Advanced Data Concepts, LLC State of Wisconsin Procurement Analysis Project Executive Briefing for...

Advanced Data Concepts, LLC

State of WisconsinProcurement Analysis Project

Executive Briefing for

Desired Future Situation & Detailed Recommendations

January 2001

2© 2000 Advanced Data Concepts, LLC State of Wisconsin

BUSINESS CASE FOR ACTION

The State purchases an estimated $900 annually State Bureau of Procurement (SBOP) has the ultimate

responsibility for all purchases– SBOP is statutorily charged with reporting the annual

purchasing activities• Purchasing Data Processing System (PDPS) was a reporting

system that provided reports on the State’s purchasing activity until it was retired during the States Y2K remediation efforts

• Currently, SBOP must rely on information that is manually prepared without a consistent coding schema

– SBOP has delegated the authority to purchase goods and services to the executive-branch agencies as well as 25 UW campuses


PROJECT OBJECTIVES, DEFINED BY THE INTERAGENCY GROUP, DROVE INTENSIVE SET OF INTERVIEWS AND ANALYSES

OBJECTIVESOBJECTIVES

DESIGN GUIDELINES

PHILOSOPHY

• Identify and realize efficiencies from common business needs

• Reengineer procurement/purchasing processes and implement performance metrics

• Define and understand successful procurements

• Make purchasing a strategic asset

• Provide quality goods and services for the best possible price

• Encourage participation of other units of government and vendors

• Identify and accommodate different business requirements and needs

• Make it easy and timely• Provide timely and accurate information

to all participants• Leverage the State’s scale and scope• Use technology effectively throughout

the procurement cycle


PROJECT OBJECTIVES, DEFINED BY THE INTERAGENCY GROUP, DROVE INTENSIVE SET OF INTERVIEWS AND ANALYSES

ADC spent eleven weeks assessing Wisconsin’s current situation– 132 staff were interviewed

– 4 State vendors were interviewed

– 85 process maps were created

In November 2000, ADC provided the Interagency Group with a picture of the current state of procurement in Wisconsin

Assessment yielded strategies for moving procurement from its current state to a desired future state


APPROACH

State of Wisconsin Management Team

Desired Future SituationModel

Detailed/Global Recommend.

State Agencies and UW Campuses

• Reengineered Business Processes

• Performance Metrics• Data Model• Vendor Analysis

• Detailed Requirements

• System Flow• Organizational

Impact• Politics• Cost• Implementation

ADC

SERVICES

ADC

SERVICES

Current Situation Analysis

• Data Collection• Interviews

•130 staff• 4 vendors

• Maps•Process•Systems

• Validate• Best Practices


COMMON THEMES & IMPORTANT FINDINGS

Purchasing Process– The creation, routing and approval of requisitions and

purchase orders is largely a manual process– The mix of manual and automated purchasing and

financial systems result in redundant processes and non-value added tasks

– Multiple levels of approval add time and complexity to informal purchasing process

– Lack of standardization and consolidation of commodities is costing the State money


COMMON THEMES & IMPORTANT FINDINGS ...

Data Management– WisMart currently does not adequately support the

procurement and related functions– Lack of standard commodity coding system inhibits

accurate reporting of purchases– No Data Warehouse to capture purchasing spend data

Professional Development– Procurement staff are not in a continuous improvement

program– Cross-training does not exist



Six Purchasing Systems: – PurchasePlus– TIPs– Rapids– Proteus– WisMart– PeopleSoft

Six Accounting Systems:– FARs– EAPS– FOS– FMS– PeopleSoft– WisMart

Existing Automated SystemsExisting Automated Systems



Sta

te A

gen

cy

Commerce Manual WISMART Manual Manual Manual WISMART WISMART N

DATCP Manual WISMART Manual Manual Manual WISMART WISMART N1

DHFS Manual Manual / FMS5 Manual Manual Manual WISMART FMS Y

DNR Manual WISMART Manual Manual Manual WISMART WISMART N2

DOA PurchasePlus PurchasePlus Manual4 Manual4 Manual WISMART WISMART N3

DOCManual /

PROTEUSManual / FMS5

PROTEUSManual Manual Manual WISMART FMS Y

DOT TIPS TIPS TIPS TIPS TIPS WISMART EAPS/FOS Y

DWD RAPIDS RAPIDS RAPIDS RAPIDS RAPIDS WISMART FARS Y

SBOP PurchasePlus PurchasePlus Manual4 Manual4 Manual WISMART WISMART N3

UW System PeopleSoft PeopleSoft PeopleSoft PeopleSoft PeopleSoft PeopleSoft PeopleSoft Y

