Procurement in the public organization refers to how government regulations govern the procedures to get the goods, services or works required to facilitate their business processes, including for public higher education institution. The main difference between procurement in the private and public sectors are located in different objectives. Procurement in the public sector not only for financial gains but also include objectives such as providing education, research excellence, community development and provide other public goods that are adjusted to the needs of a diverse work units (Arlbjørn & Freytag, 2012; Currie & Vidovich, 2000). There are three main points in the higher education institution procurement, namely the importance of procurement relationships with other functions in their respective institutions; importance of choosing the supplier of goods/services and customer relationship management; and the importance of incorporating procurement activities as activities that adding value. Good procurement activities require whole life-cycle management, procurement staff training, awareness and priority to the purchasing function, more accurate data, benchmarking and the value of purchasing consortia (Quayle & Quayle, 2000).
Public higher education institutions will be faced with a relatively tighter supervision in the future and therefore it should have the procurement function better and can help accountability and greater transparency (Glock & Broens, 2011). However, public higher education institutions are still less concerned with the importance of the procurement function compared to higher education in the private sector (Glock & Broens, 2011; Quayle & Quayle, 2000). While good procurement activities are a major component of organizational strategy (Young, Nagpal, & Adams, 2015).
Public higher education institutions in conducted procurement activities have had some challenges, such as the form of government environment and strict regulations (Glock & Broens, 2011) and complex procurement business relationships (Larson, 2009; Murray, 1999). Improvement in the procurement process needed to solve the challenge and long working time of procurement process. Improving this process can be done with the use of information systems (Rinaldi, Montanari, & Bottani, 2015).
The information system has been widely used in almost every area of life and education is no exception. Instead, technology and information systems have been applied quite widely in the field of education. In addition, management information systems can improve the competitiveness of the university itself (Dachyar & Dewi, 2015). The information system has become a basic factor to improve the performance of business processes (Silva & Oliveira, 2015). Information systems have become part of the strategy and activities of the organization. The using of information system in college give a positive impact on financial management (Silva & Oliveira, 2015) and knowledge management (Dachyar, Alam, & Pratama, 2016), and able to enhance the innovation of universities (Dachyar, Yadrifil, & Pratama, 2015).
Information system that has capability to support the business processes and also the procurement process of higher education is the Enterprise Resource Planning (ERP) system. ERP systems consist of software that supports manufacturing, orders, accounts receivable and payable, general ledger, procurement, warehouse, movement of goods and human resources. Enterprise Resource Planning system is used by worldwide companies and continues to expand into software that needed by a wide range of users, including higher education institutions.
ERP systems have the ability to be used in various kinds of conditions. A single set of software such as ERP systems are able to meet the business needs of an organization. ERP aims to reduce costs and improve business processes to be better with best practice. There are many reasons why using ERP, one of which is to increase the flow of a process and organization control. There are five benefits of using ERP systems in higher education, namely cost reduction, increase of the company's processes, reduce work and inconsistencies, integrate management and eliminate the limitations in linking the information systems of various fields (Silva & Oliveira, 2015). However, ERP systems that commonly used in commercial enterprises or not used in education field is not enough to meet the needs of higher education institutions (Noaman & Ahmed, 2015). There is a special needs to meet the academic functions of higher education institution. These needs led to the ERP system needs to be adapted to business processes of higher education institution. In another study also states that the differences forms of organization between universities and multi-national companies lead the ERP system can not be used casually in educational organizations (Pollock & Cornford, 2004). Procurement activities of the public higher education institution will also experience problems in the use of ERP systems such as adjusting the system with business processes, using problems by the user, requiring additional modules that alter the ERP system and changes in the ERP system that is too far will affect the way of working and procurement strategies becomes more difficult to implement (Pollock & Cornford, 2004).
The difference between best practice of ERP system and higher education institution business processes lead to employees need to rethink the new business processes in accordance with the comercial enterprises (Pollock & Cornford, 2004). The method that could help higher education to adjust their business processes with the ERP system is a business process re-engineering (BPR) method. BPR will help the higher education in showing inefficiency, reduce paper use, improve efficiency, and achieve operational improvements by reducing the workload and costs (Abdous & He, 2008).
Higher education should pay attention to four (4) elements of the implementation of BPR: Focus on fundamentals; radical redesigning; potentially give dramatic results; and business process orientation (Hammer & Champy, 1993). There are five (5) steps in BPR, namely preparing for re-engineering, as-is process analysis and criticality identification, data collection, development of the simulation model, and design of the to-be processes (Rinaldi, Montanari, & Bottani, 2015).
This study used the Business Process Reengineering (BPR) for designing the procurement system. The study consisted of three (3) steps, namely prepare for re-engineering, map and analyze as-is process, and the to-be design process.
