Centralized vs. Decentralized Procurement Efficient and Sustainable

California State University San Marcos
Centralized vs. Decentralized Procurement: Efficient and Sustainable

Practices
An applied research project submitted to the faculty of the College of Business Administration
and Specialized MBA Program in partial fulfillment of the requirement for the degree of Master
of Business Administration
By
Bethany Contreras
San Marcos, California

August 2016
Executive Summary
California State University San Marcos is the third youngest CSU and home to
approximately 14,000 students, 35,000 alumni and 276 full-time faculty members. While there is
great pride in these numbers, rapid expansion has caused the need for corporate restructuring as
the university undergoes new sets of growing pains and challenges. To address some of these
obstacles, CSUSM decentralized its procurement for low-dollar, low-risk purchases which has
helped streamline front-end operations and alleviate Procurement from certain activities. On the
other hand, having minimal standardization and control reduces Procurement’s ability to monitor
how the university’s Procard is being used and what is being purchased.
Of the $4.4 Million spent with the Procard in FY 2014-15, approximately 17%
($746,982) was used for office supplies. While half of a million dollars may not seem too
significant for most companies, it could mean a great deal for state-funded institutions that are
financially supported by local communities and taxpayers. Based on the university’s contracted
prices with Staples Business Advantage and estimated order quantities, the university could save
approximately $132,000 per year by switching to select sustainable versions of paper, pen and
manila folder products. An additional $75,000 can be saved by having each of the 234 registered
Procard holders reduce his/her spend on office supplies by $27 per month.
From a pure sustainability perspective, a fully centralized purchasing model is best for
minimizing rogue spend and controlling what is bought and used on campus. However, it would
require an unnecessary amount of manpower and delayed orders. Furthermore, because each
department is so diverse, it would be very difficult to meet the needs of all 127 departments in a
timely manner. Overall, the drawbacks are too great and the benefits too few for CSUSM to
implement a fully centralized procurement model. Thus, it is determined that a hybrid model be
implemented in which case only standard office products and commodities (i.e. paper, pens, etc.)
are purchased centrally by Procurement. Such orders may be placed in large quantities on a
quarterly or semi-annual basis. All other purchases may remain decentralized. Mandating the use
of contracted vendors only is also recommended so long as an Amazon Business account is
added as a preferred vendor. Coupled with centralizing large-volume products, the hybrid model
can offer Procurement the most control and visibility.
Table of Contents
Centralized vs. Decentralized Procurement: Efficient and Sustainable Practices .............. 0

Executive Summary ............................................................................................................. 1
Chapter 1: Project Overview................................................................................................. 1
Company Profile ................................................................................................................. 1
Problem Statement ............................................................................................................. 1
Central Questions ............................................................................................................... 2
Research Methodology ....................................................................................................... 2
Objective ............................................................................................................................. 3
Chapter 2: Overview of Procurement ................................................................................... 4
Introduction ......................................................................................................................... 4
General Procurement Processes ........................................................................................ 5
Essential Functions of Procurement .................................................................................... 7
Best Practices ..................................................................................................................... 7
Decentralized .....................................................................................................................11
Advantages ........................................................................................................................12
Disadvantages and Challenges..........................................................................................12
Centralized.........................................................................................................................13
Advantages ........................................................................................................................13
Disadvantages and Challenges..........................................................................................14
Chapter 3: CSUSM Procurement ........................................................................................15
Introduction ........................................................................................................................15
Procard Program................................................................................................................15
Spikes Cavell Database .....................................................................................................16
Budget Model .....................................................................................................................16
Chapter 4: Other Universities’ Procurement ........................................................................17
Introduction ........................................................................................................................17
Procurement Card Program ...............................................................................................18
Data Tracking ....................................................................................................................18
Sustainability ......................................................................................................................19
Chapter 5: Sustainability and Cost-Benefit Analysis ............................................................21
Introduction ........................................................................................................................21
Operating Expense ............................................................................................................21
Sustainable Products .........................................................................................................23
Contracted Bulk Orders......................................................................................................26
Chapter 6: Conclusion .........................................................................................................27
Defining Procurement ........................................................................................................27
Decentralized vs. Centralized.............................................................................................27
Other Universities ..............................................................................................................28
Operating Expense - Annual Savings.................................................................................28
Chapter 7: Recommendations .............................................................................................29
The Hybrid Model...............................................................................................................29
Central Repository for Level 3 Data ...................................................................................29
Procard Spending ..............................................................................................................30
Change in Budget Model ....................................................................................................30
Organizational Behavior Management ...............................................................................31
Chapter 8: Follow-Up Sources and Projects ........................................................................32
Bulk Orders ........................................................................................................................32
Sustainable Products and EPP Products ...........................................................................32
“Green” Catalog and Purchase Limitations.........................................................................33
Best Budget Model(s) for Universities ................................................................................33
Bibliography ........................................................................................................................34
Appendices .........................................................................................................................38
Appendix A: Mission Statement and Vision of SDSU’s Contract and Procurement
Management ......................................................................................................................38
Appendix B: A comparative example* of Level 1, 2 and 3 data by 3Delta System ..............39
Appendix C: UCSC’s growth of “green order” 2008-12 and EPP spend 2009-12 ...............40
Appendix D: Operating spend data by directorates for FY 14-15........................................41
Appendix E: Office supply spend totals for FY 14-15 .........................................................42
Appendix F: Total annual savings with cost reductions for FY 14-15 ..................................44
Appendix G: Products from Staples Business Advantage used for savings calculations ....45
Appendix H: Estimated calculations of CSUSM order frequencies for paper, pens and
manila folders ....................................................................................................................46
Appendix I: Interview discussion about budgets in higher education ..................................47
Chapter 1: Project Overview
Company Profile
Founded in 1989, California State University San Marcos (CSUSM) is the third youngest
CSU campus placing it at 20 out of the 23 CSU’s. Prior to its opening in 1990, President Bill W.
Stacy and twelve founding faculty members defined the institution’s mission, purpose and
academic plan. In Fall 1990, CSUSM blithely welcomed its first set of students at its storefront
location next to a Jerome’s Furniture store, a commemorated landmark known as “Cal State
Jerome”. Within two years, enrollment had grown to 1,700 students and the university was able
to move to its permanent hill-side location on Twin Oaks Valley Road. Twenty-six years later,
the commuter university is home to approximately 14,000 students and more than 35,000 alumni.
Problem Statement
Like most institutions of higher education, CSUSM operates under a decentralized

purchasing system for stationary items which the university calls the “Procard Program”. Under
the Procard Program, each department is granted the independent ability to purchase its own
office supplies. The program was designed with the intention of “improving efficiency,
flexibility and convenience related to purchasing low-dollar/high-volume transactions for goods,
supplies and approved services (2013).” While it does promote convenience and minimize
bureaucracy for low-dollar transactions, the program greatly lacks in efficiency. Overtime, some
offices have noticed a surplus of items beginning to accumulate in their storage facilities as a
result of unnecessary orders being placed prematurely or unknowingly. Not only is such
overstock consuming large amounts of useable space, limited funds are being exhausted on
nonessentials.
The current purchasing system is also producing inconsistencies within supply chain
processes causing it to be inefficient and possibly quite costly. With orders, reorders and returns
being placed so frequently, vendors are transporting materials to-and-from campus on a weekly
or bi-weekly basis. From an environmental standpoint, such high volumes of deliveries and
vehicular emissions compromise the campus’ ability to uphold its sustainability efforts.
Centralized vs. Decentralized Procurement | 1

