In 2017, a strategy consultant was hired to do a top-to-bottom assessment of the Boston University procurement program. They recommended a change in leadership. Randall Moore was hired as the new chief procurement officer in May. He took the job after receiving assurance from BU’s chief financial officer that there would be sufficient headcount where needed. There was also a realignment. Facilities sourcing and construction contracting were centralized in the procurement department.
One of Mr. Moore’s goals was to change the culture. “Procurement was really regarded as a kind of bureaucratic speed bump that stood in the way of the University being able to get the goods and services they wanted.” If you needed to procure something, “you had to go see procurement. It was like a trip through Hell. I wanted to make that a much more positive value adding experience.”
Some of these changes were simple. Rather than having a contract needing signatures travel across the university by interoffice mail, they implemented DocuSign for electronic signatures and eliminated these inefficiencies.
Prior to Mr. Moore’s arrival, BU had put in the full SAP spend management suite, formerly called Ariba. With SAP, they got the great majority of their addressable spend – representing 100s of millions of dollars – under contract. There are now 40 electronic catalogs in the SAP system.
Mr. Moore described the automation this way: “Shoppers will come in and create a shopping cart from one of our 40 online catalogs. They add accounting information and where it should be shipped to. Once that requisition is approved, it becomes a purchase order. That is electronically sent to the supplier. They deliver the goods or services and then send us an electronic invoice that is fully connected with SAP. If the invoice matches the purchase order, it is posted in SAP, and the payment is made automatically without any paper or human touch. 98% of our inbound invoices are paid electronically without a human looking at them.” This automation speeds the process and reduces costs associated with tedious, manual labor.
I ate breakfast with Sri Kotha at SAP’s Spend Connect Live Conference in Las Vegas in mid-October. Ms. Kotha is the senior associate director of procure to pay systems at BU. She came to BU from a different university in the Boston area in 2022. That university was using a procurement system that is widely used in higher education. “Coming to BU was “like coming from the 90s to the AI world. What SAP is doing is great! The roadmap is amazing!” The automation makes it feasible for BU to get early payment discounts on a significant amount of their spending. Last year, the company saw $3.5 million in savings from early payments.
While SAP has helped modernize procurement at BU, another of Mr. Moore’s goals was to drive innovation. For example, he wanted a better way to manage tail spend. For certain purchases, representing 2% of their total spend, “it was the Wild Wild West.” At a quarterly meeting of the Institute of Supply Management, Kevin Frechette, the founder and CEO of Fair Market, gave a presentation on tail spend management. Tail spend refers to low-volume transactions around a particular product. For example, the University may need to buy five snowplow attachments for the front of its Ford F-150 trucks. This is not a purchase made very often.
“I was all in from that moment,” Mr. Moore exclaimed. Fairmarkit would allow them to quickly connect to a set of suppliers who could give quotes on materials or services the University needed that were not commonly purchased. “We were customer number two for Fairmarkit. It was a great experience working with this small, scrappy startup. We were able to have a very direct impact on the development of that product. They really listened to the enhancements that we suggested.”
“You put those SKU-specific descriptions in Fairmarkit,” Mr Moore explained. “It uses machine learning to identify what is needed based on the description entered in your quotation. It will then identify suppliers that should receive this quotation. Then you press send. That goes out to those suppliers, and they respond within 24 to 48 hours with a hard quote. Then, the creator of that quotation can select the winner. So, it’s a very fast turnaround which delivers bona fide supplier quotations.”
Mr. Moore is also excited by another AI solution. They are piloting a robotic process automation solution. “We get a supplier contract back and it’s got red ink all over it because they they’ve really heavily redlined the contract. In the past, you opened the two documents on your desktop and had to swivel your head back and forth. The machine does all that comparison for you. It’s just brilliant.”
