Benefits of Automated Procurement System at Caltech
The California Institute of Technology (Caltech) is a prestigious private university and one of the world’s premier research institutions. With its mission to expand human knowledge and benefit society through research integrated with education, Caltech investigates the most challenging, fundamental problems in science and technology in a singularly collegial, interdisciplinary atmosphere, while educating outstanding students to become creative members of society.
“TechMart has drastically reduced the amount of hard copies needed to process a transaction. It also saves time because the need to call many of the most commonly used suppliers has been eliminated with punch-outs and hosted catalogs.”
Caltech is not immune to the challenges faced by virtually all colleges and universities, particularly in today’s economy: the need to adapt to shrinking budgets without compromising quality standards or depriving the staff of the goods, materials and services they need.
After reviewing expenses, Caltech’s procurement staff realized that in order to control costs, they needed far better visibility into purchasing patterns—what is each department spending, how much are they paying for items and what share of total spend is each vendor getting? This scrutiny led to the decision to completely transform the procurement process.
Specifically, Caltech’s procurement managers wanted to:
- Gain efficiency by eliminating a paper-driven process in favor of order automation.
- Streamline the ordering process across divisions/departments.
- Maximize visibility into order status.
- Provide end users with direct access to negotiated contracts.
- Automate the financial approval hierarchy.
- Create and deploy an electronic clearinghouse for auditable transactions.
Once these basic but critical functions were accomplished, the procurement managers would be able to focus on issues that provide sustained improvements and transform purchasing from an “order shop” to a strategic procurement function, with end-user departments utilizing the assistance of purchasing staff for complex purchases.
In 2004, Caltech procurement experts selected JAGGAER, a modular suite of automated procurement applications, to meet its stated objectives. Specifically designed for colleges and universities, JAGGAER manages the entire institutional procurement cycle—from requisitioning, approving and purchasing to receiving, invoicing and payment processing.
Using JAGGAER eProcurement, Caltech created “TechMart,” its private eMarketplace for electronic ordering. The entire campus community was given access to a wider range of suppliers and to easier, more cost-effective purchases. Both students and staff saw benefits.
From a graduate student in the physics, mathematics and astronomy division: “I love TechMart. I’m able to order supplies while working in my lab at two o’clock in the morning!”
From biology shopkeeper, Jose Gonzalez: “TechMart has drastically reduced the amount of hard copies needed to process a transaction. End users simply create a requisition in TechMart and submit it electronically. In most cases, accounts payable does not have to send out a hard copy of the invoice because all the information needed to pay it is already in the Caltech accounting system. It saves time because the need to call many of the most commonly used suppliers has been eliminated with punchouts and hosted catalogs.”
The most important benefit Caltech realized through its procurement transformation has been cost reductions without quality compromises. Visibility into spend has enabled the procurement department to aggregate and leverage institute-wide purchasing volume, negotiate better contracts and manage contract compliance. End users also gained better pricing by using catalog suppliers, which in turn resulted in increased contract compliance.
In addition, due to efficient processing of orders, Caltech has not had to add staff to meet increases in the level of oversight and need for compliance that have been caused by continuous changes and additions in federal policy, increasingly complicated state and local tax laws and incessant activity by internal and external audit agencies.
Bottom Line Results
- Spend under management increased threefold in four years.
- Cost reduction without quality compromise.
- 98 percent user adoption and satisfaction with eProcurement system.
- Increased contract compliance.
- Only 1 percent of purchase requisitions still made manually.
Today, Caltech is using a full JAGGAER suite of solutions across campus. Procurement executives intend to continue to implement additional features of JAGGAER ePRocurement, such as showcasing and promoting sustainable products.
Perhaps the most persuasive proof of the value of the JAGGAER solution is the unusually high adoption rate. In most cases, the adoption rate is between 96 and 98 percent, largely due to JAGGAER’s ease-of-use and detailed product search features. Though there was no mandate to use automated purchase requisitions—and there will always be users who prefer their pCards—99 percent of purchase requisitions come through the automated system.