University Business February 2018 - 50

PROFESSIONAL OPINION

Procurement leaders play key
role in financial prosperity
Streamlining spending on supplies and services is key to cost control
By Bill Cooper

S

everal years ago I participated in
a UB article called "Spotlight on
Procurement." The focus was on
the emerging recognition of procurement as a key strategic contributor to
the financial health of a university-
rather than simply serving the tactical, back office transaction shop and
"compliance cop" roles in which it was
historically cast.
After all, supplies and services represent the second largest chunk of university spending after salaries and benefits.
For tier-one research institutions,
supplies and services spending can be 25
to 30 percent of the operating budget.
For the University of California's 10
campuses, that's $8.1 billion annually.
In the UB article, several colleagues and
I argued that just the sheer amount of
purchased dollars dictated procurement
have a "seat at the table."
The severe budget crisis faced by
higher ed institutions had placed cost
containment at the forefront and thus
led more chief financial officers to see
the importance of procurement's presence in the C-suite, in the position of
chief procurement officer. If it was not
to be a permanent seat, temporary placement could stem the tide until funding
stream levels returned to normal.
30 percent over 30 years
Now six years later, not only hasn't there
been a return to "normal" but higher

UBmag.me/spending

50 | February 2018

education funding has continued to
diminish. Such is the "new normal." Its
primary driver is the continued divestment of state support for higher ed.

The challenge is not just to
come up with innovative
ways to cut spending but
also to use the supply chain
to build extra revenue.
The average four-year public university has seen per-student state and local
funding drop more than 30 percent
over the past 30 years. The cuts in
public research institutions have been
the most severe, averaging a 26 percent
drop in investment since 2008. The
typical state reduces appropriations
to higher education during economic
downturns in favor of more immediate spending needs (such as safety net
programs), but fails to fully replace their
disinvestment in the universities once
the downturn is over.
Coupled with state divestment
is the reduction in federal research support due to tighter budgets. The University of California has already seen a
20 percent drop year over year.
A source of revenues
The reality is that state and federal funding cuts have led to an evolving model
of university administration that's
greatly influenced by a corporate style of
management. This style not only focuses
on cost containment, but also, just as

importantly, on revenue generation.
And what organization within a university has the capacity to best deliver
both? It's none other than strategic procurement and its evolutionary offspring,
supply chain management.
The strategic plan is to not only
significantly cut the cost of purchased
supplies and services, but also to generate additional revenue through negotiated cash incentives and strategic partnerships, such as branding agreements
for banking, telecom, coffee and so on.
Private industry boardrooms have
for some time been concerned about
another global economic slowdown.
Accordingly, their procurement and
supply chain management organizations
must act in ever-more strategic ways.
Their charge is not just to come up
with more innovative spending cuts but
also to use the supply chain as a way of
building extra revenues.
As outlined above, university boardrooms are faced with a real, present and
ever-increasing funding slowdown. It is
essential to the financial health of their
institutions that these leaders also look
to the cost-cutting and revenue-generating capacity of effectively structured,
operated and empowered procurement
and supply chain organizations.
In fact, I'd argue that not only
should there be a seat at the C-suite
table for the chief procurement officer,
but perhaps that seat should be a little
closer to the head of the table.
Bill Cooper is associate vice president and
chief procurement officer for the University
of California system.
www.universitybusiness.com


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Table of Contents for the Digital Edition of University Business February 2018

University Business February 2018 - Cover1
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University Business February 2018 - 1
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