CSUSM is not the first to experience such inefficiencies nor is this the first time these
types of issues are being addressed. Since the economic downturn in 2008, state funding has
dropped significantly. In turn, most state universities have tried to counterbalance dwindling
funds and budgets by cutting costs and increasing student fees and tuition. While the need to cut
costs and spend conservatively has been recognized, very few have managed to address the issue
directly by altering their operations and properly monitoring cardholder purchases.
The CSUSM departments of Procurement and Safety, Risk, and Sustainability have
partnered to examine the possibility of implementing a centralized purchasing (CP) system. With
this system, Procurement would place all office orders directly with the vendors themselves upon
receipt of a purchase order from an inquiring department. Management anticipated that the CP
system would allow for items to be purchased in bulk which could possibly reduce costs as well
as vendors’ delivery volumes and carbon footprint.
Central Questions
In the beginning stages of CSUSM’s development, every department relied on

Procurement to order and obtain all office supplies. As the campus grew, the switch to a
decentralized system was made and has remained that way ever since. There is concern that
reintroducing a system that places the departments back under the dependence of Procurement
may cause tension and resistance. Before reverting back to a CP system, four key questions must
be addressed:
1. How feasible is it to centralize office supply purchases at CSUSM?
2. Will it have an impact on the campus’ sustainability efforts? If so, how?
3. What are the cost savings from bulk orders (if any)?
4. What other cost benefits exist (if any)?
Research Methodology
Secondary research is collecting data from pre-established primary research or

information formerly gathered by another individual. Secondary research was performed first in
order to gain a clearer understanding of what to look for and what is to be learned while
performing the primary research. The primary objective is to determine the different

infrastructures of a centralized and decentralized purchasing system and any related pro’s and
con’s. A medium scale study was conducted by interviewing procurement staff from all 33
California universities and some across the nation with the intention of comparing their
procurement practices to those of CSUSM.
Primary research is the process of collecting and recording data firsthand. Original
computations, analytics and insights were derived from company records and financial reports
provided by CSUSM personnel. The primary objective was to determine the financial feasibility
of implementing centralized purchasing and any related benefits. Would it be more cost
effective? If so, by how much? How would it help the institution’s sustainability efforts? With no
quantitative and qualitative data collection tools readily available, raw data was collected directly
from Procurement staff. Excel was used to perform basic data analytics.
Objective
First, the fundamental differences between a centralized and decentralized system was
identified. Other universities were closely examined for comparative purposes particularly CSUs
and UCs as their organizational structure and practices were thought to be more relative to those
of CSUSM. Give the time constraint of this project, a mass email survey with five questions was
sent to all universities at one time. The Chancellor’s Office was also contacted and asked to
share their thoughts from a legislative point-of-view.
In order to obtain a better understanding of the campus’ current purchasing structure,
information was obtained directly from the Procurement Department and the Safety, Risk and
Sustainability Department. Raw data of recent purchases was also collected from Procurement
for analytical purposes. The goal is to identify certain purchasing patterns which may ultimately
be consolidated for the purpose of bulk orders, cost savings, accurate forecasting and/or other
valuable insights.
Once all research and data analysis is complete, it was anticipated that there would be
enough quantitative and qualitative data to support the business decision to implement a
centralized purchasing system (or not) for the purpose of ordering office supplies at CSUSM.
Furthermore, dependent on the granularity of the data and the depth of the analytics, it might also
be expected that future research and projects would be identified and proposed which may
succeed this particular project by another party.

Chapter 2: Overview of Procurement
Introduction
By definition, the term “procurement” simply refers to the act of procuring or obtaining
something. More specifically, the industry uses the term to reference the process of acquiring or
purchasing goods and/or services. However, such vague terminology provides very little insight
as to what exactly procurement does for a company, what it entails and why it is so important,
thus, begging the questions -- What does procurement, purchasing, buying, contract management
and supply chain management mean? Are the words interchangeable? Are some subsets of
others? Does it matter?
Many companies have realized the importance of personalizing procurement by defining
what the department’s purpose is and what its responsibilities will be in their specific company.
Definition is needed to better depict procurement’s role in a company’s overall supply chain
process, avoid duplications, and achieve optimization, “It is said that it is only when a subject is
understood that it can be taught. This is a principal reason why an agreed and accurate definition
of the word ‘procurement’ is needed” (CIPS Australasia, 2013). (See Appendix A for an
example of how SDSU defines its procurement, what it does, and why it exists).
To some degree, how a company defines such terminology reflects the efficacy of its
current process and may be a predictor for future performance. To gain a better understanding of
where CSUSM stood, Procurement personnel were interviewed. The topic of definition was
addressed by asking the basic “what” questions stated above followed by more personally
directed questions such as “what is CSUSM Procurement’s mission statement”, “what is its
purpose” and “how important is its role on campus”.
In terms of model schemes, procurement has several variations of centralized and
decentralized systems all of which have evolved overtime as companies have altered certain
processes and even created new roles altogether. This report will focus on the traditional nature
of procurement and the most common models of centralized and decentralized schemes.

General Procurement Processes
Procurement is one of many vital functions within an organization. As such, it is usually

a part of the company’s overall strategy. As previously mentioned, procurement processes are
usually specified in great detail by executives and procurement management most of which
include contracting responsibilities, accounting and financial activities, logistics and more. For
most companies, one of the primary determinants of a successful procurement is witnessed
within the purchasing sector of procurement - how goods are purchased and at what cost.
Therefore, it is helpful if not vital that the procurement team have excellent planning,
negotiating, relational and analytical skills.
Although procurement processes are unique to each company, there is a general six-step
framework that applies to most: 1) identify the need, 2) identify the supplier, 3) communicate
with suppliers, 4) negotiate, 5) evaluate the supplier’s value, and 6) manage logistics.
1. Identifying the Need
For some, identifying the need eventually becomes the driving force behind procurement,
its purpose, and possibly its mission statement. For others, the need might change depending on
the nature of the business and how great of an impact external factors have on its operations.
Regardless, identifying the need is an internal process that usually formulates procurement
strategy which translates into a specific goal or direction and a technical roadmap of
responsibilities and requirements. This process aids in the establishment of targets and
benchmark goals that will measure and track procurement’s progress.
2. Identifying the Supplier
The supplier selection process involves more than simply comparing price points. Rather,
the overall value a supplier has to offer is thoroughly considered including quality, reliability,
money, and service. Most modern companies take a strategic approach to choosing their
suppliers and prioritizing these value factors. A short step-by-step guide of this supplier selection
process is offered by a team of business experts from the Board of Trade of Metropolitan
Montreal based in Canada. For more information, see the Bibliography reference to Info
Entrepreneurs.

3. Communication
How often companies communicate with their suppliers and the specific channels used
vary. Some forms of indirect communication occur through the use of proposals and requests for
quotes and information. The most successful buyer-supplier relationships are cultivated when
there is a direct, single point-of-contact (SPOC). In many cases, suppliers will assign a sales
representative or individual to a specific company to take care of all of their needs and serve as a
primary contact. Having a SPOC keeps communication simple yet effective as (s)he becomes
familiar with the company, its needs and its purchasing habits.
4. Negotiation
While having the right set of soft skills is essential for fostering a healthy relationship,
reaching a suitable price point is always a primary concern as well. In addition to price, other
important factors such as availability, relative timelines and if applicable, possibilities of
customization may also be negotiated. Aiming for a win-win solution in which both parties feel
that they have won can be a delicate and challenging process which requires the right negotiating
style and techniques.
5. Evaluation
Assessing the supplier’s product and/or service and the vendor themselves is typically
performed at the time of completion or prior to a contract renewal. This is an opportunity for an
organization to grade the quality of a supplier’s performance, goods, and services and predict the
nature of future business activities. According to Ray Carter, director of DPSS Consultants,
suppliers may be evaluated based on the “10 Cs”: Competency, Capacity, Commitment, Control,
Cash, Cost, Consistency, Culture, Clean, Communication (Carter, 1995). The 10 Cs of Supplier
Evaluation incorporates all of the important factors of both hard and soft skills and enables a
company to view a supplier from all angles.
6. Logistics Management
Logistics management aims to effectively plan, control and implement the movement and
storage of goods, services and/or information from the point of origin to the intended destination.
In the logistics function, Procurement works closely with its supplier(s) to ensure all shipments,

