Oakland University Purchasing

Final PresentationDecember 1st, 2016

Sara, Greg, Andrew, Stephanie, & Maria

Agenda: ● Organization Overview● Current Condition of the Dysfunctional Process and the

Problems it Causes● Team Vision● Root Cause Analysis● Target Condition, Countermeasures, & Implementation

Plan● Lean Thinking

Meet the Staff“A group of people get together and exist as an institution we call a company so they are able to

accomplish something collectively that they could not accomplish separately[...]”

Paula ReyesDirector

Judy Burton Julie HamiltonBuyer Buyer

Eileen ArseneauPurchasing Assistant

Brenda BoorOffice Assistant

Overview● The Oakland University Purchasing Department is a customer service provided to staff,

faculty, & students. The Purchasing Department: ○ Purchases goods and services for items over $5,000 (items range from pencils and

office paper to construction companies)

○ Check for any legal issues or secure insurance for applicable purchases

○ Works with preferred and external vendors to prepare quotes and determine best price

○ Places bids for expensive purchases

○ Processes requisition into a Purchase Order number

○ Places the order

● Over 250+ employees have purchasing rights

● Three forms to purchase an item: SOP, P-Card, Purchase Order

Our First Impression

Paper on paper… On paper.● Large workload for a small

department (overwhelmed)● Frustration in the process● Dysfunctional process is the

norm

● Reluctant to change but still open minded

● Long-term dedicated staff● Quiet department/work

environment

Key Customers FACILITIES

UTS

ATHLETICS

FACILITIES

SCHOOL of MEDICINE

STUDENT BOARDS

Requirements:● Request proposals● Submit multiple quotes● Department signature authorizations● Knowledge of P-card or SOP process● Balanced spending budgets

● OU Purchasing Department Staff (Serve as means of communication between staff, management, finance departments, customers, suppliers, and the University community)

● OU Departments (responsible for making conscious decisions in purchasing process)

● OU Board of Directors (overlook and approve decisions made by OU Purchasing Department)

● OU Staff & OU Students (Enjoy purchases claimed by the University)

● Surrounding Communities (Auburn Hills, Rochester, Pontiac). Appreciate services, events, and attractions developed by University.

Key Stakeholder’s

Key Suppliers1) American Data Security

(data/shredding services)

2) Apple

3) Dell and HP

4) SEHI (printers)

5) Detroit Pencil Company

6) Konica/Canon (copiers & maintenance)

7) Entech Staffing Solutions

8) Nicholas Paper and Supplies (janitorial supplies)

9) Blue Lakes Transportation

10) Trinity Transportation

Benefits of using a preferred Vendor● Lower procurement costs● No bidding required● Increased value-added services● Higher vendor performance levels

Suppliers must have:● Insurance (on top of what University

already has)● NO conflict of interests● Certifications

What Do the Customers have to say?Approximately how often do you use the

purchasing department?

50% Everyday

16.6% Few times a

Month

33.4% Once a Week

I feel as though the purchasing process is sufficient and should not be changed.

33% Agree

33% Neutral

33% Disagree

*Scale: Strongly Agree - Strongly Disagree*

What Do the Customers have to say?AI feel as though the purchasing process gets my

items to me in a timely manner.

66.7% Agree

16.6% Neutral

16.6% Disagree

When purchasing an item, I know exactly what signatures I need & don’t need to ask to find out.

83.3% Agree

16.6% Disagree

*Scale: Strongly Agree - Strongly Disagree*

What Do the Customers have to say?I feel as though the signatures required are

appropriate and not excessive.

33% Agree

16.6% Disagree

16.6% Neutral

Have you encountered any problems with the process of purchasing an item? If so, please

explain.

16.6% Strongly Agree

“Sometimes there is a long delay in processing blankets that need to go

out to bid”

“The most difficult part is obtaining all of the documents required by OU policy to set up the Purchase

Order - comparative bids, insurance certificates, contract approval (by

Office of Legal Affairs), UTS approval (for software), sole source

documentation, W-9 from new vendors, etc.”