Prepare for re-engineering is a stage that aims to understand the initial state of the procurement process in public higher education institution. There are three (3) types of procurement in the public higher education institution, the procurement price of goods/services below 200 million by direct election, procurement price of goods/services over 200 million through public auctions and procurement through e-catalogue. After understanding the initial conditions of the procurement system, followed by map and analyze as-is process stage. This stage is the mapping and analysis of the initial condition of the procurement process. Mapping and analysis used unified modeling language (UML) modeling techniques, use case diagrams and activity diagrams. Furthermore, the procurement process model analyzed and evaluated.
Design to-be process stage is a step that aims to design new procurement process. Stage design a new procurement process based on the initial state of the procurement process and the analysis in the previous section and Enterprise Resource Planning (ERP) system. Model of new procurement process design simulated using iGrafx to see the change from As-Is procurement process.
The procurement processes at public higher education institution have three kinds of procurement, e-catalogue, direct election, and auction. Procurement through e-catalogue is conduct by selecting the goods/services and suppliers through the e-catalogue website. Procurement through direct election type is conduct by direct selecting provider of goods/services that able to meet the demand. Procurement through auction conducted by auction on the auction website. Goods/services supplier will be registered for the auction. Providers that able to meet the criteria and terms of procurement of goods/services will be selected to conduct the procurement.
The initial conditions of the procurement process in public higher education institution were modeled using use case diagram shown in Figure 1. The procurement process begins when there are work units perform procurement request submission. After working unit procurement request delivered, then select type of procurement in accordance with procurement request. selected goods/services supplier in accordance with the type of procurement. Each use case that contained in the use case diagram has the workflow and information described using activity diagrams. Figure 2 shows a sample activity diagram of use case "Deliver requesition document".
After mapping the procurement process, the next step is did the analysis. The analysis conducted in this study are conducted in two stages. The first stage is conducted by simulating the initial condition to see how the initial conditions of the procurement process running and what problems that could occur in the activity, and second stage are analysis to identify activities by activities type (value adding, not value adding but Necessary, generating waste, and unknown).
Simulations performed for each type of procurement. Table 1 to Table 3 in a row show simulation results for type of procurement via e-catalogue, auction, and direct election. Based on simulation results, a lot of activities signing and checking documents that blocks the activity of procurement process.
After the simulation is conducted, the next step is to conduct an analysis based on the type of activity (Melnyk & Christensen, 2000): value adding (VA), Necessary but not value adding (NVA), generating waste (WG), and unknown (?). Analysis conducted on each of the activities contained in the procurement process. In addition to the type of activity, carried out also analysis for problems that occur in every activity.
Based on the analysis done by determine the type of activity, found the problem in each activities. Such problems were reanalyzed with the concept of BPR to obtain appropriate solutions based on BPR concept, namely Eliminate, combine, simplification, and separate (Hammer & Champy, 1993; Melnyk & Christensen, 2000; Cassidy & Guggenberger, 2001). Table 4 show any problems that occur and improvements that can be made based on the concept of BPR. Based on the existing problems, can be taken a few important points:
1. Many of the activities conducted for too long because it is done manually.
2. Many of the activities have similarity, repeated, or interconnected.
3. Some activities/actors have a function or activity that is not clear/not appropriate, and use words that confusing.
The next stap is to make an alternative improvements that can solve the problems on the initial conditions of the procurement process. Alternative also based to the concept of BPR. The alternatives that used as the basis for improvement tested by simulated scenarios on each type of procurement process. Scenarios and alternatives for improvement on every types of procurement shown in Table 5. Procurement through e-catalogue and auctions have two scenarios, scenario 1 is the scenario before using the ERP system, while the second scenario is the scenario after using the ERP system. Procurement through direct election has three scenarios, one scenario is a scenario before using the ERP system, while the scenarios 2 and 3 is a scenario after using the ERP system. The differences between scenario 2 and scenario 3 are a data supplier in scenario 2 is not stored in the ERP system and the third scenario has been stored.
The improvements scenarios simulated to see the changes from the initial conditions. Simulations performed using iGrafx software. The simulation results of each improvement scenario and initial conditions shown in Table 6. The simulation results show the scenario 2 of e-catalogue and auction procurement, as well as scenario 3 of direct election procurement give the greatest time reduction. Procurement through the e-catalogue time has decreased by 41%, auction procurement time has decreased by 50% and procurement of direct election time has decreased by 44%.
The final result of the procurement process improvement models in the use case diagram shown in Figure 3. In a new use case, there is a merger of Subdit Administration and Logistics System Development actor in Logistics Directorate actor because his work workable by Logistics Directorate. Figure 4 shows an example of the work flow improvements and information on the activities of "Deliver Requsition Documents". Compared with the initial condition in Figure 2, there are actors and activities that has been eliminated.
Based on the discussion of the results of the research, this study has been successfully designed the procurement process with an ERP system that is able to improve procurement activities in public higher education institution. Based on simulation results, the new process managed to reduce the execution time of the procurement through e-catalogue by 41%, the procurement through auction by 50% and the procurement through direct election by 44%.
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