deliveries and scheduled payments are executed in an efficient and timely manner while adhering
to all contracted terms and agreements. Other technical responsibilities of logistics management
include identifying the best delivery method, transit routes and IT resources to successfully
manage all such associated processes.
Essential Functions of Procurement
Before deciding what should be done next, it is important to examine and review the
performance of the current operating system and its efficiency. Ernst & Young Global Limited
(EY), a global leader in business consulting, claims there are five essential functions that
procurement should already be well established in.
First, creating a spendmap that logs all transactional activity in great detail and
maintaining quarterly updates is a must. Second, it is important to ensure that procurement is
already driving sustainable savings across the entire organization. Third, all procurement
personnel should have a thorough understanding of the department’s processes and how they
impact the value chain to better maintain and improve its overall value. Then, it is important to
ensure that value is carried through and realized in the management of contracts and supplier
relationships. Finally, the current operating model should be integrating both hard and soft skills
to deliver optimal outcomes.
EY suggests that companies that do not already have these five concepts and activities
embedded into their operations may be missing the mark and may make the switch to centralized
purchasing irrelevant, “If you are unable to ‘tick these boxes’ chances are that money is being
left on the table, commercial decisions are being made in isolation from the business and
antiquated processes and systems are a barrier to realising the full potential that procurement can
deliver. Furthermore, compliance to strategy and process will be encumbered by the increasing
cost to change” (2014).
Best Practices
There is a global economic need for both companies and consumers to receive the best
value possible with low cost, good quality products and services. In turn, this economic shift has
pressured many to cut their own costs while continuing to produce great results which forces

many organizations to undergo a complete business transformation. Regardless of centralization
or decentralization, adopting industry best practices are helping companies establish the right
methods, processes and philosophies. While some of these vary between companies and
industries, there are several key best practices that are relative to most and provide procurement a
systematic approach to evaluate the effectiveness of its functions and establish any necessary
efforts for improvement. Bob Engel, a seasoned supply chain executive and consultant, created
the following list of best practices which has also been endorsed by the Institute for Supply
Management (ISM)(2011).
1. Create a Supply Chain Council
Consistent cross-functional communication is essential, but establishing an official

council is more than simply meeting on a monthly or quarterly basis. By conjoining lead
personnel from the supply chain, corporate and other influential business units, the supply chain
council serves to provide direction and ensure that procurement strategy coincides with and
supports the company’s overall strategy. Council also serves as an important means of
collaboration and support. Having a solid support system is critical to the vitality of an
organization as various business units may come together and collaborate means to remove
barriers, subdue obstacles and remain innovative.

2. Align and Staff the Procurement Function
Aligning the procurement function is when companies examine all relative factors of both
a centralized and decentralized system to determine which will work best for their business
model. For some companies, placing a supply chain professional in various business units works
best while others might find a centralized approach to be much more effective. Some companies
choose to use a combination of the two models in which case strategy is kept at a centralized
level while the execution is done at a departmental level. Regardless of which model is adopted,
staffing the right personnel is primary. According to Engel, “Best-in-class companies hire supply
chain managers who have strong communication and relationship management skills (both
internally and externally), the ability to think strategically, and a focus on value creation (2011).”
3. Make Technology Work for the Company
In a technology-driven world, there are numerous IT systems, database structures and

technological avenues companies have to choose from. In many cases, companies modify their
processes to accommodate and revolve around the selected technology. However, companies
should instead choose a program that streamlines their current workflow, meets their needs and
allows users to easily retrieve and view data for important business insights. While not all
personnel may access such software on a daily basis, it is becoming ever-more important that
should the need arise, most should be able to understand how to use and read the program.
4. Create Alliance with Key Suppliers
As mentioned, the best buyer-seller relationships are established when there is two-way
communication and both parties are actively managing it together. In doing so, the flow of
communication remains well beyond the closing of any deal and becomes a long-term
commitment. As with any relationship, creating a game plan early on is important. Discussing a
platform for problem resolution and being open about all expectations before issues arise will
reduce the intensity of a problematic situation and even avoid others all together. Developing
joint and individual improvement goals and their respective metrics will also ensure that the
positive development of the relationship will always be a consideration and actively sustained.

5. Collaborate Strategic Sourcing
Some of the most effective supply chain organizations actually solicit internal feedback
for sourcing activities. The matter of strategic sourcing is made open to other departments as
well as the purchasing department. The various functional departments come together to
collaborate and share their own objectives and strategies prior to any sourcing decisions being
made, a perfect example of hybrid procurement in action. Companies that have taken this
approach have been able to lower total costs, consolidate and streamline processes and increase
customer response times (Engel, 2011).
6. Look Beyond Price
Selecting a supplier’s bid based solely on its price-point is no longer justifiable. Rather,
progressive companies are shifting their focus to the overall value and the long-term total costs
associated with owning or consuming a particular product or service, “The balance (and
majority) of the total comprises operating, training, maintenance, warehousing, environmental,
quality, and transportation costs as well as the cost to salvage the product's value later on (Engel,
2011).” Those who have a total cost of ownership (TCO) focus are typically more equipped for
negotiation as well and ask suppliers how they might be able to work together to reduce such
costs.
7. Keep Contracts Under the Supply Chain Function
The management of contracts should be the responsibility of the supply chain

organization only. Keeping contracts in a centralized repository eliminates the possibility of
misplacing or losing contracts altogether. Effective contract management may also help the
organization leverage its spend, mitigate risk and ensure all contracted terms and agreements are
being complied.
8. Optimize Company-Owned Inventory
Many organizations work relatively hard to reduce working capital, control holding costs
and optimize inventory levels. While monitoring such activities are typically not as imperative in
the education industry, it is still of some relative concern.

9. Balance Control and Minimize Risk
There is an equilibrium of corporate control and employee empowerment that very few
companies have been able to establish and even fewer successfully maintain. Companies that
have managed to preserve this balance usually review and update their policies and control levels
on a continuous basis. Of course, all such policies should be appropriate and realistic and may
instinctively go hand-in-hand with risk mitigation and further support such efforts.
10. Take Sustainability Seriously
In today’s society, sustainable initiatives and terminology (i.e. “go green”) have become
forced practices and common catchphrases, so much so that it has undermined the entire concept.
For one reason or another, the preservation of the Earth’s natural resources is often overlooked or
believed to be an overrated ecological movement. Most companies have artificially adopted the
idea to please stakeholders and increase brand appeal with green-labeled products. However,
only companies that have sincerely embraced sustainability and perhaps have a strong ecological
motivation themselves gain the most credibility and respect from consumers and employees.
Decentralized
A decentralized organizational model allows each field site to have its own procurement
center. Typically, all personnel at a particular location report directly to their general manager for
such needs. There is no centralized coordination or stringent policies other than what might
already be promulgated by the firm through financial or operational policies. Thus, each field
location is responsible for all procurement and logistic activity which serves to minimize
corporate overhead and, to some extent, foster a sense of freewill. Although the university does
not necessarily have several “field sites”, with the exception of its Temecula satellite campus, the
same concept may be applied to all of the individual departments and numerous cardholders.
Also, because cardholders are not mandated to purchase supplies from contracted vendor, the
lack of centralized coordination is just as prevalent.

