Microsoft Product

Siemens

Microsoft Business OperationsCommerce Case Study

The largest local government in the United States buys $650 million worth of goods and services each year from a list of 25,000 bidders—everything from hard drives to helicopters. Until recently, all of those purchases were made using paper forms. The time delays inherent in paperwork created chaos, waiting, and huge warehousing costs. With e-commerce heating up, L.A.County got online. Using a Web-based purchasing solution from solution provider Commerce One, the county now lets buyers shop, order and pay for goods over the NInternet. The benefits: big savings from easier comparison-shopping and lower inventory costs, faster order cycles, less paperwork, and more opportunities for small businesses.

If Los AngelesCounty were a state, its population would make it the ninth largest in the United States. With 9 million people and an annual budget of $12 billion, L.A.County is massive, and running its hospitals, police and fire departments, jails, road operations, and myriad other services is an equally massive operation. L.A.County spends $650 million each year on an incredible array of goods and services: tortillas, road graders, helicopters, livestock, paper clips, pacemakers, artificial limbs, automobiles—and much more. That’s a lot of shopping. Until recently, all of it was purchased through catalogs and paper forms. It was almost impossible to compare prices when shopping because of the mind-boggling numbers of items and suppliers involved in even simple purchases. Twenty people might buy toner cartridges at one time, without knowing that a central warehouse already had hundreds in inventory. This meant the county missed out on opportunities for volume discounts and incurred unnecessary inventory costs, not to mention the delays of paper-based order fulfillment.

Like many other organizations trying to streamline operations and reduce procurement costs, L.A.County turned to the Internet. Software vendor and solution provider Commerce One, of Walnut Creek, California, helped the county create an online purchasing system called County Acquisition Management Information System (CAMIS). CAMIS is an implementation of Commerce One’s Commerce Chain Solution, a Web-based application built on Microsoft® Site Server 3.0 Commerce Edition and other Microsoft BackOffice® family products. They also integrated CAMIS into the county’s enterprise resource planning system. CAMIS enables thousands of county employees to interactively search product lines from multiple suppliers, compare prices and check availability, place orders, and reconcile order exceptions dynamically—all through a single, easy-to-use, Web-based interface, Microsoft Internet Explorer.

Retiring a Slow, Expensive Process

Not long ago, ordering anything from a squad car to a notebook initiated an excruciatingly slow, paper-intensive process. The county had a list of contractors but the contracts were all on paper. The only automation was a Microsoft Access database that provided only high-level information on the items covered on the contract. Orders were generated through various means depending on the department. This process could range from writing down the information on a slip of paper to entering the data and generating a subpurchase order with a typewriter or personal computer. Then there was the approval process, lengthened by the circulation of so much paper, followed by rekeying and more paperwork at the supplier, and someday, delivery.

“There was an unbelievable amount of paper involved,” explains Chrys Varnes, CAMIS project director. “The cycle times were overly long, impeding county workers’ ability to do their jobs and serve the community. It was error-prone, because there was so much re-keying of information all along the way. And, the paper-based system made it very difficult for us to manage expenses … we couldn’t produce report as to what we were spending or buying from whom.”

“Finally,” she continues, “our old paper-based purchasing system was unfriendly to small businesses. They couldn’t afford to compete for the county’s business because of inefficient systems requirements and because the paperwork was so burdensome. Many supplied only one or two items, which made it difficult for us to justify the overhead of adding them to our system. We almost had to deal with large bureaucracies like ourselves with an infrastructure for withstanding lots of paper and lengthy processes.”

A Scalable, Dependable E-Commerce Solution

With many suppliers offering Web-based buying sites, Varnes saw her solution on the horizon: build an electronic commerce purchasing system. But, she says, “We couldn’t just turn people loose to place orders over the Internet” because of authorization, supplier qualification, and security issues. The county evaluated a number of e-commerce solutions, using the following criteria:

  • Scalability—the solution needed to accommodate more than 10,000 desktops.
  • Easy, flexible supplier interoperability, so large companies could link their Electronic Data Interchange (EDI) and enterprise resource planning (ERP) systems to the county, while small companies with nothing more than a PC and an Internet Service Provider could participate.
  • Ease of use.
  • Integration with ERP system.
  • Dependable, proven technology.

The county went with Commerce One, a software solutions provider of Walnut Creek, California. Commerce One’s Commerce Chain Web-based procurement application consists of two pieces: Commerce One BuySite, an application used by county employees, and Commerce One MarketSite, an extranet accessed by suppliers. Commerce Chain is specifically designed for Microsoft WindowsNT® Server and takes advantage of Microsoft Site Server 3.0 Commerce Edition and its Commerce Interchange Pipeline (CIP) feature, as well as Microsoft SQL Server™.

Now, with its Commerce One and Microsoft-based procurement system, L.A. County employees can surf through online catalogs rather than trying to locate the most current paper catalog, easily compare prices, and even check out supplier inventories to see who has supply on-hand. To find the item they want, employees can either enter a text string (such as executive desk) or use a tree-style drill-down (office equipment to furniture to desks). Employees have an electronic shopping cart; as they find items they need, they click to add them to the cart. When they’re finished shopping, the system approves routine purchases using rules built into the software, while special items get routed to managers for electronic approval. Orders are all electronic.

The whole CAMIS solution cost L.A. County around $2 million—less than a third of one percent of its purchasing costs each year. And, it implemented the system in just five months, a testament to the power of the Microsoft development platform.

Microsoft All the Way

One of the primary reasons the county selected Commerce One’s solution was its use of Microsoft technologies. “The county is a Microsoft shop all the way on the desktop and gradually in our line-of-business applications,” Varnes says. “It’s easy for our IT staff to understand the underpinnings of the procurement system because of its Microsoft foundation.”

