Horizon University (HU) is a well established higher education institution. Founded at the end of the twentieth century, it offers a wide range higher degree courses. At the beginning of the 2016/2017 academic year, the total student enrolment was 8,500. To support the student population, the university employs 120 academic staff and 220 support staff.

The total budget of HU for the current academic year has been set at BDT 500 million. Most of its income comes from student fees, although there is an increasing trend to derive additional income from commercial activities. As part of its ongoing strategy, the university is looking to build more research facilities, publish more books and papers, and organise more conferences. Another element of this strategy is to let rooms in the student halls of residence during the 20 weeks of the year when the students are away from the university on vacation.

The Purchasing and Supply Function

Until 2015, the university did not have a purchasing and supply function. All purchasing was undertaken by budget holders, who had no purchasing experience or qualifications. The purchasing function was controlled by the finance directorate.

In 2015, Rownak Hossain was appointed as head of procurement, a strategic role aimed at improving procurement practice and generating cost savings. In 2016, the university appointed three procurement officers to support Rownak in his role and to centralise the purchasing function. So far, there has been limited success, as many of the budget holders are reluctant to give up their powers to buy what they want, and only about 50% of purchasing has been centralised. Much of the decentralized purchasing is devolved to several individual budget holders. For example, each of the three restaurant managers places orders independently of the others.

The range of items purchased across the university, with the spend for 2015/2016 shown, included the following:

Catering supplies for three restaurants- BDT 25 million

Consumables for use by academic and support staff- BDT 15 million

Capital items for lecture theatres and seminar rooms-BDT 40 million

Outsourced services, such as cleaning and estate management- BDT 12.5 million

Books, periodicals and newspapers-BDT 5 million

Travel, accommodation and hospitality-BDT 5 million

IT hardware and software licenses -BDT 5 million

Professional and consultancy fees-BDT 6.5 million

With a total expenditure of BDT 132.5 million, Rownak has been given a target by the university council of generating savings of BDT 5 million each year for the next three years maintaining the right quality and right.

He has asked his procurement team to research some key performance indicators and he has obtained information from other universities in the same region. Table 1 contains a summary of the main results.

Table1-Summary of key purchasing and supply information

Particulars Horizon University The average for other Universities

Catering spend per student per annum

BDT 3,160

BDT 2,940

Number of active suppliers

75

65

Average value of stock held

BDT 680,000

BDT 490,000

Storages pace for consumables

200 square metres

180 square metres

Average cost of placing a purchase order

BDT 850

BDT 720

The information in this case study is purely fictitious and has been prepared for assessment purposes only. Any resemblance to any real organization or person is purely coincidental.

QUESTION-1:

Explain FIVE areas which Rownak might measure and how each might contribute to the cost savings at Horizon University.

Question-2:

Explain FIVE performance targets that Rownak might set his procurement team for the next year.