Advantages
By moving some decision-making processes down the hierarchical structure, tactical

decisions may be made more quickly, employee turnover may decrease and overhead costs may
be reduced. Local employees or employees within a particular department tend to have the best
knowledge about their day-to-day routine, what their inventory levels are, when to restock and so
forth. As such, tactical-level decisions may even be improved throughout the entire organization
if each individual department or field site is managing their logistics efficiently and properly.
With fewer layers of bureaucracy, the speed of these decisions are also greatly accelerated as
decision-making is permissible by individuals or smaller teams of management.
Employees often prefer a decentralized model because it provides a sense of autonomy.
Under the decentralized system, personnel become self-sufficient and are able to make their own
decisions, make scheduling adjustments and even implement their own ideas as long as they are
within reason and adhere to the few company policies that are already in place. Employees who
are given more autonomy tend to be more loyal to the company and stay longer.
For the employer, the approach may relieve some overhead and several burdensome tasks
such as hiring, ordering supplies and managing inventory for numerous local and global field
sites. In doing so, the employer may now focus the attention on long-term, big-picture items and
corporate strategic efforts such as global expansion, brand positioning and big data analytics.
Disadvantages and Challenges
One of the primary disadvantages of a decentralized system is that it weakens

procurement's operational and managerial ability to ensure economies, synergies and buying
power with suppliers and carriers. Without a common purchasing channel or process,
organizational inconsistencies and asset duplications are common. Departments or field sites
may lack the necessary time, skill set, or manpower to effectively manage their inventory
resulting in poor coordination, over/under-purchasing and unnecessary expenses.
If a company has 100 different departments, it is likely to experience 100 different
purchasing practices, preferences and processes. Even uniform policies and standardized
procedures that have been put in place by corporate are not always followed accordingly. With
each department following its own set of procedures, inconsistent, duplicate, and even

unreported sets of data complicate any sort of tracking and monitoring of procurement activities.
Accounting experts and supply chain professionals tend to agree that decentralization is
inoperative without experienced or properly trained personnel managing the process.
Centralized
A centralized purchasing system is one in which all departments of a company make

purchases through a common purchasing division. Companies that have a wide geographical
distribution typically created by a sizable variety of departments often use this systematic
method to avoid duplicity of orders, increase efficiency, and lower costs. There are three primary
forms of centralized procurement within both the public and private sector of business. Two
forms involve one or multiple sites that report to a single headquarters location. The third form
involves a multi-plant or division company base that has procurement at each field location
which then reports directly to the central procurement at headquarters. The centrally located
procurement administers full direction, supervision, and policy creation through to each field
location.
Advantages
Having greater control allows for more visibility into what the company is purchasing,
what it needs and how those resources are being obtained. With one division committed to
purchasing materials, companies are better able to locate the best deals, lower purchasing costs
with high volume bulk discounts and maintain a more organized transactional system for
monitoring purposes and further data analytics. Overall, incorporating all or most of the
company’s procurement functions into one silo allows for a much smoother transaction and helps
streamline the entire logistical process. In terms of vendor relationships, the SPOC form of
communication mentioned earlier is much more easily facilitated in a centralized model. With a
single-point of contact on both sides -- vendor and customer -- the ease of communication
greatly improves which strengthens the overall customer-supplier relationship.
Regardless of the number of individual field sites or departments a company may have,
most purchases are of similar goods and/or services. Common-item purchases may be made in

bulk allowing for potentially exponential savings for the company with better pricing, discounted
large volume orders and reduced delivery charges and staffing costs.
For tracking purposes, computerized systems can be used to automate some of the tedious
tasks as well as integrate several other systems used by different departments such as finance,
accounting and procurement. Integrating purchasing systems and aggregating records
significantly simplifies the record-keeping and tracking process as they are now centrally located
in a single data warehouse. As a result, management of inventory and purchasing visibility
becomes much more efficient.
Disadvantages and Challenges
While monitoring purchases may significantly increase in efficiency and effectiveness,

having to send purchase orders and requisitions to the procurement department may cause
delays. This is particularly problematic for companies with time-sensitive operations such as
manufacturing and production. For the university’s situation, however, the purchasing of
common items in bulk may address this issue as items may now be on-hand. The primary
challenge this approach poses is storage space. While some universities do have warehouse
facilities on their campus, CSUSM currently does not meaning that each department will have to
store any excess inventory. However, most departments have their own storage rooms and are
already storing extra items, so the need for a warehouse may or may not be immediate.
Implementing the right IT structure and/or computer system is relatively expensive and
time-consuming. The initial investment of money and time to construct or set up a purchasing
system is dependent on the size of the company and the current IT infrastructure already in place.
Such technologically advanced changes may or may not be necessary depending on what is
already established.
Perhaps one of the biggest disadvantages of the old-fashioned central procurement model
is the autocratic message it communicates to other departments. Retracting an individual’s
independent ability to make and control his/her own decisions is off-putting and may cause
resistance and tension, “More often than not, the business units believe corporate procurement is
neither qualified nor knowledgeable enough to make decisions on behalf of their businesses.
They resent decisions pushed their way and find ways to resist and go off on their own”
(Anklesaria, 2014).

Chapter 3: CSUSM Procurement
Introduction
Centralized purchasing is no new concept to CSUSM. At one time, it was Procurement’s

responsibility to purchase everything for the campus, interact with the vendor, receive deliveries
and distribute goods to each department. However, as the campus grew, procuring materials
became an increasingly long and tedious process. For example, if campus personnel wanted to
purchase copy paper, they would submit an order request to Procurement. The request would
then sit in a queue along with others and would be reviewed on a first come, first served basis.
Eventually, Procurement would receive and review the request, question it and have it corrected,
if needed. Once everything was confirmed, the copy paper would be purchased via a Purchase
Order (PO) which would undergo a three-way matching process to ensure every aspect was in
compliance with the university’s purchasing policies. If something did not match up, the order
would be delayed. Then finally, the copy paper is delivered to the inquiring department.
As the campus grew, it was decided that such low-dollar, low-risk purchases could be
made by individual departments, thus, the Procard Program was created. Today, there are 234
registered cardholders across the 127 departments on campus. By empowering employees to
make high-volume, low-dollar purchases, the transformation is believed to have helped
streamline front-office processes and allow Procurement to give appropriate attention to the
larger, more involved purchases
Procard Program
The Procard is a campus-wide credit card used as a primary means for departments to
access their operating budget for the purpose of purchasing approved goods and services. Each
transaction is limited to a maximum purchase of $2,500 and $10,000 total per month. Using a
universal Procard allows the university to accumulate rebates and aggregate spend. Ultimately,
accounting and procurement personnel are relieved from having to monitor and record each
individual transaction saving time and resources.

Spikes Cavell Database
The university tracks and monitors all spend with Spikes Cavell, a cloud database
solution. CSUSM uses Spikes Cavell primarily for the use of aggregating spend and analyzing
purchase history. The university’s current data storing process does not include real-time data.
Rather, the university may only view historic activities that are batched at the end of every fiscal
year. While business intelligence is becoming more prevalent and a typical norm for companies’
operations and even vitality, the university’s procurement and finance department rarely perform
any kind of data analytics of cardholder spend. The batch data is used mostly for identifying any
trends and possible fraudulent activity. However, if fraudulent behavior did occur, uncovering
what exactly was purchased and pinpointing the transaction to a specific cardholder would be
challenging and time-consuming.
Budget Model
Budgeting was a popular topic of concern and almost always came up during a
discussion. There are six types of budget models that most organizations follow: incremental,
static, zero-based, rolling budget and rolling forecast. While most CSUSM personnel were not
sure which particular model the university used, the nature of its approach primarily resembles
that of incremental budgeting. Incremental budgeting assumes that the previous budget may be
used as the next year’s budget with only some incremental changes based on actual results. If
more money is needed than last year’s budget, the higher amount must be justified. If the full
budget was not used, it will be assumed that a lesser amount is more appropriate and next year’s
budget will be reduced. It is the reduced budget that concerns cardholders. Coupled with the
fluctuating and unpredictable nature of state funding, the assumed need for lower budgets
pressures many to max out on expenses whenever possible. It is this type of mentality that fuels
rogue spend and the exhaustion of funds.

