February 21, 2005
57, Number 20
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February 21, 2005
Strategic sourcing saves $2.5 million
BY Michael Terrazas
A project began last summer to leverage the University’s purchasing power and obtain more competitive pricing from vendors is yielding real results: about 2.5 million of them per year, in fact, after phase one of the initial project.
Calling the Strategic Sourcing Project, it combines the efforts of a steering committee appointed by Mike Mandl, executive vice president for finance and administration, with an outside consultant. The goal is to negotiate “preferred vendor” contracts with companies and, in turn, receive better pricing on goods and services. The phased project began by examining five areas—information technology hardware, document and mail services, furniture, telecommunication services, and scientific supplies—and so far has worked out arrangements that should produce annual savings of some $2.5 million, or roughly 8 percent of annual expenditures in four of the areas, Mandl said. (Work on document services is still proceeding.)
The outside consultant, Huron Consulting Group of Chicago, has expertise in the higher education and health care purchasing markets and helped Emory negotiate the best deals. For example, Dell is now Emory’s preferred vendor for computer hardware; this does not mean the University will only buy Dell computers, but it is a distinction valuable enough to the company that it reciprocates with more competitive pricing. The arrangement includes deals on computer “bundles,” which one steering committee member compared to what an automobile dealer may offer on a car’s option package.
“If you get air conditioning, power windows and power seats, they’ll bundle those features together and it’s cheaper than if you picked them individually,” said Charlotte Johnson, senior vice provost for administration.
Project manager Rex Hardaway, director of procurement and material services, said Dell has been Emory’s de facto preferred vendor for some time; outside of some departments that often deal in print production and graphic design (for which Macintosh is the industry standard), the great majority of Emory desktop machines are Dells.
Hardaway said, while one of strategic-sourcing goals was to negotiate improved pricing that does not depend on mandating which vendors Emory can use, some cost savings will not be realized unless a degree of behavior change occurs. Where preferred vendor arrangements exist, there is an expectation that departments will take advantage of those arrangements—provided, of course, that the vendor can supply what is needed. Making this easier is the fact that each preferred vendor has agreed to match prices from other vendors on equivalent products.
Other examples of preferred vendors are Fisher Scientific for laboratory equipment; Steelcase and Haworth for furniture; Tech Depot (a division of Office Depot) for computer peripherals and printers. For a complete list of preferred vendors, visit http://epic.emory.edu and follow the links to the purchasing department.
The commodity areas selected for the first phase of the project were those in which Emory devotes a large proportion of expenditures, Johnson said. The second phase will examine IT hardware and software, copiers, courier services, subsets of medical supplies, and telecommunications.
“The efforts of the purchasing department, the sourcing steering committee and the consultants we engaged for this initiative have been very good,” Mandl said of the first phase. “They worked hard to review data and business plans, and then negotiated with vendors to establish new contracts for Emory’s benefit. Given the many talents of the committee and the manner in which all stakeholders worked together on this initiative, I am not at all surprised by the level of ongoing savings generated for the University.”
Anyone with questions about strategic sourcing or preferred vendor arrangements should call Hardaway at 404-727-4332.