Says Thomas Gonzales, co-founder and chief technology officer of Commerce One, “The Microsoft BackOffice platform is a perfect fit to the county’s needs, because it supplies the integration, performance, scalability, and reliability they need. It also gives them a seamless way to manage their supplier network and a standard framework for extending e-commerce activities.”

Microsoft Site Server 3.0 Commerce Edition is embedded in Commerce Chain, providing a cost-effective, open, standards-based solution for trading partner interaction and real-time information exchange. “The Commerce Interchange Pipeline feature of Site Server gives the county an easy, consistent way to manage suppliers across a common pipe,” Gonzales says. “From Commerce One’s perspective, the Microsoft platform gives us a powerful commerce engine that we can leverage while focusing our efforts on tailoring the application to L.A. County’s needs.”

The Commerce Chain BuySite software, accessed by county employees, is built around Microsoft’s COM (Component Object Model) (COM) and Active Server Pages (ASP) technologies. It also uses WindowsNT Server’s built-in Web server, Internet Information Server, as well as Microsoft SQL Server version 6.5. Gonzales says that Microsoft technologies give the site maximum flexibility and performance. “We can deliver a high-performance Web application that allows us to meet our customers’ needs, especially when some degree of customization is required. No two businesses are alike. We need the flexibility to tweak our application without sacrificing standardization across desktops.”

The Commerce Chain MarketSite, accessed by suppliers, is noteworthy because it operates beyond the county’s firewall. Site Server Commerce Edition’s architecture enables Commerce One to commerce-enable a broad spectrum of suppliers and process a broad range of transactions using an open framework. It provides suppliers with all the tools they need to keep their catalogs up-to-date and to perform standard sales tasks like order placement, billing, and order tracking.

“What makes the MarketSite unique is how we use Commerce Interchange Pipeline for commerce transactions,” Gonzales says. “It allows us to offer both protocol and data format independence, which provides a great deal of flexibility for information exchange between trading partners. It can accommodate any of the new emerging e-commerce standards whether ANSI, OBI, EDIFACT or others. Microsoft tools let us architect for both performance and flexibility.”

Tight Integration with ERP Systems

L.A. County’s new mainframe-based ERP system is called AGPS (Advanced Government Purchasing System) (AGPS), a government-focused purchasing system from INFORMS of Montgomery, Alabama, which manages all purchasing and contracts activities. Commerce Chain integrates tightly with AGPS, as well as with supplier ERP and order management systems. County employees actually enter the Commerce Chain BuySite through AGPS. After shopping in BuySite, an AGPS requisition screen is automatically populated with BuySite data. AGPS then creates a purchase order and passes the P.O. information to Commerce Chain MarketSite, which links to the supplier’s back-office systems. A supplier’s internal order is created, supplier inventory is allocated, and a request to pick and ship from the supplier’s warehouse is generated. The supplier sends its internal order number and confirmation back to BuySite, so the county can manage and track order status. All communications between legacy systems, WindowsNT-based servers, mainframe ERP systems and Commerce One e-commerce software take place automatically, in real time, with no rekeying, no manual direction, and no paperwork for the county.

Moving Away from a Warehouse Mentality

One of the first benefits of the new procurement system was a pocketful of cash: L.A. County was able to shut down its central warehouse, providing a one-time $20 million savings and ongoing savings of $6 million per year. The new procurement system allows county workers to see exactly what’s on the shelf in either the county’s or a supplier’s warehouse with a few mouse clicks.

“Warehouses are a ‘just in case’ mentality — you stockpile materials just in case you need them,” says Joan Ouderkirk, acting director of L.A. County’s Internal Services Department. “True just-in-time procurement means we have confidence in our systems to deliver goods when we need them, where we need them.” The county is hoping the new Web-based procurement system will get it completely out of the business of stockpiling goods so it can close 90 smaller warehouses, too.

The ability to compare prices is generating another big savings:; within some product categories, there are often savings of up to 5 percent that can be saved by comparison shopping. This competitive purchasing is saving millions of dollars a year.

The county also now has excellent management of its procurement process. Because everything is digital rather than paper-based, anyone can generate instant, easy reports on all the county’s procurement activities: what the county is buying, from whom the county buying it, what it costs by item, and much other information.

More Small-Business Involvement

One of the most important benefits of the new procurement system is the way it enables thousands of small businesses to do business with L.A. County. “As a government agency, we need to be an equal-opportunity employer,” Ouderkirk says. “Small businesses just didn’t have the opportunity to bid on county contracts before, because partnering with the county required a big investment. When we give business to small businesses, we employ more people and help the county economy.”

From the county’s perspective, small businesses can often provide better prices and better availability than large companies. Browser technology brings small businesses into the process, saving the county money and helping the greater Los Angeles County economy by involving more companies. A new small business Web site posts all county bids and contracts; previously, a small business had to go to all 37 county departments and hunt these bids out one by one.

Says Edna Bruce, director of the Office of Small Business in L.A. County, “We launched this site with a budget of less than $25,000 using Microsoft technology. In the first few months, we’ve gotten half a million hits, and thousands of small businesses have successfully become county suppliers.”

The county is now working to get more suppliers to link up to the Web-based procurement system. They’re also looking to automate even more activities between the county and suppliers to expand the global trading community. With the virtual marketplace provided by CAMIS, any company in the world can be an L.A. County supplier.

Delivering in the Age of Now

With county workers spending less time processing paperwork, they’re able to spend more time in value-added activities like training suppliers and administering contracts.

“Purchasing is no longer the bad guy, slowing things down,” says Ouderdirk. “The purchasing department can now be a hero to county workers, saving the day instead of holding people up. We’re living in the age of now, and CAMIS lets us deliver to that expectation.”

L.A. County