Sta

te A

gen

cy

Notes:1. DATCP has developed a set of VisualBasic macros that allow s the mass uploading of certain transaction types from Excel to WISMART that are processed through the interface system.2. DNR has a Grants subsystem that generates recurring payment and liquidation transactions that are uploaded to WISMART and processed through the interface system.3. DOA has developed a w eb-based application, PurchasePlus, for Requistion creation, tracking and approval, w hich in turn generates PO transactions w hich are uploaded to WISMART and processed through the interface system.4. Phase 3 of the PurchasePlus implementation w ill address Invoicing and Receiving.5. PO information is manually entered into FMS from the hardcopy purchase order to maintain encumbrance balances.


Leadership/ComplianceBest Practices Process High Moderate Low

1. Centralization vs. Decentralization X2. Cross Functional Sourcing X3. Dollar Thresholds & Solicitation Types X4. Informal Bid X5. Formal Bid X6. Printing X7. Statewide Contracts (Leveraging Volume) X8. Intergovernmental Procurement X9. Procurement Audits X10. Purchasing Transactions (PO’s and Req.’s) X11. P-Card X12. Vendor Payment X13. Vendor Management (Vendor Net) X14. Measure Supplier Performance X15. Minority Business Development X16. Reporting X17. Automated Systems X18. IT Organization X19. Systems Architecture X20. Data Management X21. Business Intelligence X22. Training X

COMMON THEMES & IMPORTANT FINDINGS - BEST PRACTICES EVALUATION


Buyer/Supplier ManagementPurchasing as a Strategic Asset

EMBRACING THE FOLLOWING STRATEGIC FRAMEWORK WILL DRIVE PROCUREMENT & OPERATIONAL EXCELLENCE

Strategic Planning• Continuous Learning &

Innovation• Review Buying and

Supplier Behavior• Strategic Sourcing• Key Performance

Indicators

Technology Architecture• Enterprise Application

Solution• E-Procurement • Data Warehousing• N-Tier / Client-Server

Architecture

Business Process Re-Engineering

• Best Practices• Imperatives• Organization Impact• Commodity Code

Standardization• Human Capital

Development

Vendor Management• VendorNet• E-Procurement• Supplier Performance

Measurement


THIS PROJECT RESULTED IN SEVERAL MAJOR RECOMMENDATIONS

THE FOLLOWING IMPERATIVES MUST BE ADDRESSED TO REALIZE IMPROVEMENT OPPORTUNITIES IN THE PROCUREMENT CYCLE.

– Leverage Large Volume Purchases - achieve maximum vendor discount

– Expand Use of Cross-Functional Teams - develop sourcing strategies for high volume and complex purchases

– Approval Process - decrease approvals to one per transaction (requisition and purchase order)

– Commodity Coding - standardize on UN/SPSC naming convention– Purchasing Card Reporting and Management - report on P-Card

purchases by commodity and dollar amount– Purchasing as a Strategic Asset – establish purchasing as an

integral part of the strategic planning process



KEY IMPERATIVES CONTINUED …

– Expand Training Program - provide a continuous improvement program for SBOP and agency procurement staff

– Standardization and Consolidation - institute a standardization program to achieve cost savings

– VendorNet Official State Bidders List - eliminate all bidders list but VendorNet

– Vendor Data Rationalization - WISMART the only vendor table for State

– Key Performance Indicators - for Staff, Vendors and Customer Satisfaction

– Develop Data Warehouse - for the analysis of statewide purchasing activity and spend data


