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Chicago Public Schools manages approximately 680 schools in its effort to educate 410,000-plus students, which means it's larger than most Fortune 1000 companies, federal bureaucracies or even countries' standing militaries in terms of headcount. It also means that until CPS automated its operations, it was a huge headache manually handling processes with its many suppliers and vendors, banks and Medicaid.
Transactions that should have taken a few days to close might extend for several months. Officials recognized the need to evaluate providers of integrated electronic data interchange (EDI) solutions. What they required was something easy to use, quickly implemented, and which would allow CPS to map and translate various data sets into and out of its enterprise resource planning software. As with any other enterprise its size, CPS wanted the solution to have a quick ROI. Moreover, because the school system and its needs continue to grow, the solution had to be able to scale with its operational needs.
Healthcare was a major area of concern for CPS. Before HIPAA mandates existed, there were no fewer than 400 different types of electronic formats. Once the HIPAA mandates were implemented in 1996, the promise of automation could start to be realized among the many players in healthcare. The need for CPS to automate its highly manual process that could sometimes take 60 to 90 days to close was the first and most obvious place to receive attention.
A large enterprise has many procurement needs. In the traditional buyer model, an organization issues a purchase order, receives an invoice, and pays for the product by sending a check to the supplier. In an organization as large as CPS this process is susceptible to bottlenecks in processing payments, errors and shipments that can bog down productivity. Studies show that proactively managed enterprises like CPS look to technology solutions to cut down on errors and speed the whole process from procurement to payment. Seeing improvements in time and cost in the supply chain approaching 30 percent to 60 percent is the reason organizations look to automation with integrated EDI data between buyers and suppliers.
For years, Chicago Public Schools manually reconciled payments to suppliers and managed the banking relationships. But extensive research indicated that CPS could achieve a high ROI in this area alone with integrated banking transactions.
Sometimes an organization is both a payer and payee. On the one hand, CPS buys from its vendor community; on the other, it provides healthcare services for which it must be paid or reimbursed. The technology partner must provide tools that deliver on both sides of the buyer and supplier equation.
After extensive vetting of potential providers, CPS chose DiCentral's DiUnite platform, says Lingaraju Saride, an independent contractor working as a systems analyst for the school system.
First, healthcare eligibility benefits inquiries and responses are now integrated into the school system's Oracle E-Business Suite. This automates the process of verifying coverage of employees and students under Medicaid. By leveraging DiCentral and Oracle technology, CPS achieves faster decision cycles and fewer errors, which produces a savings in time and money that resonates throughout the entire organization, according to Mike Neadeau, vice president of sales at DiCentral.
"Operating manually in an organization that big - that just gets hairy. There are all manner of bottlenecks that pop up, and it takes forever," Neadeau says.
It was important for CPS to find a technology partner that provides a total solution for purchase order, invoice, and purchase order acknowledgment. "It made a big difference to us that we select a technology provider with user-friendly integration tools that provide for rapid implementation times," says Prasad Nettem, director of Enterprise Financial Systems for Chicago Public Schools.
The project called for automating the purchasing process and included EDI purchase order, P/O acknowledgment, and invoice information with the majority of suppliers. CPS has successfully implemented EDI processes with more than half of its vendor community. Given that the average cost of manual invoicing in a large enterprise is $8.44 per invoice, automation helps save tremendous amounts of time and money at CPS, says Saride. In addition, cutting down on manual errors has resulted in increased productivity.
Reconciling payments to suppliers and accelerating benefits verification through Medicaid were central to improving business processes across the enterprise at CPS. By integrating the EDI payment order/remittance advice, account analysis, and application advice transactions into the Oracle E-Business Suite, the procure-to-pay (P2P) and order-to-cash processes were improved. The P2P process can now be closed out in days rather than weeks, says Neadeau, representing a savings in man hours across the whole procurement process. "We can review inbound data reports and manage the vendor payment process more rapidly than before," says Nettem.
CPS has quite a roster of suppliers, and large ones, such as Follett Corporation, Office Depot, Dell, Apple, Staples, Baker & Taylor, and School Specialties Group, do a large volume of transactions each month, Neadeau says. "Having so many schools that are a part of a large purchasing effort requires a high level of organization and automation. DiCentral simplifies the interaction between CPS and its suppliers with its EDI and integration software. Built to integrate with ERP systems like Oracle E-Business Suite, DiUnite enables CPS staff to map data out of Oracle and into the correct EDI format for sending purchase orders to vendors, as well as doing the same on inbound purchase order acknowledgments and invoices back to CPS."
When an organization sends thousands of purchase orders a month, it must also accept thousands of invoices. The kind of trading partner interaction Neadeau describes allows CPS to close the financial loop 60 percent faster than before.
Exchanging payment information and enabling banks to make transfers to payees is almost a requirement in order to receive the full benefit of EDI automation with one's supplier community, Neadeau says.
The system's annual budget tops $5bn, which is no small amount, but like any enterprise it's always pressured to reduce expenses. "Cutting down on written paper checks, eliminating bottlenecks for possible mistakes, accelerating the procure-to-pay cycle and increasing productivity are all part of a suite of best practices in which CPS considers money well spent," says Neadeau.
Keywords: supply chain management, supply chain solutions, supply chain planning, payment order management, vendor payment management, Medicaid payment management
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