Purchasing Initiative/Shipping
Team
REPORT
Agenda
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Purchasing Initiative Guiding Principles
Express Shipping/Team Activities
Work Plan
Evaluation Criteria
Review of each Supplier
Recommendation
Implementation Plan
Next Steps
Printing Team Update
SciQuest Overview
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Guiding Principles of the
Purchasing Initiative
• Improve or maintain service and quality
• Maintain total cost of acquisition perspective
• Strive for overall value to the MIT community as
a whole
• Involve the community
• Develop/maintain relations with suppliers
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Express Shipping/Team Activities
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Conducted six focus groups
Held preliminary meetings with Vendors
Decided to issue joint RFP with Harvard
Reviewed and rated RFP responses
Conducted three Follow up meetings with
vendors (UPS and DHL jointly with Harvard,
Fedex separately).
• Requested in depth demonstration of UPS and
DHL Technology Solutions. FedEx did not
present a viable solution.
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Harvard Status
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Back end problem with Fedex
Main goal to develop a Technical solution
Not happy with Fedex presentation
Sub Team overall in favor of DHL
Change management a big challenge
Currently communicating with end users
Hopes to make a recommendation to upper
management within the next few weeks
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Work Plan
Complete
In progress
Project
preparation
Gather data
and fact base
Activities
•Collect detailed
data and ideas
•Analyze
current processes and
contracts
•Finalize scope
•Brainstorm on
cost reduction
and process
improvement
ideas
•Analyze data
Phase 1
Phase 2
Create
preliminary
strategy
•Interview users
(requirements
and
improvement
ideas)
•Assess savings
and impact
•Interview
others** on
improvement
ideas
•Scan supply
market
*Request for proposal
**Other schools, groups, management, etc.
Phase 3…
Develop
RFPs*
•Conduct supplier
interviews/workshops
•Meet with
Harvard on
possibility of joint
RFP
•Decision made
to proceed
together
•Create/send
RFPs in
cooperation with
Harvard
Evaluate and
negotiate
•Assess supplier
RFP response
•View presentation
and demos for
each supplier
•Evaluate each
supplier
•Develop
recommendation
Implementation planning
•Develop
implementation
plan and form
teams
•Communicate
internally/incorporate ideas
•Develop tools to
track savings and
monitor adoption
•Steering
•Create plan to
Committee approval modify/adapt as
•Negotiate
feedback is
•Sign contracts
received after
implementation
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Express Mail - Supplier Profile
Market summary
•Three key, comparable players: FedEx, UPS, and DHL
•All three have comparable logistics and distribution systems - reliability similar
•Companies differentiate themselves by customer service, technology, pricing, and marketing
Supplier
Financials
MIT history
Comments
DHL
•$28 Bill rev
•Purchased Airborne
Spring 04
•D&B Financial stress
class: moderate
•MIT preferred vendor since
1989
•Most recent contract from
1999-2004
•Very strong in the international market
•Flat rate pricing
•Very competitive pricing
•$25 Bill rev
D&B Financial stress
class: moderate/low
•Secondary supplier on
campus
•95 separate accounts on
campus
•Strong quality image
•Zone pricing
•Not as competitive in
price/fees
•$33 Bill rev
D&B Financial stress
class: moderate/high
•Has refused to deliver
express shipments to office/lab
until this process.
