Observatory Case Study: Mississippi State
University
Mississippi State University implemented the Spikes
Cavell Observatory to deliver improved spend and contract
visibility. We talked to Don Buffum, Director of Procurement &
Contracts and Taylor Adams, Procurement Manager about their
experience to date.
"I don't mind telling you we didn't come into this blind. We
looked at the rest of the marketplace before deciding to go with
the Spikes Cavell Observatory, and we've looked at it again since.
I don't believe there is a better option out there available,
particularly when you look at the cost versus the value. So I'm
delighted and looking forward to the Observatory helping us deliver
real savings for the University and contributing to us being able
to think and act more strategically."
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Tell me a little bit about your agency?
Don: The university has a little over
20,000 students now and around 4500 -5000 employees. We're a very
research intensive University so we're buying a lot of different
things for a lot of different departments. We spend around $112m on
goods and services each year.
Can you describe your procurement function and where
and how it fits into the organization?
Don: We have myself and two purchasing
managers. We've broken up the university's spend by department and
allocated a number to Taylor and the remainder to Jennifer. There
are a further two people in purchase order processing, as well as a
bid specialist and a person who oversees state contracts. When I
arrived four years ago the University was processing around 18,000
purchase orders a year, now we're down to 7,000 as we've moved a
lot of purchases to procurement card.
Taylor: Four years ago we were very much a
paper production shop, and our office has been in a transition in
an effort to become more strategic –the reduction of purchase order
volumes is allowing that to become a reality.
Would you describe the procurement function's role as
mainly tactical or mainly strategic?
Don: Right now about 50/50 but we're moving
in the right direction.
What do you see as the top three challenges for
procurement at Mississippi State University over the next 12
months?
Don: The top area of focus for the coming
year or two is to continue to drive out savings by
implementing an eProcurement system alongside the Spikes Cavell
Observatory in order to help us better manage maverick
spend.
We'll also be looking at standardization in some areas. We
might not be mandating that they use "Product X", but coming up
with 5 alternatives and saying, "Use one of these." We can at least
control some spend a little bit better that way.
Using the Observatory, we'll have information at our
fingertips that will help us educate our customers on where the
spend is going – this will help significantly in changing buyer
behavior. We've already used the Observatory to establish that we
spent over $600,000 last year at a local retail store. And you know
every single one of those purchases was probably at list price as
most retail outlets are not giving us a discount. So with the
detail on hand from the Observatory, I'm looking at this and
many other examples to contact some of the departments and say,
"You spent X dollars at this store last year. Let's look at
better ways to spend the University's money."
You've been working with Spikes Cavell to deliver
improved spend visibility. What were you hoping to achieve when you
undertook the data transformation and spend analysis
project?
Don: I wanted to have the ammunition that
would help me get better control over the University's spend and in
particular identify maverick spend. When I looked at the
Observatory, it was clear that it was a very cost effective way to
help me do that and a lot more besides. We buy a lot of different
goods and services at the university and without the Observatory,
it's very difficult to get a firm handle on how much we're spending
by category and with whom.
The Observatory also gives us the information we need to
identify where we were buying from the same vendor all over the
campus but didn't know it. None of our 200 departments is going to
look at their own spend and say, "Oh that's something we spend a
lot of money with, we need to compete that". So that's 200
different "business managers" that only see what they spend. So we
can use the Observatory to go to the department heads and say,
"Okay guys, you don't spend a lot in the category, but the
university as a whole does. Why don't we compete this and come up
with a contract that you can all utilize?"
Taylor: A good example of that is gases.
The University buys a lot of gases, for example Oxygen and
Acetylene, as well as specialty research gases. We had a vendor
contact us to discuss a pricing proposal and initially we thought
this was going to be a relativity minor line item. Well we drilled
into the information in the Observatory and within a matter of
minutes we'd established that across the University, we were
spending the better part of a million dollars a year across three
vendors, in gases. To get to that would have taken a lot of effort
as our systems just aren't set up to make that analysis as easy as
it should be.
