National Aquarium reels in savings with online buying
Karen Prema -- Purchasing, 3/2/2006 2:00:00 AM
Did you ever wonder how aquariums buy exotic fish and frogs, or build the beautiful and extreme exhibits that attract you to visit? Or wonder how a purchasing professional picks the right supplier to transport an endangered species from Australia to the U.S.? It's not your everyday procurement, unless you work at the National Aquarium in Baltimore.
While the aquarium has a specialized process for procuring fish (more on that later), it also buys the more typical materials and services which offer leverage opportunities. These products are typically bought on a project basis, as new exhibits are constructed at the Aquarium (the Aquarium's biggest spend is in architectural services, which is in the $6 million range).
The project path for a new exhibit starts with setting a budget for materials and services. A designer is then hired through a typical RFP process with design firms. Next, a construction manager is hired and eventually subcontracts all the pieces of the project, including concrete, plumbing and electrical services.
What does the typical bill of materials look like for a huge exhibit construction project? For example, the new Animal Planet Australia: Wild Extremes expansion, which opened December 2005, required one hand-knotted metal screen measuring 15,000-plus sq ft; 120 plus pilings; 150 plants all indigenous to Australia; 1,800 Australian animals; 6,000 cubic yards of concrete 33,000 sq ft of crystal clear; low-iron float glass and 60,000 gallons of water.
Technology to the rescue. It's in these construction material areas that Hans Keller, CTO and overseer of purchasing activity for the IT department, has leveraged e-procurement technology. The aquarium first implemented software from Epicor in 1999 and moved to its e-procurement applications in 2003 with a specific focus on leveraging its capital equipment spend. As a nonprofit organization, getting funding for e-procurement technology was surprisingly pain-free, Keller says. The CFO and others saw the value they could get from the system with long-term goals of having very structured content to do reporting and analysis on cost when building new exhibits. The aquarium's goal in 2006 is to expand e-procurement across the enterprise so everyone is using e-procurement for capital and operating buys.
Supplier diversity is an integral part of the aquarium's procurement strategy. There is one dedicated purchasing staffer whose role is coordinating opportunities for Minority and Women-owned Business Enterprises (MWBEs). The procurement specialist is responsible for carrying out this program and advising aquarium employees on MWBE vendor availability. Aquarium buyers also encourage prime contractors to utilize MWBEs as subcontractors. Built into the system are reports that the procurement person can generate to show what percentages are being spent with MWBEs, says Keller.
When decentralization is a good thing. While many companies tout centralization as the key to procurement savings, due to the wide variety of materials and items purchased at the aquarium, the majority of buying activity is decentralized. Project managers normally coordinate the purchasing process and partner with other team members. For example, a project manager might work with the biological programs staff for the procurement of animals and with the facilities department for the procurement of electrical materials and services. In the end, the biological program staff or facilities staff may make the final purchase, but the decision-making is a collaborative effort and the project manager is responsible for the project budget.
However, Keller realizes the aquarium can benefit from consolidating some of its spend where it makes sense. It may not be buying enough crocodiles to consolidate on one supplier, but the commodities and services common enough to leverage can be centralized.
The goal is to centralize purchasing in areas where there are repeat purchases "so that we can leverage the total spend over a period of time to receive the greatest discounts possible with our vendors," says Keller. In areas such as electrical services or pumps for life support, Keller feels the aquarium would benefit from centralization. One area with centralized purchases is office supplies. Keller says that all office supplies are purchased through one vendor whose performance is evaluated on a yearly basis.
It's not simple to buy fish. So, how do you go about procuring over 600 species of fish, birds, amphibians, reptiles and marine mammals? Supplier performance is extremely important to the projects at the aquarium and may not take on the same set of goals that many procurement organizations are used to. For example, animal and fish suppliers are measured by the health of the animals they provide. The project manager works hand-in-hand with the medical and husbandry staffs to make sure the animals are coming from acceptable places.
Multiple departments partner together to collaborate on animal prices, and animals on loan. Purchasing also has to coordinate fishing trips to places such as the Bahamas. "When we do that, we have to specify what fish we're going to look for, what places we are going to look at, the maximum limit, and, then, work with the government on permits.
"Things that people think of as noncritical end up being the most critical to us," says Keller. For instance, a fish in a tank of water that is kept at 55 degrees can't have the water temperature go up to 60 degrees, or the fish will die. "Normal things like lighting, HVAC and temperature controls become as mission critical as anything else," says Keller.
The logistics of transporting the animals is also expensive. For instance, a 4-ft Barramundi, a fish found in Australia, costs about $300, but it costs about $5,000 to ship because it needs the proper enclosure full of water for the animal. The aquarium uses a variety of mechanisms for transporting animals. The type is primarily determined by the taxonomy of the animal, says Keller. "We have done everything from police motorcades, to private planes, to UPS," he says.
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