•Historically not a flexible
organization
•MHEC* contract vendor 7
FedEx
UPS
* Massachusetts Higher Education Consortium
Express - Buying Process
Issues
Process
DHL
FedEx
Users/decision
makers
•Anyone can potentially order, no
centralization within dept or groups
•Anyone can potentially order
•95 different accounts on campus
Ordering
•Order/schedule online or phone, drop off in
bldg. 11, or reg. scheduled pickup between
8am- 7:30pm
•Provide cost object at pickup on the air bill
(shipments are sent with invalid/no cost
object)
•Call to place order or reg. scheduled
pickup between 8am-7:30pm
•Use blanket PO for each account (95)
•Use credit card
Admin/
processing
•MIT central receive 1 weekly electronic
invoice for all of MIT
•Cuts 1 check for all MIT shipments
•Time spent on cost object resolution for
central and DLCs
•Dept. receives invoice for each
shipment which must be reconciled,
signed and given PO (labor intensive)
•MIT central cuts many checks for all
the accounts
Vendor contact
•Users order from vendor
•Account manager assigned by DHL
available to assist DLCs
•MIT procurement manages the contract
centrally
•Users order from vendor
•No contracts (depts subject to various
fees and potentially varying prices)
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Evaluation Criteria/RFP
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Single Strategic Partnership
Cost Reduction Plan/Pricing
Performance Management
Logistics
Order and Payment Processing
Customer Service and Sales Support
Marketing Capabilities
Delivery
Value Added Services
Environmental Responsibility
Business Profile, References and Partnership Experience
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Evaluation Criteria/Presentation
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General Quality and Completeness of the Presentation
Customer Services and Support
Expertise and Professionalism of Service Team
Pricing/Cost Savings
Cost recovery and processing for Late delivery
Technology Capabilities
Invoice processing efficiency
Desktop delivery
International Shipping Resources
Innovation and future solutions
HazMat shipping
Prior Business relationship with MIT
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FedEx
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Competitive price
Rates available to Lincoln Lab
Brand recognition
Did not bid jointly after agreeing to in preliminary
meeting
Did not provide pricing for an on-site facility
Did not quote flat rate pricing
Was not open to a true partnership
Evaluation score RFP
3.1
Evaluation score Presentation 2.9
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UPS
• Competitive Prices
• Rates Available to Lincoln Lab
• Worked “out of the box” to understand our
business/technology requirements
• Environmentally conscientious- hybrid vehicles
proposed at MIT account
• Special dedicated Customer Service team
• Perception of many users that they are only
ground shipping company.
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UPS cont
• Relatively new to the international market
• Negative press in Computerworld regarding
problems with package-flow software suite
• Presentation exhibited an indifferent approach
(both MIT and Harvard teams agreed)
• Evaluation score RFP
4.5
• Evaluation score Presentation
3.3
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DHL
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Competitive pricing
Rates available to Lincoln Lab
Excellent Technical Solution
Proactive Notification on late deliveries (in beta
testing, should be available in 2006)
Special customer service program
Current MIT preferred vendor
Recognized leader in International shipping
Offer two types of alternative fueled vehicles into
operations, although not at MIT yet
Completion of Airborne acquisition brings them
on par with UPS and Fedex domestically
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DHL cont
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Perception that they are not as good as Fedex
Current back of the house issue
More focused customer service needed
Brand loyalty to Fedex
Evaluation score RFP
3.3
Evaluation score Presentation
4.1
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Sample Pricing
Express document to NY:
DHL
FedEx
UPS
Mid Morning
$5.61
$4.61
$3.98
$5.07
NA
$5.47
$4.92
NA
$4.93
$3.74
$4.87
$4.44
Afternoon
10:30am
12:00pm
3:00pm
$7.69
$6.69
$5.97
$ 7.37
NA
$ 7.09
$ 7.13
NA
$ 6.26
Second Day
10:30am
$4.83
$ 4.99
$ 4.58
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Afternoon
10:30am
12:00pm
3:00pm
Second Day
Express document to Cal.
Mid Morning
Sample Pricing
Two pound package to:
DHL
Fedex UPS
Washington DC
10:30 am
$6.79
$10.63 $8.19
England:
$19.18 $27.80 $20.54
Ten pound package to:
Washington
$14.63 $18.27 $22.54
England
$33.63 $37.89 $32.55
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International Package
(10 lbs.)
Service
DHL
FedEx
Belgium, France,
Germany, Ireland,
Italy, Luxembourg,
Netherlands, U.K.
$126,451.11
$ 134,547.39
Zone F
Japan
$ 31,721.08
$
34,285.88
$46,514.48
Zone H1
Australia, South
Korea, Malaysia,
New Zealand,
Philippines,
Thailand
$ 67,810.68
$
66,855.60
$62,307.60
$225,982.87
$ 235,688.87
Zone C
Assumes 10 pound package
Based on MIT’s international
Shipping volume FY04
UPS
$120,201.35
$229,023.43
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Fedex and UPS Technical Solution
FEDEX
UPS
• Creates Electronic Air
Bills
• No current process to
validate cost objects
• System designed for
central mail room, not
for unsophisticated
shippers.
• Creates Electronic air
bill
• Validates cost objects
• Designed to be used
by unsophisticated
shippers
• Not tested on Macs or
Netscape.
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DHL’s Tech Solution
• Will be available to all potential shippers at MIT
• Will inform shipper of shipping and pricing
options
• Will require a valid cost object before air bill can
be created. Allowing more flexibility for drop off
points on campus.