What has better spend visibility enabled you to achieve
to date?
Don: The Observatory has already been
invaluable in giving us way better visibility over our spend than
we've ever been able to achieve with our existing systems. For
example we've been able to show where we're using multiple vendors
in the same category where different departments have been using
these different vendors. It has enabled us to ask the question of
department heads and it has already resulted in us identifying
priority categories to focus on.
Another simple example of how the Observatory has helped was
when we were able to determin exactly how much was spent
on food last year. Using the Observatory, we were able to
show where it was spent was spent - which vendors, which
departments and how much with each - and be confident that we were
looking at all of our spend on food. With the Observatory we were
able to do it quickly, with little effort on my part, and there are
many similar examples. That alone will save us a huge amount of
time and effort across the year.
Taylor: I think it's fair to add that it
seems like every time we use the Observatory, we end up with a new
strategic initiative that has the potential to save us time, money
and effort! We were recently having a dialog with a number of
the University's IT vendors, most of whom were resellers. After a
quick analysis using the Observatory, we realized that the value of
our spend was substantial enough across the relevant categories
that we don't necessarily need to deal with resellers. We may be
better off dealing with some of the manufacturers directly and
getting better prices as a result.
What are you anticipating better spend visibility will
help you achieve in the future?
Taylor: I think there are a number of
things we could do. We've started to identify the low hanging fruit
and now we're getting into the more complex analysis – uploading
our contacts and identifying where maverick spend appears to be
occurring by category for example.
Don: We think that there's a major
opportunity to use the Observatory to identify opportunities to
cooperate with other universities and colleges in the state. To do
that though we need to have the other universities using the
Observatory. One of the things I am planning to do is meet with the
other universities, show them what we've already done and show them
what we might be able to do together.
Taylor: Don and I have talked about this a
lot, and more effective cooperation with other universities and
colleges is what is potentially most exciting about the
Observatory. If we can get the others on-board, we'll be able to
quickly identify common vendors, no matter what they're called in
the financial system, and establish which categories make the most
sense for cooperative contracting efforts. There's no way we'd be
able to do that without the Observatory.
Do you think you could have undertaken the data
transformation and spend analysis project without external
help?
Don: No, absolutely not.
How did you find working with Spikes
Cavell?
Don: Excellent. There's never been a time
when I've contacted your people and not got a quick response and
proper response. The training has been good. If there's something
I'm looking for or trying to figure out how to do it, I contact our
account manager, they give me the answer back. Recently I had a
kind of a unique request, I don't remember what it was, but I
couldn't figure out how to pull it all together. Based on my
account manager's response it was very complex, but rather just
telling me how to do it, he told me how to do it and also ran the
report for me, so it's just fantastic.
You have one word to describe Spikes Cavell to a
colleague or peer. What would that one word be?
Don: Beneficial. Great product, great
service at a very reasonable price. And I think your pricing model
is huge – most finance people are not going to come out and admit
that their finance package doesn't give them the information
procurement need. So me being able to go in there and tell them,
"Look, we can get this cleaned up, the spend properly categorized
and a set of easy to use online tools to manipulate it, and it's
only going to cost a modest number of dollars each year." They're
happy and willing to listen and support it.
Taylor: I don't mind telling you we didn't
come into this blind. We looked at the rest of the marketplace
before deciding to go with the Spikes Cavell Observatory and we've
looked at it again since. I don't believe there is a better option
out there available, particularly when you look at the cost versus
the value. So I'm delighted and looking forward to the Observatory
helping us deliver real savings for the University and contributing
to us being able to think and act more strategically.
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About Mississippi State University
Mississippi State University is a land-grant university located
in Oktibbeha County, Mississippi, United States. It is classified
as a 'comprehensive doctoral research university with very high
research activity' by the Carnegie Foundation. MSU currently has an
enrollment of over 20,000.
www.msstate.edu
Published: 9/29/2011
TAGS: msu, spend visibility, observatory, mississippi state university, procurement