T H E M c K I N S E Y Q UA R T E R LY 2 0 0 3 N U M B E R 4
Purchasing lessons for schools
Brian Chapman and Chip W. Hardt
K E V I N C U R RY
Districts that improve their purchasing processes can capture significant savings.
Purchasing and supply management is rarely a top priority for school districts in the United States, but our research suggests that it should be. As a result of state budget crises, school districts are facing declining budgets for the first time in more than a decade.1 They are already struggling to meet stringent local and national guidelines for student achievement and to maintain their crumbling infrastructure. Better management of purchasing could help them make ends meet without compromising educational quality.
In our experience with school districts around the country—most recently with the Chicago Public Schools and the Puerto Rico2 Department of
Education—we found that bringing better discipline to purchasing and supply management can save school systems from 10 to 35 percent in many categories of nonpersonnel spending, including textbooks, transportation, food, and janitorial services. Annual savings in large urban school districts have ranged from $30 million to $40 million.
To achieve those sorts of figures, school districts need to examine their spending practices and to refocus on the original mandate of their central purchasing functions: saving money. Many of these departments have grown more concerned with filling out forms than with outcomes, and the result is that many departments have become inefficient bureaucracies that waste the taxpayers’ money and frustrate both teachers and school administrators.
School systems should ask two questions about every product and service they buy: “How much can we save by purchasing it centrally?” and “If it is complex, should the user—as opposed to central purchasing—buy it?”
School districts in Boston, Chicago, Los Angeles, and New York have seen their 2004 budgets fall by 2 to 12 percent from 2003 spending levels.
Puerto Rico, a self-governing commonwealth associated with the United States, is comparable to many large urban districts in size and management structure.
PURCHASING LESSONS FOR SCHOOLS
The answers can help determine whether each purchasing decision is made centrally or locally and what role the purchasing department should play (Exhibit 1).
Some commodities, including those provided by utilities and office supply companies, should be controlled centrally. The potential savings are huge, and it doesn’t really matter who is, say, the cell phone vendor or what type of copy paper a school system buys. For more specialized products, such as educational devices for hearing-impaired students, the right product is more important than the savings, and special-education staff members are the natural decision makers.
Who buys what?
Complexity of product
Example: devices for hearingimpaired students
Example: capital-improvement programs, janitorial services, textbooks
Goal: quick turnaround, minimal disruption of day-to-day operations
Goal: maximum value
Natural owner: user’s department
Role of purchasing department : support for user’s department
Natural owner: variable
Role of purchasing department : part of cross-functional team
Example: concrete for new construction Example: cell phone service, office supplies
Goal: efficiency of process, cost reduction
Goal: lowest price
Natural owner: variable
Natural owner: purchasing department
Role of purchasing department : leads sourcing (user’s department leads execution) Role of purchasing department : centralized purchasing, with no exceptions
Identifying the role of the central purchasing department will also help determine how many people it requires. For items the department buys centrally, employees need to design product specifications, evaluate