Chapter 4: Other Universities’ Procurement
Introduction
All 10 UC and other 22 CSU campuses were sent an email survey of 5 questions
pertaining to their procurement procedures and sustainability initiatives. The email was also
distributed to the Sustainable Purchasing Leadership Council and select universities nationwide.
See Figure 1 for a list of the survey questions. Of the twelve universities that did participate in
the survey, eleven believed that more centralized purchasing for stationary supplies would be
beneficial and worth implementing whether it be for sustainability initiatives or cost-effective
practices. One university thought that making the switch and constructing such a model would
not be worth the time nor the effort. The Chancellor’s Office was also asked for their input about
moving to a centralized model at the individual-level to which the response was, “Yes and no.
Yes, if consolidating the spend of the entire system would give the system a leverage in
negotiating prices. [However,] by removing the procurement cards the Procurement Dept. would
slow down and be overly burdened by many small purchases which would take them away from
analyzing and giving the appropriate attention to the larger and more involved purchases
(2016).”
Figure 1 - Survey Questions
General Survey Questions

1. How does Procurement track purchases made with non-contracted
vendors (e.g. Amazon or eBay)?
2. Do you regulate what type of office supplies may be purchased?
3. Has the university taken sustainability efforts into consideration

and performed any measurements (i.e. levels of pollution per
delivery, purchase of sustainable products)?
4. In your opinion, do you think implementing/tracking any of these

thing would be beneficial? Please explain.
5. Do you think it would be beneficial to operate under a centralized

procurement for office supplies? Please explain.

Chancellor's Office Survey Questions
1. In your opinion, do you think a centralized approach would be
beneficial from an operation, financial and/or sustainability
standpoint? Please explain.
2. The majority of institutions of higher education seem to operate

under a decentralized model. Why do you think that is?
3. What type of budget model does Cal State use?
4. What do you think would make centralized purchasing possible?
5. What would you expect to see or convince you that such a model
would be worth implementing?
Procurement Card Program
All institutions of higher education in California operate under a very similar

decentralized model and procurement card program. While there are some variations regarding
purchase restrictions and transaction amounts, the differences are minimal. Staples and
OfficeMax are the two primary, contracted vendors used by most public California universities.
However, the realization that many cardholders are purchasing materials on Amazon at lower
prices or for the sake of product assortment and availability has caused some to consider adding
Amazon Business accounts to their list of preferred vendors. Meanwhile, purchases made off-
contract are tolerated. Of all the survey participants, California State University Channel Islands
was the only institution that mandated the use of contracted vendors and had established
ramifications if not followed, “All office supplies are purchased via procurement credit card
from Staples Business Advantage . . . If cardholders purchase office supplies (i.e. pens, staples,
paper etc.) from other vendors they receive a warning. Those who violate the policy multiple
times are given an audit finding. For our campus the 4th audit finding leads to permanent
revocation of the card (2016).”
Data Tracking
While specific database types and platforms may vary, many California universities
reportedly use a similar monthly auditing process to monitor spend data. Universities have the

ability to restrict and control purchases made through a preferred vendor catalog only. Because it
is typically not mandated that cardholders purchase solely from contracted vendors, such
restrictions are not always enforceable. Some universities do not track off-contract spend at all.
When asked why a university does not prohibit such purchasing activity, the typical response
included reasons such as lack of product assortment, cheaper prices or simply not worth the
effort. Of all survey participants, the University of Pennsylvania was the most unique in terms of
data visibility. UPenn currently accesses Level 3 data -- itemized transactional data. (See
Appendix B for more detailed information and comparisons of Level 1, 2 and 3 data). Level 3
data is the equivalent to viewing an itemized invoice versus other universities that may solely
view an “end-of-year invoice” with aggregated numbers only.
Sustainability
When asked about the possible benefits of implementing a centralized model,

sustainability was the most voiced reason for doing so. Whether it be purchasing eco-friendly
products or reducing pollution levels, other campuses have already altered their purchasing
habits in an effort to be more sustainable. Procurement at CSU Chico is currently searching for
the most sustainable white copy paper. Once determined, the university will block out all other
types of paper from their online Staples Catalog (2016). CSU San Luis Obispo already blocks the
purchase of virgin copy paper and requires all cardholders to buy paper with at least 30%
recycled content (2016).
The University of California Santa Cruz has been supporting sustainability initiatives and
measuring campus-wide efforts for many years. Specific to office supplies, UC Santa Cruz
promotes the procurement of environmentally preferred products (EPP). The campus has had
great success over the past few years with an average increase of 12% in EPP purchases between
2008 and 2012. (See Appendix C for UCSC’s recent percentage growth in green orders and EPP
spend). In 2014, the university developed an Environmentally Preferred (EPP) Office Supply
Catalog which sought to further increase EPP purchases by 150% by the end of FY 15 (Ellison-
Swabey, 2014). The program was led by a student intern and the Green Purchasing Working
Group (GPWeG), a business unit within the university’s Procurement Department, and has been
deemed successful, thus far.

In terms of deliveries, vehicles emit significant amounts of pollution and consume large
amounts of natural resources. Even once the delivery arrives to its destination, vehicles typically
remain idle for a sizeable amount of time which alone consumes several billion gallons of fuel
each year and emits significant amounts of pollution all in addition to the emissions during
travel. According to the Environmental Protection Agency (EPA), idle truck and locomotive
engines can emit up to “11 million tons of carbon dioxide, 200,000 tons of nitrogen of oxides
and 5,000 tons of particulate matter on an annual basis (2016).” To combat high levels of
pollution, the University of Pennsylvania implements a truck idling policy in coherence to the
state law that limits the length of time a diesel-fueled commercial truck may remain idle (The
Associated Press, 2009).

Chapter 5: Sustainability and Cost-Benefit Analysis
Introduction
According to supply chain professionals, there is no longer a clear-cut choice as to

whether a centralized or decentralized purchasing system is better than the other. In some cases,
a hybrid form of the two known as “regional central procurement” is being promoted particularly
for public companies operating globally (Anklesaria, 2014). However, some of the key concepts
may still apply even to an organization operating in only one or two locations.
Regardless of which process is used, some standardization is necessary. Maintaining a
common process administered by the entire institution is especially important for organization,
tracking, and data consistency. What companies would not want is for each of their departments
or set of teams to use a different sourcing process which is partly the current situation for
CSUSM as departments are purchasing office supplies from various non-contracted supplier
which is not fully tracked by procurement. But, is this really important? How big of an issue is
this? Is it big enough to where CSUSM should alter its current processes? Before any decisions
are made, the size of these inefficiencies must be quantified and the move to change any current
operations must be justifiable. At the same time, management must also consider every aspect
that is and will be impacted by its decision including internal relations with each department,
external relations with suppliers, total costs, waste levels and any related effects on the
environment and the local community.
Operating Expense
At the end of every fiscal year, CSUSM sends all financial reports, reconciliations and
spend amounts to the Chancellor’s Office. After thorough review, the Chancellor’s Office inputs
all such data into the Spikes Cavell database. The entire process usually takes 12 months or more
which is why the university may only access annually batched data with a time lag of at least one
year. As a result, the following numbers and calculations are based on financial reports from
Fiscal Year 2014-15, the most recent record within the database to date.
CSUSM’s total operating expense in Fiscal Year 2014-15 was $35.5 Million. As
illustrated in Figure 2, the university’s total Procard spend accounted for 12.40% of the total

operating expense at $4.4 Million, the second largest spend of the university’s four reported
business units (See Appendix D for operating spend data by business units). While Procard
transactions are certainly not the majority of the campus’ spend, it is where the university may
have the most control in terms of cutting costs and managing budgets.
Figure 2 - Operating Spend by Bussiness Unit

2%
5%
12%
Cal State San Marcos
PCARD
SM University Corporation
81% Associated Students Inc.
In 2014-15, CSUSM used at least seven vendors for stationary goods, Office Max being
the primary supplier. For an illustration of these spend amounts, refer to Figure 3. Of the $4.4
Million spent using the Procard, approximately 17% was used for office supplies with a dollar
value of $747,000 (See Appendix E for a list of Office Product Suppliers, their transaction
values and calculated spend percentages). Vendors such as Amazon, Target, Walmart and Costco
were categorized as “Retail and Wholesale”. Although it is possible that office products may
have been purchased, the transaction values of Target, Walmart and Costco were not included
due to uncertainty. Amazon transactions, however, included a Product Freetext Description of
either “Office Supplies” or “Other”. Thus, all Amazon transactions with the “Office Supplies”
description were accounted for.

