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DonorsChoose.org, a not-for-profit organization based in New York City, was pioneered by teachers at a Bronx public high school in the spring of 2000. Charles Best, then a social studies teacher, saw first-hand the scarcity of materials in public school classrooms. Looking for a way to address this problem, he launched DonorsChoose.org, a web site connecting classrooms in need with individuals who want to help. As of April 28 this year, DonorsChoose.org had received $21,885,876 from donors in 50 states. These funds have been used to support 51,830 projects impacting 1,220,478 students. In order to maintain control, DonorsChoose.org purchases all materials needed for projects, once they have been fully funded by "citizen philanthropists." To help manage this growing activity, it recently implemented software from Ariba.
Q: How did you become involved in Donors-Choose.org?
Bocanegra: Besides the passion I have for the business model and the non-profit aspect of this organization, I basically am here because of my educational background and experience. I am an engineer, and as a graduate student at MIT I did my thesis on the Toyota production system. What I have been trying to implement here are a lot of the tools and philosophies from the Toyota system. I also spent 11 years at AT&T, where I was involved in operations and supply chain management.
Q: How does the supply chain support the operations of DonorsChoose.org?
Bocanegra: Teachers at public schools can go into the DonorsChoose.org web site and post a proposal requesting materials or resources, or experiences like a class trip or expert visitor, to enhance the learning experience of their students. The proposal that they draft and submit to us becomes the initial part of the supply chain. We actually look at every single proposal that we receive and screen them to make sure they meet our minimum guidelines and requirements. If approved, the proposed project gets posted on our web site and donors-or 'citizen philanthropists' as we refer to them-choose projects that they would like to partially or fully fund to make these classroom wishes a reality. So once a project has been screened by us, posted to our web site and funded by philanthropists, we in operations go ahead and buy the materials and resources from our vendors, who deliver these materials to the classrooms. The teachers do not get the money directly; they receive the materials. So there is a lot of coordination that has to happen between the teachers, DonorsChoose.org and our vendors to make sure that the materials arrive at the classrooms when they are needed. That's the front half of the supply chain. The other half is that we then send teachers out a feedback kit, including disposable cameras, so they can take pictures of the material when it arrives and as it is being set up and as the students are using it. Then the students write thank-you notes to the donors describing how their specific donation helped the classroom and those notes and the cameras are sent back to us in a pre-paid envelope that is included in the kit.
The thank-you notes that the students send are often very creative. It is just wonderful to receive all these notes and pictures from the students, who all have big smiles on their faces. So we take this information and build donor feed-back kits. We divide the pictures and thank-you notes among the donors who contributed to that project and send those out.
Q: So you combine the buying power of all these projects to get better deals for the schools?
Bocanegra: Yes. The idea is to balance the purchasing power that we get by aggregating all these purchases from thousands of teachers, without dealing with thousands of vendors, which makes it very difficult to create long-lasting relationships. So we want a big enough number of vendors to let us have sufficient variety from which the teachers can select materials and also to provide some competition amongst vendors so we get the best pricing. But at the same time we want the number of vendors to be small enough so that we have purchasing power and can build a good relationship.
Q: Are you using Ariba to help with this type of supplier management?
Bocanegra: Yes. We have selected 36 vendors to integrate with us through the Ariba platform. We will add more vendors as we go along, but will start with these 36. Once they are plugged into the Ariba platform, we will be able to streamline our processes and become a lot more efficient in a way that is very scaleable.
Our vendors cover a wide range. We have large companies like bookseller Barnes & Noble, which is one of our biggest vendors, and Best Buy, which provides all the electronics for the classroom and things like LCD projectors. Then we have many mid-sized and smaller vendors and also some vendors that we use to handle customized requests, such as for musical instruments or equipment. We have a lot of music teachers out there seeking violins, pianos, band suits-all kinds of musical things from us. So we are hoping to include one or two preferred musical vendors in the 36 that we initially integrate into the Ariba platform.
Q: How did you handle all this before Ariba?
Bocanegra: Well, we are still in the implementation phase so what we are doing now is basically our 'before' picture. It is a very manual process. When a project gets fully funded we first send a confirmation email to the teacher. The average wait time is about four months, so we need to make sure that nothing has changed in the interim and that the materials are still needed and still available from the vendor. Once the teacher confirms that the material is still needed, we go to our current e-procurement system to make sure the materials are still available, but that is a very manual process right now. We have to generate a purchase order manually via Microsoft Word and send that to the vendor either by fax or email or sometimes via xml. Currently, we don't get a purchase order receipt notification or any status reports on the purchase order, so we really don't know if it was received or is being filled unless we call and ask or until we hear from the teacher that the material was received. So it is very difficult for us to keep track of the status of these purchase orders.
Actually, we used to get a lot of inquiries from teachers about missing products-basically asking, 'where is my stuff?' We really needed some way to confirm that materials had been received, or, at the very minimum, that the purchase order had been received at the vendor's location. So one of the things that we implemented is to have two employees whose full-time job is calling the vendors to confirm that they received all of the purchase orders we sent over the past week and to re-send any that were missing. You can see what a cumbersome and manual process this is.
Q: Ariba will streamline all of that?
Bocanegra: Absolutely. We will implement Ariba in three phases. The first phase will automate purchase order generation and routing as well as a system for monitoring the status of POs. That phase also is when we plug into the Ariba Supplier Network. The Ariba Supplier Network will actually generate the purchase order and route it to the appropriate vendor. It will also provide us with confirmation that the purchase order has been received by the vendor and will give us updates when the order is in process and when it has shipped. We will automatically receive a shipment tracking number so we can track shipments and provide that information to the teachers for self-service tracking, which will minimize the number of customer service inquiries that we get.
In phase two we will plug into Ariba's electronic invoice presentment and payment system (EIPP). I mentioned earlier that today we receive paper invoices from our vendors. With Ariba's EIPP, we will receive invoices electronically. We also will be able to electronically reconcile the invoices against the purchase orders-today we don't do that at all. Finally Ariba's EIPP will allow us to review every single invoice and approve it electronically and have the payment sent electronically to the vendor instead of us having to send checks manually to the vendors.
Phase three is more long-term and will focus on procurement content. This part of the solution will allow teachers to sign into a website that will direct them to catalog content of the actual vendors when they are ready to order materials for funded projects. They will use Ariba's software to browse through all the content that is available and to select the materials that they need.
Q: So this should reduce your administrative costs?
Bocanegra: Yes. We knew that to help us get to that next level where we are spending a very small percentage of our donation dollars for administrative expenses, we needed a solution like Ariba. Moreover, Ariba was a must-have in order for us to scale nationally. Until last month, we only were in a limited number of cities and states, but we now have expanded to all 50 states and we couldn't have handled that without more automation.
Q: What is the timeline on your implementation?
Bocanegra: Phase one and two are scheduled for [completion in] the spring of 2008. For phase three, we are looking at the summer of 2008.
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