“When a company changes name or operate under a DBA it can get tricky to get Accounts Payable to cut a check. I always check with Julie Hamilton now on how to fill

out the purchase requisition.”“The main problem I encounter is when

other departments are involved and everything is on hold until someone from that department signs off. (Legal, UTS,

Risk Management) If my requisition does not need approvals from other

departments, the buyer's complete purchase orders within a reasonable

amount of time.”

“I don't have any problems purchasing items, I think that the issue is that there are periods of time during the year when there is an influx of

ordering and it just takes more time to get through all of the requests[...]”

What Do the Customers have to say?What would you estimate the average time is from

when the requisition is filled out to the time you actually received your purchase?

Have you encountered any problems with the process of purchasing an item? If so, please

explain.

“I think they could use more staff to help with the increase in buying power across the university- this to me isn't a

purchasing issue.”

“1. The biggest issue is when other departments get involved. Depending on which department we're

waiting on, a Purchase Order can take up to 3 weeks to be completed. 2. Keep the purchase orders to one page. On a positive note, I really like having the POs

emailed to me”

“I would like to be able to scan my signed documents and email them to purchasing.

Instead of having to mail them or walk them over myself. Also we used to be able to

lookup and see if a req was received, we no longer have that ability.”

“7-10 Days”“Two weeks”

“It depends on the product. If it is office equipment or a computer it could take 2 to 6

weeks for the product to arrive.”

“I prepare the purchase reqs for others in the department, so someone other than

me is usually receiving the item - not sure of the average time to take delivery.”

If it's a PO, when it does not need another department's approval then I have no problems

with the time. If I ask for something to be rushed this department is extremely helpful. On average requisition to purchase order is within one week.

Longer if pending approvals.

Process Map Indicators

Purchasing Gone Modern

Purchasing On A Dime

Deleted from Dysfunctional Process

Problem Area

MUDA

Value-Ad.

The Dysfunctional Process

51% MUDA

10% Value-Added

58 TOTAL Steps

30 Steps of MUDA

6 Value-Added

The Problems

Minimal Standards or process in place

Lack of communication between departments

Out-of-date SpreadsheetsMinimal metricsInadequate transportationWaitingOverprocessingConsistently changing processLack of resources

Major Problem in Result of the “Problem” ➔ Customers don’t complete the requisitions accurately

◆ Purchase Order Requisitions pile up● Purchase Order requests are delayed

○ Customer is unhappy

➔ Customer does not process a requisition timely (Ex. OU Athletics bus trip)◆ Purchase Order must be rushed

● Rushed order takes priority before other waiting customers

➔ Waiting and delays may break relations with suppliers

➔ Frustration, Employee dissatisfaction

➔ No metrics on errors by customers to defend processing delays and areas for assistance by upper management

➔ Customers begin to question the effectiveness of the Purchasing Department

Root Causes of the Key Problem Areas ➔ Requestor calls Purchasing Department:

◆ Root cause ● Unnecessary and too many signatures required● Requestor does not know process or who is required to sign off ● Department purchasing approvals are out of date (unaligned with HR)

○ Causes a delay in the process

➔ Document travels by foot, securing up to 5 signatures:◆ Root cause

● Inter-campus mail takes too long● No support from IT to implement online e-signatures● Banner system has too many copies of same document, also pulling reports from

system is difficult for users.● Purchasing Department will travel by foot without complaint just to hurry along

process, this in turn creates habits that go unchanged.

