An eProcurement Success Story
West Lothian lies off the M8 motorway, midway between Edinburgh and Glasgow. In the past, the district was famous for its coal mining and shale oil industry - but now West Lothian is known for its success in attracting inward investment. Studies show West Lothian boasts the fastest growing economy and one of the best standards of living in Scotland.
The Livingston-based West Lothian Council's recent successful venture into eProcurement to rein in unnecessary spending, has proved that when it comes to making its budgets go further, it is one of the leaders redrawing the map of local authority purchasing.
West Lothian's success, which will ultimately yield a long-term savings target approaching £1m, follows the successful adoption of the Scottish Government-backed eProcurement Scotl@nd service (ePS). The move followed a similarly fruitful three-year project using Purchase-cards that have been successfully integrated into ePS.
The Council's eProcurement story so far has been one of good judgement, with little need for luck to play a hand, despite the Council's choice of date, Friday 13th September 2002, on which to go live with its first transactions.
West Lothian's purchasing manager Neil Gubby, who drove the Purchase-cards project, is now keen to maximise the financial benefits to the council of tighter procurement and a reduction in non-contracted or 'maverick' spending. That approach has already led to top-line budget savings, which can then be used to benefit local taxpayers through improved services.
West Lothian's Chief Executive Alex Linkston too has already recognised the ePS operation potential, and foresees significant savings from it.
The Response to ePS
"The response from the users and suppliers following the implementation of ePS has been very positive. We are already seeing benefits of implementing ePS, one of them being a reduction in the time it takes to order goods and process transactions. The aims and objectives of ePS compliment our current modernisation programme, Wired West Lothian, and will transform the process of procuring goods and services. It is our intention to have 500 users online with ePS by 31 March 2003," says Alex Linkston.
Currently, West Lothian use a mix of three systems:
PECOS (the application system which is a component of ePS), Purchasing cards and paper orders and invoices, with PECOS planned to run council-wide within 18 months. "Purchase cards were my lead into eProcurement," says Neil Gubby. "I started beating the drum then, and three years later we now have our own system."
While other authorities consider how they can best integrate eProcurement with their financial systems from the outset, West Lothian has instead focused its activities on maximising its eProcurement savings using PECOS, integrating its successful foray into Purchase Cards, and choosing to wait to integrate its financial systems at a later date. (PECOS has the ability to run "standalone" as well as part of a fully-integrated system.)
West Lothian's expected long-term savings of £1m within 18 months would cover the costs of 50 staff in the overall procurement process, though the council insists the savings should not be calculated on the basis of jobs, but on the benefits to be gained in the streamlining of processes and saving staff time. For example, using an eProcurement system effectively will mean less need for creditor chasing.
Neil Gubby also expects there to be significant aggregation benefits from using ePS. For example, instead of making purchases of perhaps, £20,000 from each of 12 suppliers, West Lothian will be able to make one purchase worth £200,000, giving it more purchasing power.
The Potential Savings are Significant
West Lothian's total number of transactions across the council is now 130,000, with 80,000 of them on the supply side. (The other 50,000 covers services.)
Of those 80,000 transactions, 40,000 are properly made through 228 contracted suppliers. However, the other 40,000 are off-contract "maverick" buying purchases from around 2,300 suppliers. Reducing this maverick-spend through PECOS and putting in place agreed contracts, will dramatically reduce West Lothian's exposure to the higher prices paid to non-contracted suppliers.
The council already has over 115 contracts in place with key suppliers, and is now undergoing a major supplier adoption programme for its e-Procurement programme. The suppliers themselves are positive about the new system:
"Corporate Express is delighted to work with West Lothian Council on what has become a very exciting project," says Diane Julian, Corporate Express Sales Manager, National Accounts. "eCommerce is particularly suited to the office supplies industry as it improves accuracy, enhances the whole supply chain and minimises the cost base for both Corporate Express and West Lothian Council."
In addition to getting supplier adoption up and running, one of West Lothian's key tasks now is to oversee the "change management" issues for its staff. Getting buy-in from managers to ensure that their line staff adopt new procedures to cut out maverick buying is critical. That means ensuring that affected staff must be effectively trained in how to use ePS.
West Lothian's Goals
West Lothian's goal is to have rolled out the ePS service across the council within 18 months. Stage One has already seen the council exceed its target of having 20 users and approvers online with 8 suppliers. It now has 60 users and approvers and 8 suppliers. Its Stage Two target is to have 500 office-based users up and running on the system by 31st March 2003. In Stage Three, it expects to put a further 200 people in Community Education offices onto the system, before finally working to add around 440 schools staff.
The fact that ePS is a remotely-hosted service, and accessible with just an Internet Browser, has enabled the council to move quickly to reap the benefits, without the need to procure expensive hardware or software. The schools and education spending is particularly important, because education alone accounts for nearly half of the council's £200m budget. Previously, getting key education staff including school heads to control their buying habits has proved to be a major challenge.
Eventually, Neil Gubby sees ePS giving West Lothian and its neighbouring local counterparts the potential to aggregate their contracts with local suppliers.
East Lothian Council has also recently adopted ePS. West and East Lothian have already begun working more closely, jointly managing the ending of food and catering contracts to enable them to go out to tender together.
Summarising The Benefits
Summarising, the benefits of e-Procurement using the ePS service to West Lothian, are:
- Potential savings of over £1m
- Control of Purchasing
- Elimination of non-contracted "maverick" spending
- Improved budgetary processes
- More purchasing power with suppliers
- Better user-friendly systems - and happier employees
- Improved management information
- A common platform to work with other local authorities on co-operative buying projects.
More information . . .
Should you wish further information relating to this article or general information about the eProcurement Scotl@nd service please contact:
West Lothian Council
eProcurement Scotland General Enquiries