Reengineering the purchasing function: identifying best practices for the City of Chicago.

• Author: Kustermann, Kathryn M.
• Position: Purchasing department of Chicago, Illinois

Chicago's purchasing department has redesigned its processes by incorporating best practices from research conducted around the country.

As local governments across the U.S. replace legacy financial systems, they can seize the opportunity to redesign extant business processes. Recently, the purchasing department of the city of Chicago, at the encouragement of the mayor, began an initiative to improve the service, timeliness, and quality of information in the core purchasing processes. This included finding ways to:

* reduce processing time from identifying a need through awarding a contract;

* increase vendor participation on bids;

* encourage greater participation of minority and women-owned vendors in city business;

* improve the quality and accessibility of information; and

* speed up the payment process.

During the past year, much work has been completed to position the purchasing department to meet these objectives. This article presents the methodology and approach taken to redesign the core purchasing processes at the city of Chicago. This article also provides some useful reference guides, presents findings of best practice research, and summarizes the key purchasing redesign improvements. Finally, it outlines steps taken to implement a new enterprise resource planning system that enables the process redesign improvements.

A Three-Phase Process Redesign

Using Proven Transformation Methodology. The purchasing reinvention project was officially initiated in June 1997. Operating as business consultants in partnership with the management team of purchasing, the city's Department of Business and Information Services (BIS) set out to reinvent purchasing, using the transformation and change methodology documented in popular publications such as Reinventing Government,(1) Improvement Driven Government,(2) and Reengineering the Corporation.(3) A team made up of members with reengineering experience in private-sector management established a facilitative methodology to redesign processes.

The authors of Improvement Driven Government recommend a core business process redesign method that follows six key principles, which Chicago incorporated in its project:

* base the redesign on the strategy;

* make the business and political case;

* involve the right people;

* use information technology wisely;

* manage the change; and

* ensure continuous improvement.

The project was guided by the reengineering definition described in Reengineering the Corporation, that is "the fundamental rethinking and radical redesign of business processes to achieve dramatic improvements in critical, contemporary measures of performance, such as cost, quality, service, and speed." Essentially, the "clean sheet of paper" approach was used in comprehensively redesigning the way in which the city of Chicago purchased goods and services.

In addition, the entire "business system diamond" was considered in the redesign approach. The focus was not only on redesigning the core business processes, but also on the crucial role of information technology as the enabler of the processes, and the roles of jobs, skills, and structure, culture and values, and management/measurement systems as supporting elements of the new processes.

Facilitative, Not Directive. As recommended in the reengineering literature, the city of Chicago followed a three-phase approach to this transformation (see Exhibit 1). The approach included facilitating teams of purchasing employees representing a cross-section of roles and levels in the organization to define new ways to accomplish work. More than 30 end-users were directly involved. Employing a facilitative approach ensured that purchasing ultimately owned the redesigns and was accountable for the results along the way. The entire effort was approached from a process perspective, allowing purchasing employees to discover ways to bring improvements in the performance of the critical purchasing processes they performed every day.

Additionally, to ensure that progress was made early on and momentum was sustained throughout the duration of the project, several "quick hit" projects were initiated and completed. These included posting bid information on purchasing's Internet Web page for easier vendor access, reducing the number of required bid submissions from three to one to lessen the burden on vendors and increase control with only one copy, and...