SEVERAL SYSTEM SOLUTION OPTIONS EXIST

Option Degree

of Change

Complexity Timeframe Cost Benefits

1. a) Maintain Existing Environment b) Deploy Data Warehouse

Low Low 1Q00 Low Accurate reporting of Spend data

2. a) Deploy a Purchasing Software (WISMART Agencies) b) Deploy Data Warehouse

Medium Low 1Q00 Low Accurate reporting of Spend data

Automated purchasing 3. a) Upgrade WISMART (v3.0)

b) Migrate DHFS/DOC and DWD to WISMART c) Deploy Purchasing Software (WISMART Agencies)

High Medium 2002 Medium Accurate reporting of Spend data

Automated purchasing Eliminate FMS and

associated costs 4. a) Upgrade WISMART (v3.0)

b) Migrate all Agencies to WISMART c) Deploy Purchasing Software (all Agencies)

High High 2002 High Accurate reporting of Spend data

Automated purchasing Single Accounting System

5. Deploy EAS Solution Very High

Very High 1Q00 Very High

Fully integrated purchasing, accounting and financial management



SYSTEMS SOLUTIONS– Near-Term, Immediate:

Develop Data Warehouse to capture data for the analysis of statewide purchasing activity and spend data

Conduct detailed feasibility study to determine best approach for dedicated statewide procurement solution that automates the requisition to payment process

Enhance in-house purchasing system (e.g., PurchasePlus) Purchase procurement software package (e.g. PurchasingNet,

Compusearch Software – Prism, Dynamic Software, MRO Software, …)

• Deploy solution into the WISMART agencies which automates the majority of manual purchasing functions within the State Agencies



SYSTEMS SOLUTIONS– Medium-Term:

Utilize E-Procurement – use reverse auctions and/or strategic sourcing for new purchases where feasible

Chief Information Officer – centralize technology initiatives under leadership statewide executive

– Long-Term: Adopt the implementation of an Enterprise Application System

(EAS); also referred to as an Enterprise Resource Planning (ERP) System

Includes consideration of upgrading WisMART (AMS Advantage 3.0 Software) and migrating all agencies to WisMART in conjunction with retaining newly deployed statewide procurement system


AN EAS/ERP IS THE RIGHT LONG-TERM SOLUTION AND MUST EXTEND BENEFITS BEYOND PROCUREMENT TO JUSTIFY BUSINESS CASE FOR INVESTMENT

Pursuant to Executive Order No. 408 and specifically Section 14.019 of the Wisconsin Statutes, the Secretary of the Department of Administration is to create an internet-based “service center” giving citizens access to core state government services which includes portals, e-procurement, e-records and e-signatures.

Electronic Government requires a well designed front-end web portal, tight integration with back-office administrative systems (finance, purchasing, human resources, etc.), and reengineered business processes to successfully manage the new business model.

Enterprise Application Systems or ERP serve as the most comprehensive foundation for the successful implementation of electronic government initiatives. Such systems not only provide the technical capability to make this happen, but also force the necessary degree of organizational change required.


Procurement Today:Managed pertransaction

Hands-FreeProcurement: Managedby exception.

Online productselection

Search large catalogs Personalized views; namedshopping carts

Requisitionapproval

One to multiple levels ofmanagement approval

Transactions automaticallyapproved based on rules

POtransmission

Fax, e-mail, EDI direct tosuppliers; supplierretypes the order

Order is sent through asupplier clearinghouse

Paymentauthorization

Dependent on three-waymatch of PO with invoiceand receipt

Immediate; based onshipment notice

Analysis Sporadic; not linked tosupplier performance

Continuous; integrated inreal time; drivesoptimization of process.