Figure 3 - Office Products Spend
500,000.00
450,000.00
400,000.00
350,000.00
300,000.00
250,000.00
200,000.00
150,000.00
100,000.00
50,000.00
.00
Total Spend
Using FY 14-15 numbers, if CSUSM were to reduce its operating spend on office
products by 5% per month, the university would be able to save approximately $37,000 (See
Appendix F for savings calculations and totals). That would be a monthly spend reduction of
$13 per cardholder or $25 per department. If a 10% reduction is deemed feasible, the annual
savings would increase to approximately $75,000.
Sustainable Products
In many cases, sustainable efforts go hand-in-hand with a company’s ability to reduce

costs and be more efficient with its use of limited resources by reducing waste, energy and water
consumption. However, there are times when sustainability contradicts the traditional sense of
business. Although eco-friendly products use recycled material, contain less chemicals and/or
consume less of some natural resource, they can be more expensive. Even so, many consumers
and organizations continue to adopt sustainability. Organic foods, for example, can be marked up
as much as 50-100% (Roos and Kelly, 2009), yet the market is expected to grow anywhere
between 9 and 14% by 2018 (Daniells, 2014).
More specific to office supplies, price differences vary depending on product, brand and
quality. Some of Staples’ sustainable products are cheaper while others are more expensive. This
study compared prices and markups of 3M sticky notes, Hammermill multi-purpose paper, BIC
ballpoint pens, Pendaflex and Smead manila folders and Lysol disinfectant wipes. (See

Appendix G for the products that were used and their corresponding prices and item numbers).
Refer to Figure 4 for the price comparison between sustainable and standard products.
Figure 4 - Price comparison of regular products and sustainable substitutes for

paper, pens and manila folders
Recycled/Eco-Conscious
Regular (% of recycled content) Price Difference
Paper $ 45.00 $ 42.32 30% = $ 2.68
(5,000 sheets) $ 37.00 50% = $ 8.00
$ 37.27 100% = $ 7.73
Pens $ 7.23 $ 5.26 62% = $ 1.97

(12 count)
Manila Folders $ 9.45 $ 8.92 30% = $ 0.53

(100/box) $ 11.32 10% = $ (1.87)
Disinfectant Wipes $ 13.99 $ 18.87 25% = $ (4.88)

(240 wipes)
Sticky Notes $ 16.27 $ 20.69 30% = $ (4.42)

(24 pack) $ 17.57 100% = $ (1.30)
Overall, the price differences averaged at $0.94. It is important to note that this is a basic
estimate of prices from only six specific brands and nine sustainable products. Staples Business
Advantage offers an array of products sourced from over a hundred different suppliers. As the
company pushes for a more sustainable business model, their already large variety of eco-
friendly products continues to grow. Given the timeframe of this project and lack of data
availability, a more substantial number of products and prices were not thoroughly analyzed.
As depicted in Figure 4, the only sustainable products calculated to be more cost-
effective are the paper, pens and manila folders. Of these three product categories, the items with
the lowest price were used to calculate cost savings ─ 50% recycled paper, 62% recycled pens

and 30% recycled manila folders. Figure 5 illustrates the total annual cost differences between
purchasing regular products and sustainable products. The annual order quantities for CSUSM
purchases were determined without any hard data and are merely estimations that were thought
to be realistic based on the number of departments and cardholders on campus. (See Appendix
H to see how the order quantities were calculated).
Figure 5 - Total annual cost comparison of regular products and sustainable

substitutes for paper, pens and manila folders
Regular x Annual Order Qty. = Total Cost

Paper $ 45.00 14040 $ 631,800
(10 reams)
Pens $ 7.23 6318 $ 45,679

(12 count)
Manila
Folders $ 9.45 14040 $ 132,678
(100/box)
$ 810,157
Recycle/Eco-Concious x Annual Order Qty. = Total Cost

Paper $ 37.00 14040 $ 519,480
(10 reams)
Pens $ 5.26 6318 $ 33,233

(12 count)
Manila
Folders $ 8.92 14040 $ 125,237
(100/box)
$ 677,949
By purchasing sustainable products from these three product categories alone, CSUSM
may potentially save approximately $132,000. Coupled with the $75,000 savings of conservative
spend (10% annual spend reduction), the university could reduce its Procard spend by at least
28%.

Contracted Bulk Orders
As mentioned, Staples pallet-sized offers are not currently a part of CSUSM’s contract,
thus, the pricing is much higher. For example, ordering a pallet of paper is over $1,000 more
expensive than purchasing the equivalent of 40 boxes individually. It was thought that if the
university agreed to purchase orders in larger volumes at one time, a discount rate may be
applied to pallet-sized orders. The university’s Staples Business Advantage representative was
contacted for such information. The representative stated that because of the university’s already
sizable discount rate and rebate percentage on regular-sized items, an additional discount would
not be granted for pallet-sized orders. However, this does not rule out the possibility of savings
with bulk orders. The university may still consider purchasing products in bulk by ordering
larger volumes on one invoice.

Chapter 6: Conclusion
Defining Procurement
Definition is needed to better clarify procurement’s role in an organization. How a

company defines that role may reflect the efficacy of its current process and may be a predictor
for future performance. The mission statement of CSUSM’s Procurement includes a one-
sentence statement, “We are a dedicated team providing strategic business solutions to support
the University mission with a focus on service, communication and collaboration”. The
statement does not depict how important its role is on campus and how it supports the
university’s mission and purpose. Several goals and initiatives are also included on the
department’s website but the metrics for measuring progress were not mentioned nor were they
clear when discussed with Procurement personnel. Additionally, while the Procurement
department is compiled of four business units, little integration is evident and knowledge of each
other’s responsibilities is unclear.
Decentralized vs. Centralized
While there is no one-size fits all, there is a general six-step framework and industry best
practices that apply to most procurement departments, regardless of which model is being used.
By decentralizing some of the decision-making processes, tactical decisions may be made more
quickly, employees are empowered and overhead costs may be reduced. The decentralized model
may relieve procurement of several tedious, lower-level activities and allow for more time to be
dedicated to bigger projects and duties. However, sacrificing some of that control means little-to-
no visibility into what other departments are purchasing. It’s also possible that procedures and
policies may not always be followed and lack of self-discipline or specialized skills could result
in higher levels of rogue spend. In contrast, centralization allows for more control and visibility
of department purchases and activities. Incorporating all or most of the company’s procurement
functions into one silo allows for a much smoother transaction overall and helps streamline the
entire logistical process. It can allow for the best deals to be made and more efficient use of
budgets as well. However, the process of centralized purchasing is more time consuming and
may cause unnecessary delays of orders and distribution of supplies.

From a pure sustainability perspective, a fully centralized purchasing model is definitely
a much better way to control what is bought and used on campus and minimize rogue spend.
However, it would require an unnecessary amount of manpower and delayed orders, “To
[centralize purchasing] at a campus our size would require us to more than triple our FTE count
(University of Pennsylvania, 2016).” Overall, the drawbacks are too great and the benefits too
few for a university to implement a fully centralized procurement model.
Other Universities
Most, if not all, California universities operate under the same decentralized process and
use of a Procurement card. As a result, most are also experiencing similar issues and challenges
of excessive rogue spend, limited visibility and data tracking inabilities. Of those that
participated in the survey, most liked the idea of a more centralized process to achieve the
benefits of sustainability, control and visibility. Several universities are already implementing
sustainable initiatives that counterbalance some of these inefficiencies to some extent.
Operating Expense - Annual Savings
Purchasing sustainable products versus synthetic products could lead to additional

savings. The research showed that by purchasing sustainable products in simply three categories
could save the university approximately $132,000. Combined with conservative spend at a 10%
annual reduction rate, CSUSM could reduce its costs by 28%. Although some inventory may be
purchased in large volumes as bulk orders, pallet-sized orders offered through Staples Business
Advantage may not be placed on contract at a discounted rate.