• MIT will send a feed daily to DHL containing all
valid cost objects
• Users will not go through authorizations,
however the quality of the information gathered
by the system will allow management by
exception
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Team Recommendation
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DHL, Subject to contract negotiations
Zone pricing
On-site location
Implement technical solution, emphasize
demand management feature.
• Require all air bills created on system /no paper
air bills allowed
• Increase of Drop boxes on campus
• Retain on site location (Build 11)
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Demand Management
• Real savings in giving end users the information
they need before they book a shipment to make
a good business decision.
• Fedex strategy appears not to encourage
demand management.
– Very small percentage price difference
between 10:30am and 3:00 pm (8% to 10%)
– DHL and UPS offer much higher percentage
price difference (20% to 30%)
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Potential Savings/Demand
Management
• Move 90% of Fedex business (20% difference in
price) $60,000 per year.
• Move 30% of next day overnight (10:30 am) to
next day afternoon (3:00pm) $36,000.
• Move 20% of next day to second day $36,000
• Back end savings in Departments and Central.
– Calendar Year 2003
• 3837 Fedex invoices processed
• 2686 Checks cut to Fedex
– Calendar Year 2004
• 3800 Fedex invoices processed
• 2133 Checks cut to Fedex
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Potential savings (cont.)
• Eliminate 90% of Fedex paper transitions
– 6907 invoices over two years x $2.44 =
$16,845
– 4337 checks over two years x .55 = $2,385
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Express - User Quotes
Would you switch suppliers if your current vendor was not selected?
“I would change, but
would have to know
practical reasons”
“I would switch but my
boss may not be willing”
“I’m not loyal”
“MIT users don’t embrace
change”
“I will use whatever
service MIT makes easy
for me to use”
Other comments:
“I didn’t know DHL
was onsite… or
had resources”
“I didn’t know FedEx rates
were so much higher”
“Only if we keep same
level of customer service
as now”
“I thought people
(procurement/mail
services) are too busy
balancing books to help
with shipping issues”
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Implementation Plan
• Implementation team will be established
• Communications/Marketing
• Partnership Management
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Ongoing Management Process
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Partnership manager to be appointed
Works with vendor to roll out the program
Conducts quarterly meetings
Monitors usage and non-utilization
Ensures accurate pricing and savings
Procurement contact for all shipping needs
of the institute, express, International,
local, same day courier.
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Next Steps
• International mail
• Same day couriers services
• Next phase of Initiative
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International-Current Status
• Conducted meeting with the top users of
international mail, Sloan (3 groups), MIT Press,
Tech Review, Mail Services
• Each group has different business requirements
• Sophisticated users making vendor decisions
based on their business requirements
• Discussed possibility of joint RFP
• Conducted preliminary meetings with vendors
• Conclusion, not enough benefits/potential
savings to proceed at this time
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Courier Services
What we currently do:
• Difficult to obtain MIT’s total spend. At least 10 different companies used over the last
few years
• Many departments use taxi companies paying via petty cash/vouchers, credit cards
What to do going forward:
• Each focus group had members who used this type of service and many were
interested in a MIT-wide recommended supplier
• Quick win – MIT to recommend MASCO consortium vendor Skycom (minority owned
local company recently awarded the MASCO contract)
• Savings: Potentially 50% savings (for taxi co. users) to 5% (for courier users)
• Other improvements/benefits:
– Centralized solution for all Institute departments, reduce time on vouchers,
reimbursements, etc.
– Competitive and standardized pricing
– Comprehensive reporting to gain a better understanding of spend in this area
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Preliminary Next Phase of Initiative
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Office Equipment
Scientific Supplies
Fleet
Furniture
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Agenda: Print Initiative
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Update on the Print Initiative
Printer evaluation progress
Work plan
Next steps
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Print Evaluation Progress
Goal
To improve the way MIT buyers purchase print services
Target offset and digital printing (i.e., brochures, newsletters, reports, posters, stationery)
Opportunity
MIT purchases $3.9 million in print from 240 printers
Establish a core set of 12-15 qualified printers that will meet the needs of the MIT community
Increasing the volume to fewer printers enables MIT to negotiate pricing
Educate MIT community in hiring the right printer for their publication
Vendor evaluations
The team evaluated the 240 printers currently in use at MIT
Reduced the number to 19 finalists
Currently conducting interviews and plant tours of final candidates
Final recommendations to the Steering Committee in May
Print partner criteria
Highest level of service, quality and competitive pricing
Focus on innovative solutions, use of technology
Benefits
•Steering purchases to a core set of preferred printers enables price negotiations
(potential to establish price grids, discount programs, etc.)