Forrester Research, Inc - Jan. 2000

E-PROCUREMENT HAS THE POTENTIAL TO CREATE NEW EFFICIENCIES BY PROVIDING IMPROVED QUALITY, LOWERING COSTS, REDUCING CYCLE TIME AND TRANSACTION COSTS

SYSTEM SOLUTIONS


BUY-IN MUST BE DEVELOPED EARLY AND REAFFIRMED OFTEN; UNDERSTANDING AND MANAGING CHANGE IS CRITICAL TO ORGANIZATIONAL SUCCESS

Barriers to Buy-In include:– De-centralization has created information silos

• Agency vision instead of State vision• Lack of structured interagency communication

– Independent spirit of agencies• Agencies are operating with a variety of processes and

procedures within the framework of the statutes and procedures set forth by DOA

– Agency staff highly invested in maintaining solutions developed by them for their particular agency

– Lack of centralized leadership in Information Technology • No comprehensive IT strategy to support business goals

– Limited financial resources

ORGANIZATIONAL & POLITICAL CONSIDERATIONS


FIRST STEP... ESTABLISH STRONG EXECUTIVE SPONSORSHIP

The extensive nature of the business change, broad number of agencies and stakeholders impacted, and the balance between central coordination and local control requires strong executive sponsorship– Create common agreement around a common

enterprise view that transcends interagency conflict and “stonewalling”

– Continuously communicate the value and importance of the initiatives



SECOND STEP... CREATE FIVE TASK FORCES, WITH CROSS-FUNCTIONAL REPRESENTATION FROM THE AGENCIES, FINANCE, AND IT

STANDARDS(PROCESSES, COMMODITIES, …)

VENDOR DATA MANAGEMENT(RATIONALIZATION OF VENDOR DATA)

DATA WAREHOUSE(DESIGN & IMPLEMENTATION)

ENTERPRISE PROCUREMENT SYSTEM(EVALUATION & SELECTION)



Change Wis.Stats. 16.004;16.701>Wis.Adm.Code Chapter Adm 9 to indicate that vendors must register with VendorNet to bid with the State and/or receive contracts

Change Wis.Stats. 16.75 to identify legal notice as electronic notification

The State should establish a centralized CIO position to provide consistent direction to the agencies– Centralized leadership in Information Technology would support the

States business strategies and goals while insuring that technology decisions remain aligned with IT strategies

Develop incentives (financial or others) to reward agencies and staff for participating in new statewide procurement initiatives

THIRD STEP… ADDRESS POLITICAL CONSIDERATIONS



WE HAVE TRIED TO ENSURE THAT RECOMMENDATIONSARE CONSISTENT WITH THE INTERAGENCY GOALS

INTRODUCTION

Does Not Satisfy Goal (or not applicable)

Partially Satisfy Goal

Satisfy Goal


Implementation Timeline and Preliminary Cost Estimates

IMPLEMENTATION GAME PLAN

MAJOR INITIATIVE Q1-2001 Q2-2001 Q3-2001 Q4-2001I Data Warehouse:

- Design - $250 - 300K

- Development $100 - 150K

- Implementation $75 - 100K

- Training $50 - 75K

- Hardware: Servers - $75K

- Software: DB License $100K, DB Tools $125K

- Software: Query Tools $250-$400K

II Procurement System Evaluation & Selection

- In-house Solution vs. Package Software

- Consider AMS Advantage Upgrade

III Reengineering Procurement Processes

- Imperative Implementation

- Process Gap closure

IV Vendor Data Rationalization

- Reconcile and Cleanse Vendor Data

- Migrate to Single Master Vendor File

V Implement UN/SPSC Commodity Code System

- Implementation Assistance to SBOP

VI Strategic Sourcing - Phase I

- Commodity/Service Selection $50-$75K

- Market Analysis $30-$60K

- Specification Development $100-$150K

- Agreement Management $25-$50K

VII E-Procurement (Pilot)

VIII Establish Implementation Committee(s) &Communications Program

$300,000

Design, Development, & Implementation$500,000 - 625,000

$80,000 - $100,000

Hardware & Software$550,000 - $700,000

DOA

$200,000

DOA

$50,000

To Be Determined - based on number of agenciesand scope of services

© 2000 Advanced Data Concepts, LLC State of Wisconsin

ADVANCED DATA CONCEPTS, LLC

MANY THANKS TO THE STATE OF WISCONSIN FOR THIS

OPPORTUNITY TO SERVE YOU.

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