➔ Waiting and delays may break relations with suppliers

➔ Frustration, Employee dissatisfaction

➔ No metrics on errors by customers to defend processing delays and areas for assistance by upper management

➔ Customers begin to question the effectiveness of the Purchasing Department

Root Causes of the Key Problem Areas Cont.... ➔ Process delayed due to waiting:

◆ Root cause ● Approvals are time sensitive● Legal can hold up time, due to making sure purchases meet standards set by their

department and University standards.● UTS Agreements (department itself is backed up)● Purchasers are left in the dark as to where their purchase is in the process

○ No connectivity/reports in Banner system ➔ Paper waste:

◆ Root cause ● Not having online systems in place to track and follow orders● No e-signature system in place● Requires multiple people to touch and sign off● Quotes, bids and agreement are potentially signed and printed as hardcopies● Documents end up getting shredded in later phases of process

Purchasing On A Dime

48% MUDA

14% Value-Added

42 TOTAL Steps

20 Steps of MUDA

6 Value-Added

12 of steps removed

51% MUDA

10% Value-Added

58 TOTAL Steps

30 Steps of MUDA

6 Value-Added

Dysfunctional Process

VS.

Purchasing Gone Modern

16% MUDA

16% Value-Added

31 TOTAL Steps

5 Steps of MUDA

5 Value-Added

30 of steps removed

51% MUDA

10% Value-Added

58 TOTAL Steps

30 Steps of MUDA

6 Value-Added

Dysfunctional Process

VS.

UTS Support & Limitations - Interview●

OU Purchasing Hopes vs. Our Goals 1. Less paper

2. Implement online approval paths3. Remove “by foot” transportation

4. Reduce production time

1. Less paper2. Remove “by foot” transportation & market

electronic scanning3. Eliminate over processing

4. Improve communication between departments

5. Implement communication through new hire notifications which will reduces out-of-date spreadsheets an inaccurate approval paths

6. New standards and checklist 7. Create and educate eSignatures

8. Virtual Trainings or videos available online and required

9. Implement a new acknowledgment for customers

10. Implement 5S Practices

Our Roadblocks

● Banner printing limitations● Limited resources to support with time and money● Delay from participating parties

○ Insurance○ UTS approval○ Legal○ Vendors to confirm goods/service and align with requesters needs○ Signature path

Week 2 Month 1 Week 6 Month 2 Week 10 Month 3 Week 14 Month 4

Ideal Timeline of Implementation Plan

Intradepartme

ntal Meeting

to discuss key

objectives

First 20 POR’s to come through are timed and tracked

Trial Period

Implement Purchasing On A Dime

Create virtual trainings

New approvers must have

certification

Communicate all changes & standards

Begin error and cycle time tracking

Update and

deliver policy to

authority for

approval

Slim & update

approvers file

and post on

share drive

Host an

interdepartment

al meeting to

communicate

changes

Intradepart. meeting to discuss results & II’s

NHN

Process

in place

Time & track next 20 POR’s to come through

Formal Period

January 2017NHN Process in Place. Policy changed. Approvers list updated and publicized. All parties aligned and communicated to

March 2017POD Trial Period complete. Begin formal implementation

June 2017Visualize and note ALL ideal electronic system coding as a department

July 2017Present to UTS and other authorities. Update policy to align with electronic approval path

October 2017Communicate with 2 departments changes to test new system.

Jan Feb Mar Apr May Jun Jul Aug Sept Oct Nov Dec

Nov. 2017Fix any errors in system

January 2018Formal Implementation of Purchasing Gone Modern

December 2017Create virtual trainings and communicate standards of PGM

PGM - Purchasing Gone ModernPOD - Purchasing On A Dime

The “Big Picture”

Policy Deliverables

Current Policy #1000

“Vouchers for already established and approved purchases [...] must be signed by the fund signer taking responsibility for the current transaction. Typically, this will be the department business manager or department head. Vouchers without prior authority, such as SOP’s and PV’s, must be signed by the person who has the appropriate level of Commitment Authority and Fund Signing Authority. Multiple approvals may be required as in the case of purchases charged to grant funds, software license purchases, and purchases requiring the review of Risk Management

Deliverable 1

“Vouchers for already established and approved purchases [...] must be signed by the requesting department head. Vouchers without prior authority, such as SOP’s and PV’s, must be signed by the person who has the appropriate level of Commitment Authority and Fund Signing Authority (The list of approvers can be found “here”).

