Procure-to-Pay Process
Enhancement Project
March 15, 2006
Purchasing 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 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 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 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 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 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
Procure-to-Pay Process Overview
Proactively
Source
Goods & Services
Order Goods
& Services
Receive Goods
Supplier
Monitor Supplier
Performance
Pay Supplier &
Finalize Transaction
Receive &
Process
Invoices
An Effective and Efficient Process Requires a Great Deal of Coordination
Between Suppliers, Purchasing, Schools/Centers and Accounts Payable
Procure-to-Pay Process Overview-Volumes
FY05 – Monthly Averages
21,700 PO Invoices
6,800 C Forms
1,700 Requisitioners
900 PO Managers
15 AP
Reps
Efficient and Timely Processing of These Transaction Volumes Requires
Teamwork and Full Compliance with Process Steps and Policies
Our Business Problem
Suppliers Are Not Paid Within Terms
FY 2006 YTD July – Jan
Non-EDI PO Invoice Payment – Supplier Terms 30 Days
Aging
Invoice
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 invoices or were not paid within supplier terms
88% of PO invoices were paid within 60 days
Process 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

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 & 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-toend 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 & 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