New ordering process could save $30M

Faced with shrinking budgets, universities nationwide are looking for creative methods to cut costs. To save money at Duke—up to $30 million—administrators plan to consolidate the process for ordering items.

Office supplies, lab equipment, services and other supplies currently cost the University $650 million every year, Executive Vice President Tallman Trask told the Academic Council last month. To reduce the cost of these expenditures, the University expects to go live with a software program that could save anywhere from 5 to 20 percent of every dollar spent.

The electronic program, produced by Cary-based SciQuest, connects users with contracts that offer lower costs and price cuts. It also eliminates paperwork, which can be time consuming.

“You’ve got to have some kind of efficient system, and this is an attempt to basically automate and put online the ability to mass negotiate prices but then let people pick out the orders whenever they want to,” Trask said.

Reducing costs by only 5 percent could save the University about $30 million a year.

“Don’t count on $30 million yet,” Trask said, noting that the actual estimate is subject to change.

SciQuest announced that Duke would purchase SciQuest software July 13, and the University will begin pilot tests of the program in January. The “rollout” is expected to take 12 months, according to Jane Pleasants, assistant vice president for procurement and supply chain management at the University and the Health System.

Once implemented, department chairs, faculty members and researchers will use the software.

The benefits of the updated procurement program should be almost immediate, Pleasants added.

“It gives us the ability to do a lot of spend-analytics,” she said. “We will be leveraging all of Duke’s buying into one place.”

The new program will mark a drastic shift for the University—which currently relies on paper-based procurement methods, Pleasants said. Faculty and staff currently have access to some eProcurement programs, such as Staples’ EWay online ordering system, which provides specialized Duke prices.

“We have standing orders with vendors where the prices may or may not be negotiated,” Trask said. “This is just an attempt to put it all together in one big box.”

Choosing cautiously

Although eProcurement programs like SciQuest have been in existence for more than a decade, Pleasants said the University was initially cautious about using one of the programs immediately after the dot-com boom.

“You didn’t even know [which eProcurement companies] would be around [after the boom],” Pleasants said. “Every single company that came and knocked on our door... most of them are not even around now.”

SciQuest was chosen out of the large group of eProcurement programs in today’s market because of its large database of supplies necessary for research, Pleasants noted. Pharmaceutical companies such as GlaxoSmithKline also use SciQuest’s purchasing technology.

In fact, Pleasants said the desire for an eProcurement program initially came from the School of Medicine in 2008—however, the recession in that year complicated those plans.

“All major IT projects were put on hold,” Pleasants said.

When the University received American Recovery and Reinvestment Act funding earlier this year, the project was able to be re-evaluated, she added.

Catching on to the trend

Duke, however, will not be the first university to implement a widespread eProcurement program.

SciQuest serves more than 165 customers, many of whom are higher education institutions, according to Julie Hepner, market director for higher education at the company. Some of those schools include Harvard, Stanford and Yale Universities. The University of North Carolina General Administration also signed a contract with SciQuest last year, though not all UNC system schools, like UNC-Chapel Hill, use the software.

Many universities have reported that the software program has been effective. Emory University, which first purchased SciQuest software in 2003, disclosed that it realized $6 in savings benefits for every $1 spent on the SciQuest program in a May report to the U.S. Securities and Exchange Commission.

“[The cost of the SciQuest software] is really not huge—it would actually be surprising how low the annual subscription is,” Pleasants said, adding that the company charges both an implementation and an annual fee.

For the program to be successful, however, Pleasants noted that individual departments will have to establish appropriate approval processes that expedite supply orders.

Hepner added that SciQuest looks forward to working with Duke, especially because it is a local company.

“We are the market leader within higher education and primarily within research-driven education,” she said. “I love the idea of having Duke as a live and successful customer.”

Taylor Doherty contributed reporting.