The goal of the Central Receiving Initiative is to reduce procurement costs by directing the majority of orders to vendors that have negotiated contract pricing as well as reducing traffic in the campus core by having most purchases delivered to Central Receiving on Oak Street.
The cornerstone of the project is the iBuy online procurement system that became available universitywide in July 2007, offering core products from contracted vendors’ catalogs at substantial discounts. Units have been able to purchase commodities through either iBuy or WebCat, the online ordering system managed by Central Stores and Receiving.
Effective the first week of October, Web-Cat was replaced by iStore, a new warehousing application used by Central Stores and Receiving. Although campus units may purchase some items from Central Stores through the iStore application, the selection is reduced, and many of the products are available only from strategic vendors in iBuy.
iBuy is being expanded and now offers about 18 vendors – including OfficeMax, Dell Computer and Hewlett Packard. About 15 more vendors will be added during the next few months, including several vendors that sell audiovisual equipment and supplies, and nine vendors that offer life sciences-related products, said Brad Sheriff, director of university strategic procurement in the Office of Business and Financial Services.
The iStore application also will be moved into iBuy within the next few months, offering items such as copy paper, janitorial and restaurant supplies, maintenance and repair items and Apple computer products.
“And that’s where the savings come in – funneling the bulk of purchases for specific items to specific vendors,” said Pam Voitik, director of campus services. “Yes, you may have an item or two that’s more expensive to buy, but in the long run, everything will be more economical to buy because of the volume. We can negotiate contracts where the prices are a whole lot better than the prices individuals get going out and using various vendors for purchases. And in today’s economy, that can be very important.”
A 2004 study by the consulting firm Accenture indicated that the university could save as much as 5 to 15 percent on the $308 million it spends annually on purchases of commodities by changing its procurement to include a systemwide application such as iBuy that encouraged units to buy from contracted vendors and helped better manage spending by facilitating data analysis.
“We are directing everyone to go through iBuy so we can have one central point of information for vendor negotiations and monitoring vendor performance,” said Ken Merrill, director of Stores and Receiving.
“We are asking for cooperation – not mandating – that units use strategically negotiated vendors,” said Maxine Sandretto, assistant vice president of business and financial services. “When we negotiate contracts, we work very hard to ensure that the vendor will provide the best service to the university.”
While pricing is part of that, there are other costs as well, such as the administrative costs of processing payments to multiple vendors and personnel time spent shopping, Sandretto said.
A study by Illinois Business Consulting during spring 2007 indicated that the personnel costs per purchase for requisitioning supplies electronically through iBuy were $4.31 versus $13 for a P-card transaction and $18.47 for an SCT-Banner requisition.
WebCat had about 3,000 to 4,000 users, and there was “a huge surge in people asking for iBuy training” when it was announced that WebCat would be discontinued, Sandretto said.
During fiscal year 2009, iBuy generated an average of 3,360 purchase orders monthly. For the first quarter of FY10, that grew to 4,417 purchase orders monthly. And from Oct. 1 to Nov. 15, it soared to 6,343 purchase orders, Sheriff said.
To reduce traffic on campus and lower delivery costs, shoppers are being asked to have most purchases delivered to the Central Receiving and Distribution Center on Oak Street. However, “there are certain commodities that are time-sensitive – such as food – or that require special handling or special permits – such as livestock and hazardous materials – that must be delivered directly to the destination,” Merrill said. “But, if we can mediate the number of delivery vehicles on campus, we can eliminate a lot of traffic congestion.”
“Since Central Stores and Receiving is making deliveries around campus every day in smaller vehicles, it’s much safer to have them redelivering purchases than having a big Staples truck back up to somebody’s dock to unload a couple of reams of paper,” Voitik said. “If they are delivering to one location, vendors will give you a discount on delivery charges or what their markup might be.”
The Central Receiving and Distribution Center is being funded by a technology fee that vendors pay to have access to iBuy in addition to reseller rebates from computer sales and negotiated discounts from vendors based upon the single point of delivery.
An e-settlement system that will accept vendor invoices electronically, compare them against purchase orders and pay them electronically is being developed. That system is expected to go into effect in May 2010, Sheriff said.