Chapter 7: Recommendations
The Hybrid Model
Because each department at CSUSM is diverse, needs vary and staff numbers fluctuate,
Procurement should only centralize large volume orders of supplies that are used by the entire
campus such as paper, pens etc. All other purchases may remain decentralized.
Many companies are using less compartmentalization and instead are shifting towards
greater integration across numerous functions and business units. A decentralized procurement
with central leadership is noticeably the better model for many. More companies are realizing
that combining the pros of both centralized and decentralized procurement can be more
advantageous than simply implementing one alone. This hybrid model ultimately takes the
greatest strength of both models and marries the power of centralization with the flexibility of
decentralization.
It is clear that switching to a more centralized model may have an adverse affect on
employee moral. Rather than taking a dictatorial approach, the most successful central
procurement department will behave more as resource that is mutually beneficial to the entire
organization as well as each individual department. Much of this emotional need can be fulfilled
with good communication, collaboration, openness and transparency. Sharing services and ideas
and being open about processes while maintaining a balance of authoritative control will help
ease the transition and maintain a positive relationship between procurement and other business
units.
Central Repository for Level 3 Data
Many of CSUSM’s Procurement issues with data tracking and transparency can be
resolved by having a central repository and database of all office purchases. Each office
currently reports their purchases to a designated lead in their individual department. The
designated lead collects the invoices and sends them to the Procard Coordinator who then
records all of the invoices from all cardholders and all departments in their own individual file.
With this particular recording system in place, it is extremely difficult to retrieve any itemized
data.

Rather than having to wait for others to turn in monthly reports, it would be much more
efficient if Procurement could directly access digitally stored Level 3 data. Level 3 data is the
equivalent of an invoice where each individual item that was purchased is clearly visible.
Business-to-business industries such as corporate, government and industrial offices often use
and even require Level 3 data. In addition to gaining access to full visibility, the data also has the
benefit of helping businesses further reduce their interchange costs, “Often times, Level 3
interchange rates are up to a full 1.00% lower than their standard counterparts (Dharma
Merchant Services, 2016).”
Procard Spending
Regardless of any related benefits or lack thereof, conservative and responsible spending
is a must. While a 10% annual reduction rate was used, a higher percentage may also be
considered. If lower percentages are considered, any lower than 5% may be too miniscule.
Sustainable products should be purchased to accumulate savings at a much larger rate. While a
catalog of all available eco-friendly products would help streamline this process, Staples
Business Advantage does have its own filtration system that allows end users to browse such
products more easily. Although Amazon prices were not thoroughly examined, it is generally
known that the website has an array of products and competitive prices for most items.
Considering the possibility of opening a business account or creating a contract with Amazon
may prove to be financially beneficial.
Change in Budget Model
There are six commonly used budget models: incremental, zero-based, activity-based,
performance-based, centralized and responsibility center management (RCM). It is
recommended that each of these be examined and taken into consideration, with the exception of
the incremental model. The incremental budgeting model may account for much of the rogue
spend. The model itself is usually deemed as “lazy”, “wasteful” and/or “inefficient” by industry
professionals. This topic should be considered and discussed at a legislative level whether by a
university’s VP or President or even as high as the Chancellor’s Office. It is an important matter
of concern and if changed, must be implemented from the top down. (See Appendix I for an

interview discussion about budgets in higher education between Andrew Hible, COO and co-
founder of HigherEdJobs.com, and George McClellan, Vice Chancellor for Student Affairs and
Enrollment Management at Indiana University).
Organizational Behavior Management
Organizational behavior (OB) is the science of behavior and how it is influenced by

group and structured settings and other individuals within an organization. The management of
OB is notably a challenging task as it considers workplace diversity and individual differences,
perceptions and attributions for the purpose of understanding and optimizing group dynamics,
decision making, teamwork, leadership, and quality improvement programs. Based on various
interviews and conversations throughout this study, employee relations were always a topic of
concern. Despite how practical a change in processes may be, if employee resistance is thought
to be a possible reaction, it will generally not be implemented. Although this is generally a more
sensitive topic for the political and unionized nature of higher education, it is still a matter of
concern and should be managed and modified where able.

Chapter 8: Follow-Up Sources and Projects
While this project addressed many original topics of concern, research led to more
questions and exposed untapped areas worth further examination. Several follow-up projects
were identified throughout the timespan of this project which may be conducted by other
students at a future time and possibly enhance the findings of this thesis.
Bulk Orders
Although CSUSM cannot receive a discount on specified “pallet-size” orders from

Staples, it is still possible to order large volumes of product at one time. This may prove to be
cheaper than purchasing several different brands and types of paper. If the university were to
decide to purchase in bulk, the exact square footage of available warehouse space would first
need to be known. Exact quantities and order frequencies would need to be calculated as well.
Although this project was not able to gain access to such data at the time, it is possible. Those
who are responsible for auditing each cardholder’s invoices may be contacted for purchasing
data which then may be analyzed for such numbers. Otherwise, a survey may be distributed to
each cardholder asking about their purchasing needs and habits. It would be important to take
into account the size of each department (staff count) and possibly their duties and
responsibilities. For example, the university’s Career Center handles affairs with students, staff,
faculty and outside businesses whereas Accounts Payable may only deal directly with staff and
faculty. Do such differences affect purchasing habits and order frequencies? If so, how? If the
department were to hire another member, how much more paper (for example) would the need to
purchase? How might this help forecast future orders? A more in depth cost-benefit analysis may
also be performed if such data is acquired.
Sustainable Products and EPP Products
Research proved that purchasing sustainable products makes sense financially. It is

possible to further enhance the calculated $132,000 savings by analyzing and comparing more of
Staples “green” products. Whether or not comparing all available brands is necessary should be

determined between the student(s) and the project sponsor. Of course, not all eco-friendly
products offer the best value. In fact, “sustainable” products are sometimes not very sustainable
at all. The use of non-synthetic, organic tends to compromise the quality and lifespan of a
product. Product reviews from customers and industry professionals may be examined to help
determine which eco-friendly products are worth investing in.
“Green” Catalog and Purchase Limitations
Of the products that are deemed more cost-effective, a “green” catalog may be created.
The catalog project may possibly use UCSC’s EPP Program as a reference but should be original
and specific to CSUSM’s needs. Having a specialized catalog allows cardholders to easily
browse available green products and minimizes the need to search for such products themselves.
A convenient and hassle-free way to locate sustainable products may incline cardholders to
purchase them more often. Finally, the project may examine the possibility of mandating the use
of the green catalog or purchases of certain eco-friendly products as some California universities
already do.
Best Budget Model(s) for Universities
Specific to the education industry, this project will look into the six different budget
models and weigh the pro’s and con’s of each. It is important to examine all external factors that
affect the budgets for state-funded universities as well. The incremental model may or may not
be the best choice for institutions of higher education. Regardless, there may be an issue with the
way funds are being spent. The research of this project may expose other budgeting and/or spend
issues, ask additional questions or recommend a more efficient process.