Deliverable Support

● Only specifies 1 approving signature● The list will be located on a share drive and purchasing rights will be narrowed down.● Last sentence is exempt because before moving forward with requesting a PO it already

states in the policy they must go through Insurance, legal, grants, or UTS before completing the process. Therefore by purchasing signing off on a requisitions means all requirements have been met.

Implementation

“Change is not an event, it's

a process.”Reduce the employee with spending authority by 50%Create pin ID that when used system will identify allow certain

access to that specific person and deny purchases over budget amount

Create a maximum of 2 signatures per requisitionCreate a thorough training program (focusing on people at the

front-end of the process). Including an acknowledgment that must be signed before given rights to purchase anything. Training may be done directly with the Purchasing Dept., or by virtual tutorial (youtube/webinar)

Electronic signature forms- send forms by emailAutomated approval path for approvers and appropriate Buyer.

The PO is created based off Buyers approval.Approver Spreadsheet in Share DriveNew Hire Notifications from HR Department or relating

Departments to update Approvers SpreadsheetCurrent, correct revised spreadsheet with half the amount of

approved buyersAutomated tracking emails sent to requestorMetrics are now attached in approval of PO (excluded Error

Tracking)

Process Owner

Key Metrics

Follow-Up

Process Owner

Paula Reyes (direct)OU Purchasing department (indirect)

Key Metrics

1) Cycle time- how long between the requisition is created and Purchasing created the PO. *Newly Implemented by Purchasing Staff*

2) Error Tracking - Who is making them (departments, individuals, etc). Locate the errors. Retrain or rethink process.→ By using these two key metrics, the turnaround to fix errors will be reduced increasing efficiency and accuracy .

Follow-Up Activities

1) Send out weekly updated sheet of approved/certified requestors. “New Hire Notification”

2) Have bi-monthly training sessions monthly to stay current with added changes or improvements to process.

3) Monitor new metrics that have been put in place & update Share drive spreadsheets

4) Send updated reports of progress to upper management citing pros and cons of new process

5) Hold weekly interdepartmental meetings with purchasing staff to encourage new ideas and gain feedback

What Is It Worth To You?● 1 Pack of 500 sheets of paper is approximately $15.00. Say purchasing uses at least 50

Packs of paper a year… that’s 25,000 sheets of paper and $750.00. In only 12 months. ● The survey says… the longest part of the process is typically lead time. Narrow approving

authority and reducing signatures will save the largest area of waiting time. ● At the cost of nothing, Purchasing on a Dime eliminates 16 Non-Value Added steps● Introducing training methods and new purchasers certification will help reduce customer

defects which in return reduces lead time● Implementing online approval would allow for the following:

○ a requisition to be approved within three clicks ○ PO to be generated within one click ○ 0 Sheets of paper○ All while automatically tracking metrics○ Communicates requisition status to vendors and customers

Lean Tools & Problem Solving Techniques Process Map

Bottleneck Analysis

5 Whys

Going to the Gemba

A3 Report

5S

Process Map:● A workflow diagram that breaks down each step in a process.

This allows us to analyze what steps are muda, value added and pinpoint the root cause.

Bottleneck Analysis:● Used to identify the part of the process that is limiting the

overall throughput. This will help us speed up and improve the performance of the process.

5 Whys:● Ask “Why” 5 times to help find the true facts and root cause.

Going to the Gemba:● Identified “current condition” of the operation by going to the

gemba and talking with the purchasing staff to get an understanding of the problems and process.

Building a A3 Report:● By starting an A3 style report we are able to organize where

the process currently is and where it needs to be.

Wrap Up:● Overviewed the responsibilities of the Purchasing Department and

identified affiliated parties● Analyzed the Dysfunctional Process, problems it causes, & the root

causes of the problems● Introduced “Purchasing on a Dime” & “Purchasing Gone Modern”● Compared OU Purchasing visions with our goals● Identified our roadblocks● Described our Implementation plan & Timeline● Stated why “Purchasing on a Dime” is worth your time● Identified the Kaizen tools we used