•Printers properly matched to the job provide the best price
•Reduce MIT staff time in locating appropriate printers
•Vendors familiar with the MIT environment will reduce process time for MIT and vendors
•Printers become an extension of the PSB: a resource for training and education
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Print Initiative Work Plan
ACTIVITY
OCT NOV DEC JAN
FEB MAR
APR
MAY
JUN
Request for Information (RFI)
Request for Solutions (RFS)
Evaluate data
Plant tours and interviews (RFP):
Plant tours
Printer interviews
Surveys:
Survey of design partners
MIT community survey
Presentations:
Steering committee & community
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Next Steps
• Complete printer evaluation process in April
• Present recommendations to Steering Committee in May
• Share recommendations and gather feedback
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Information Group
Focus group workshop participants
Academic Counsel
AOFO/ACCII/AIM
• In the summer, negotiate partnerships
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MIT Procurement’s
New
E-Commerce Portal
(coming to a computer near you in fy06)
Powered by
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SciQuest
• Software company offering a suite of hosted solutions
to meet eProcurement needs
• Act as a Catalog aggregator specializing in Scientific
type supplies
• Leading eProcurement provider for Higher Ed, life
sciences, industry research organizations
• Yale, Cal. Tech, Notre Dame, U. of Michigan, Indiana,
Arizona, U. Penn, Penn State
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New E-Commerce Portal
• Focus groups conducted in September 2003
and August 2004
• MIT signed with SciQuest September 2004
• Will provide access to dozens of top MIT
suppliers
– currently excludes some large suppliers that interact mainly
with Facilities due to internal accounting issues
• Expected go live scheduled for June
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Portal Advantages
• Front-end solution allowing web-based purchasing
automation with select vendors
• Based on current ECAT Model
• One-stop shopping for MIT community
• Potential to search across multiple supplier catalogs
(Hosted catalogs)
• Ability to do chemical structure search
• Ability to create personal & company favorites
• Order error reduction
• Potential to expand easily
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Portal Model (based on ECAT Model)
MIT maintains a single connection with SciQuest for shopping content
and order delivery for dozens of suppliers
Requisition
User's
Desktop
SAP
Authorizations
SAPWeb
Requisition
Approvals
Purchase Order
A/P
Payment
MIT
Vendor
MIT Marketplace powered
by SciQuest
Providing access to
dozens of MIT suppliers
Punch-out
Catalog
Punch-out
Catalog
SciQuest
Order Manager
Vendor 1 Order
Vendor
2 Order
System
Vendor
N
System
Order
System
Shipment
Shipment
Shipment
Vendor 1 A/R
Vendor
System2 A/R
Vendor
SystemN A/R
System
Vendor 1 A/R
Vendor
2 A/R
Funds
Receipt
Vendor
N A/R
Funds
Receipt
Funds Receipt
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Targeted supplier criteria
• Value to the research and academic community
• Number of purchase order and invoice
transactions
• Capability/willingness to participate
• Favorable total cost of acquisition
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Potential Suppliers
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Sigma Aldrich
Invitrogen
Perkin Elmer
Qiagen
GE BioSciences (formally
Amersham)
Bio-Rad Laboratories
Integrated DNA
Strem Chemical
USA Scientific
Thorlabs
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Newark InOne
Digi Key
Cambridge Valve
Dry Ice
Stratagene
Rainin
Cambridge Isotope Labs
Beckman Coulter
Potential for furniture
vendor
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Open Issues
• What vendors do we bring into the portal
• “Hosted” or “Punch-out” catalogs
– Pros & Cons to both
• How do we use the “Science” Catalog
• How do we handle sensitive/restricted items
(equipment, radioactives, needles & syringes)
• How will we handle the back-end invoicing
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Potential Savings
• Negotiated price concessions from first group of seven
suppliers.
– Potential to save researchers > $250,000 based on last year’s
numbers
– Savings could be even larger if supplies pick-up increased
market share
• $5-10K in hard dollar payment process savings
• Potential transactional savings
– > 6,500 Purchase Orders
– >12,000 Invoices
– > 7,000 P-Card
– > 11,000 Checks
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Welcome Community Input
Any questions, thoughts or ideas on
this subject can be sent to
thoole@mit.edu
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