PURCHASINGSYSTEMS

ItwasMay2000andChristineClark,atechnologydeploymentspecialist,hadtorespondtoTSPSystems'proposal for the development of a software system that would simplify and integrate the automatedpurchasing process used by the 191 schools in a district of Ontario, Canada. Christine recognized that,although there was a strong need for such system, there was a similarly strong resistance to the proposalfromothersattheAdelaideDistrictSchoolBoard.

THEDISTRICTSCHOOLBOARD

TheAdelaideDistrictSchoolBoard(ADSB)wasformedonJanuary1,1998throughtheamalgamationoffour previously independent school boards in Ontario.This consolidation, like many others in Ontario,was the result of the "Fewer School Boards Act," Bill 104 legislation.The ADSB served 161 elementaryschools and 30 secondary schools, with a student population of about 90,000.The Board employed over8,000staff,includingteachersandsupportstaff.

The main functions of the ADSB were to centrally administer the district's education budget and provideservices,suchasfinance,humanresources,informationtechnologyandpurchasingandwarehousing.

THEPURCHASINGDEPARTMENT

ThemaingoalofthepurchasingdepartmentattheADSBwastoprovideacentralizedpurchasingfunctionfor the schools in the district (Exhibit 2 is an organizational chart of the purchasing department).ThisfunctionwascriticaltotheoperationoftheBoardforseveralreasons:

• Therewereeconomiesofscaleinpurchasingandprocessingordersofincreasedvolumeandvalue.
• Centralized processing was critical for controlling expenses, meeting government regulations andensuring the compatibility of new equipment with existing equipment and systems.For example, thegovernmentrequiredthatpurchasesinexcessof$50,000gothroughaformalcompetitivebidding

process. The purchase of materials and equipment for schools required the consideration of a numberof health and safety factors, such as the toxicity of materials and placement of equipment. Also, it wascritical that, when purchasing computer hardware and software, they be compatible with equipmentandsystemsalreadyinplace.TheBoard'spurchasingdepartmentfacilitatedalloftheseprocesses.

• The purchasing department worked with warehousing facilities, which stocked common supplies andhelpedexpeditethedeliveryofsuppliesandequipmenttoschoolsanddepartments.
• Finally, the centralized purchasing function was meant to provide service to teachers and support staffbyreducingthetimeandefforttheywouldotherwisespendacquiringsuppliesontheirown.Itwasthedelivery of this service that was concerning Clark, as she considered the system for ordering supplieswasnotwidelyaccessibleanduser-friendly.

CHRISTINECLARK

Clark had worked for the purchasing department of the local school board for the past 25 years.Prior tothe consolidation, she was a senior buyer in charge of overseeing the operation of the purchasing system.After consolidation, her role was now divided between the Purchasing and IT departments.She becameresponsible for most technology-related purchases and the deployment of the computer-based purchasingsystem.

THEPURCHASINGPROCESS

There were two primary ways to order supplies through the Board's purchasing department.The first wastoplaceordersthroughacomputer-basedsystem.Thissystemwasaccessibleonlytodesignatedindividuals, usually school secretaries and administrators.Using the Oracle-based system effectivelyrequired some degree of experience with computers and familiarity with the software.Bruce Lawrence, aseniorbuyer,explainedtheproblemwiththecurrentsystemandtheneedforamoreuser-friendlysystem:

Many of the users are not computer literate and are scared by technology.It is difficult atfirst to become proficient at using this system.The secretaries have had to learn to use somany systems in the past couple of years that they are now asking for simple-to-usesystems.

The second alternative was to place request for orders by telephone or fax to the purchasing department.Because of limited access and the initial complexity of the computer-based system, a large number oforders were made this way.This method, however, placed a heavy load on an understaffed purchasingdepartmentandgeneratedcoordinationproblems.Clarkexplained:

It is not uncommon for people here to get 50 phone calls each day!Also, they willsometimes call more than once and talk to different people.You then have more than onepersonworkingonthesameorder.

Thealternativetoplacingordersthroughthepurchasingdepartmentwasto purchasedirectlyfromsuppliers using procurement cards (for purchases of less than $1,000).Some schools were makingunauthorized purchases and having suppliers bill the Board directly.This resulted in non-compatibilityandwarrantyproblems.

Clarkexplainedwhatanimprovedsystemwouldbelike:

We want to move to a "point and click" Web-based system so that any of our 8,000 userscan order supplies easily.They would look at what they want to order and select it.Ourgoal is to reduce the overall number of orders generated and make orders of higher value.We want to concentrate our efforts on the big item contracts, where our work really addsvalueandnotspendtimeonthephonetakingcareofthesmallorders.

THESOFTWAREPLATFORMDECISION

Clark had received a bid from TSP Systems, a well-known software development company, to develop anapplication for processing orders from a web-based interface. Clark explained the issues in making thisdecision:

Weinpurchasingarereadyforthissystem,butotherareas,suchasfinanceandwarehousing, are not interested ingoing in this direction.Our system needs to work inconjunction with both the financial and inventory systems.The finance department justupgradedtoabudgetsystemthatdoesnotgiveusflexibilitytointegrate.

Integratingthesystemwithfinancewasadvantageousbecauseitwouldfacilitateauthorizationofpurchasesandbillingtotheschoolaccountsandwouldallowforelectronicinvoicing.Itwouldalsoallowuserstoorderfromwarehouseinventoryorfrompurchasinginaseamlessenvironment.

Top management had recognized the advantages of implementing a system that would integrate the dataprocessing of all functions, including human resources, inventory, finance, purchasing, etc.Clark'smandatewastofindanintegratedsystemanddevelopaproposalforitsimplementation.Shehadbeenandwas still visiting software development companies looking for such integrated solution.However, themorecompaniesshevisited,thelessoptimisticshewasaboutfindingasuitablesystem.Moreimportantly,she believed that it was likely that other departments would resist any changes in their current systems,particularlyfinancegiventheirrecentinvestmentinthebudgetsystem.

Clark wondered what her next steps should be.There was a strong need to satisfy users with an easy-to-use application that would facilitate direct order placement.The current system was generating heavyworkload on the purchasing department that required staff to work overtime during the week and onweekends.The months of June and August were approaching and that meant the volume of requisitionswould be at their peak from schools preparing for the following academic year.Also, two years after theconsolidation of the school boards, there was still talk about further personnel reductions.It was unlikely,however, that management would authorize the implementation of software that did not integrate all thefunctional areas and would likely require further changes in the near future.Clark knew that this situationrequiredimmediateaction.

Questions:

1. Identify the main and basic issues
2. Assumptions - identified and explained
3. Environmental Analysis - Internal and External
4. Recommendations
5. Final Recommendations
6. Implementation Timeline
7. Conclusion