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FY 2015/16 [PPT]. (2015, March 13). CSUSM.
Daniells, S. (2014, January 3). US organic food market to grow 14% from 2013-18. Retrieved
June 14, 2016, from http://www.foodnavigator-usa.com/Markets/US-organic-food-
market-to-grow-14-from-2013-18
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sustainability internship program (PSI) [PDF].
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from http://www.supplychainquarterly.com/topics/Procurement/scq201101bestpractices/
Hibel, A., & McClellan, G. (n.d.). Budgets in higher education - the keys to successful financial
management. Retrieved June 14, 2016, from
https://www.higheredjobs.com/higheredcareers/interviews.cfm?ID=445

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organizational-structure-603.html
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Appendices
Appendix A: Mission Statement and Vision of SDSU’s Contract and Procurement

Management

Appendix B: A comparative example* of Level 1, 2 and 3 data by 3Delta System

Appendix C: UCSC’s growth of “green order” 2008-12 and EPP spend 2009-12

Appendix D: Operating spend data by directorates for FY 14-15

Appendix E: Office supply spend totals for FY 14-15

Appendix F: Total annual savings with cost reductions for FY 14-15

Appendix G: Products from Staples Business Advantage used for savings
calculations
Product Item Description and Number

Paper
Hammermill Hammermill Hammermill Staples
(10 reams)
Premium 32% 50% 100%
Multipurpose Recycled Recycled Recycled
Paper Copy Paper Copy Paper Copy Paper
Item #686873 Item #HAM86700 Item #329306 Item #375577

Pens
BIC BIC
(12 ct)
Retractable 62%
Ballpoint, 1.0 Recycled
mm Ballpoint, 1.0 mm
Item #463828 Item #811490
Manila Pendaflex Smead

Pendaflex
Folders 30% 100%
1/3 Assorted
(100/bx) Recycled Recycled
Tab Cut
Cutless 3-Tab 3-Tab
Item #033760 Item #555286 Item #489408
Disinfecting Lysol
Seventh
Wipes Lysol 25%
Generation
(240/pk) Recycled
(70/pk)
(80 wipes/pk)
Item #164208 Item #309955 Item #848852
Sticky 3M
3M 3M
Notes 30%
Post-It Super 100%
(24 pads/pk) Recycled Super
Sticky Recycled
Sticky
Item #653414 Item #860982 Item #704406

Appendix H: Estimated calculations of CSUSM order frequencies for paper, pens
and manila folders

Appendix I: Interview discussion about budgets in higher education
Question 1
Hibel: In your book, Budgets and Financial Management in Higher Education, you state, "The
reality of higher education budgeting is that there are typically far more programs and services
to advance the institutional mission than there are dollars to fund such ideas." How is this issue
reconciled?
McClellan: It helps to have a mission that has wide campus support coupled with a strategic
plan that is tightly tied to that mission and that was developed through an inclusive process of
the community. This facilitates prioritization of resources and minimizes the likelihood of
disruptive tension born of the budget process. It's also really helpful for a unit to keep an eye on
their programs and services and cut what isn't working (or not working well enough for the
investment of resources) and look to spin off successful programs to partners with more
resources or to get support for those success programs from other sources (folks like to invest
in winners). This can allow a unit to use internal reallocation as a strategy to develop "new"
dollars. It can also be a helpful negotiating tool when something has to be cut or not funded as
you can point out what you have already given up as part of the negotiation process. One final
tip, be sure you can articulate what you won't be able to do if funding is not available for a
particular program or service. Whose ox will be gored?
Question 2
Hibel: Also in your book, you discuss many different budget models from formula budgeting--
state allocated money to public universities to zero-based budgeting--each item must be
justified during budget creation to performance based budgeting-resources allocated based on
achievement of criteria. Please describe these approaches and when each is most optimal?
McClellan: You've done a nice job of providing a brief but concise explanation for each of the
three you mentioned, and there are several more common models. One of my favorite parts of
our book (my co-author is Peggy Barr) is the chart that we developed listing the various models
and their strengths and weaknesses. Let me share just a few words about some of the more
common models. Both formula budgeting and performance-based budgeting are becoming
more common and much more discussed in higher ed right now. On the surface it's tempting to
see these models as very attractive, and there is a lot to recommend both of them. The
problem, however, comes when the variables in the formula or the metrics of performance are
defined. For example, if state funding formulas are heavily weighted in the areas of degree
completion and research funding, regional public universities may be at a substantial
disadvantage. With regard to performance metrics, there can be a struggle both in terms of
identifying what constitutes performance (e.g., if a research institution prioritizes technology
transfer then humanities may be slighted) and in figuring out how to assure that units not directly
involved in the performance being measured are to be funded. If the performance of an
academic unit is measured by number of majors or credit hours, how do you value admissions
which no doubt had something to do with the academic department's success? The incremental
model is attractive to some because it's really simple and very transparent, but it can lead to

simply replicating over or under allocation of resources. On the other hand, zero based
budgeting which requires budgets to be justified annually can help minimize the likelihood of
such repetitive error, but it is an incredibly time consuming process. This brings me to my final
point on your question. Relatively few institutions adopt an absolutely pure version of any given
budget model. They typically adopt some sort of hybrid that works in the unique context of their
institution.
Question 3
Hibel: A large part of budgeting for upcoming fiscal cycles involves forecasting. What are your
suggestions on successful forecasting?
McClellan: What's the old saying? The best indicator of future performance is past
performance. Peggy and I are big believers in using several years worth of data (no less than
three, no more than five) when forecasting revenues or expenses. You can look at the trends,
give some thought to what might be different (if anything) in the year ahead, and make
adjustments to the forecast accordingly. Another tip is to be conservative when it comes to both
revenue and expense forecasts. Shade your prediction for revenue to the low side and for
expenses to the high side. When the son of one of my friends was little and asked if he were
hungry or tired, he would cutely answer "just a little bit, not a lot." He'd be a great budget
forecaster.

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California State University San Marcos

Centralized vs. Decentralized Procurement: Efficient and Sustainable

San Marcos, California

Centralized vs. Decentralized Procurement: Efficient and Sustainable Practices .............. 0

Like most institutions of higher education, CSUSM operates under a decentralized

Centralized vs. Decentralized Procurement | 1

In the beginning stages of CSUSM’s development, every department relied on

Secondary research is collecting data from pre-established primary research or

Centralized vs. Decentralized Procurement | 2

Centralized vs. Decentralized Procurement | 3

Centralized vs. Decentralized Procurement | 4

Procurement is one of many vital functions within an organization. As such, it is usually

1. Identifying the Need

2. Identifying the Supplier

Centralized vs. Decentralized Procurement | 5

Centralized vs. Decentralized Procurement | 6

Essential Functions of Procurement

Centralized vs. Decentralized Procurement | 7

1. Create a Supply Chain Council

Consistent cross-functional communication is essential, but establishing an official

Centralized vs. Decentralized Procurement | 8

3. Make Technology Work for the Company

In a technology-driven world, there are numerous IT systems, database structures and

4. Create Alliance with Key Suppliers

Centralized vs. Decentralized Procurement | 9

6. Look Beyond Price

7. Keep Contracts Under the Supply Chain Function

The management of contracts should be the responsibility of the supply chain

8. Optimize Company-Owned Inventory

Centralized vs. Decentralized Procurement | 10

10. Take Sustainability Seriously

Centralized vs. Decentralized Procurement | 11

By moving some decision-making processes down the hierarchical structure, tactical

Disadvantages and Challenges

One of the primary disadvantages of a decentralized system is that it weakens

Centralized vs. Decentralized Procurement | 12

A centralized purchasing system is one in which all departments of a company make

Centralized vs. Decentralized Procurement | 13

Disadvantages and Challenges

While monitoring purchases may significantly increase in efficiency and effectiveness,

Centralized vs. Decentralized Procurement | 14

Centralized purchasing is no new concept to CSUSM. At one time, it was Procurement’s

Centralized vs. Decentralized Procurement | 15

Centralized vs. Decentralized Procurement | 16

Figure 1 - Survey Questions

General Survey Questions

2. Do you regulate what type of office supplies may be purchased?

3. Has the university taken sustainability efforts into consideration

4. In your opinion, do you think implementing/tracking any of these

5. Do you think it would be beneficial to operate under a centralized

Centralized vs. Decentralized Procurement | 17

2. The majority of institutions of higher education seem to operate

3. What type of budget model does Cal State use?

4. What do you think would make centralized purchasing possible?

Procurement Card Program

All institutions of higher education in California operate under a very similar

Centralized vs. Decentralized Procurement | 18

When asked about the possible benefits of implementing a centralized model,

Centralized vs. Decentralized Procurement | 19