Our guest blog post, Advantages of a Procurement Hub in the Education Sector, comes from Abhinav Parameshwaran, a Solutions Consultant for Zycus Inc.
Procurement teams are gaining a seat at the strategic table of every organization, primarily because of their ability to provide great value in terms of supporting the corporate vision. This is certainly true in case of the university sector. Academic institutions realize the impact that Procurement Savings can have in the wake of thinning government grants and falling number of endowments/donations.
The challenges in the university procurement sector are many. A typical university CPO faces the following strategic challenges:
- Justifying the allocation of resources to “Administration” and not “Faculty”
- Catering to Ad-hoc requests
- (Quite often than not!) Lack of Visibility into spend
- Lack of Strategic Supplier Relationships
- Government Policies/Guidelines
An appropriate step towards overcoming these challenges is with the help of a Procurement Hub. A hub model has been largely successful in the corporate world, allowing organizations to get better negotiating leverage because of:
- Demand Aggregation
- Central Visibility into categories, suppliers and requests
- Creation/Utilization of a talented pool of procurement professionals
Universities across the globe have been tying up strategically from an academic perspective to provide students the best of education, ensure exchange of knowledge by faculty sharing, allowing exchange of ideas via various forums/meetings and consortiums. With the advent of E-Procurement and maturity of the “Procurement Solution Domain”, this is perhaps the best time for universities to come together from a strategic perspective and realize the benefits of strategic group purchasing. The different ways in which universities can connect with each other to realize a common goal of cost savings are as follows (3 of the many networking possibilities)
- Shared Services Hub: Sharing Procurement Resources among universities, thereby ensuring congregation of resources for those universities who do not have trained procurement professionals. Universities can opt-in/opt-out, and choose which categories they want to be purchasing via the Shared Service Hub.
- Third Party Advisory: This is a separate body that has dedicated staff and facilities that advises universities on purchasing. There are buy-ins from all the participating universities ensuring better collaboration and they function under a common governance framework
- Consortium: May or may not involve creation of a new organization/sub organization but there will be a common governance code in ALL the participating universities, ensuring better savings realizations because of demand aggregation with vendors.
The benefits that universities can draw because of a radical shift from traditional procurement models to a hybrid-Hub/Spoke model offer tangible and real savings. But there are also additional risks that universities need to address before taking the big leap.
- Governance structure
- Policies controls
- Alignment of Hub vision/objectives with an Individual University’s strategic plan
Once these key issues are talked and chalked through, federal and private universities can leverage better economies of scale and realize immense savings through cost reductions. They will also gain deeper insights into procurement, develop strategic relationships with multiple suppliers, and enjoy the benefits of increased efficiency and effectiveness of their procurement centers.