricing uploads are problematic for many systems that have not planned for their complexity. Causing expensive delays in price administration and poor procurement administrative decisions. Discounted Price Structure results in drastically higher overall product costs. Fixed catalog cost models should be preferred. Program discounts for volume, proximity, business practices and other contract enhancements are not typically shown. No value added programs are typically shown. Double order entry may be necessary for some customers, once into their system once into the e-commerce system.

23. E-commerce Pitfalls Contract pricing configuration of contracted service provider must match contract pricing model or there is a large effort needed to “fit” the systems together if the environment is not punchout. Customer Authentication at the ship to level must be considered for most vendor systems to seamlessly integrate with third party systems. Unless location addresses match exactly orders can be missed or miss directed. Some vendor system reporting capability will also be lost. Free form ship-to addresses must be valid physical delivery addresses . Address validation requirements on the customer side must be robust to prevent an employee from easily misdirecting a product shipment.

24. OfficeMax: Integration & Opportunities • Business Structure: • Coding: Account #'s and Consignees #'s (ship-to) • State of Oregon: • 533,102 transactions annually • 402 accounts • 15,001 ship-to codes • Logistics: warehouse order fulfillment, truck staging, next day deliveries and sustainable totes • Customer Service: PIN #’s • Representative assignment • Reporting to end-user level : 875 generated monthly

25. OfficeMax: Integration & Opportunities • ePro Integration: • Pass account/ship-to information from OM Landing Page via cXML extrinsic coding • Account/Ship-to codes assigned during on-boarding process • Process to identify non-set up users for assignment of coding • Opportunities: • NASPO Community Exposure • Customer: Savings, Initiatives and Excellent Service

26. THANK YOU!