Moving its office supplies purchase online has helped Arkansas Blue Cross and Blue Shield to significantly reduce its supplier base, improve process efficiencies, and allow its buying operation to concentrate on more strategic tasks.

An independent licensee of the Blue Cross and Blue Shield Association, Arkansas Blue Cross and Blue Shield is the largest health insurer in Arkansas, serving more than 858,000 Arkansans.

The company's buying operation led by Garold Lessig, purchasing agent, selected the Clarus Corp.'s eProcurement system nearly three years ago to allow requisitioners capability to place orders online not only for office supplies, but also for computer hardware and software, business forms, office furniture, print-on-demand services and other goods and services.

In 2001, requisitioners placed orders for $11.5 million worth of goods and services through the Web-based system.

That's more than 12,000 orders that Lessig and his staff didn't have to process last year.

Before implementation of e-procurement, Lessig and Kim Roncketto, purchasing assistant/fleet administrator, manually processed paper requisitions mailed to their Little Rock office from Arkansas Blue Cross and Blue Shield regional offices and Medicare contract offices located in four other states—Louisiana, Oklahoma, Missouri and New Mexico.

"We had about six or seven different kinds of paper reqs," says Lessig. "Once we received the reqs, we had to reroute them for approval. We also had to create a purchase order, and file the paper forms. It was very labor intensive and once we started growing, it became horrific."

The purchasing operation was working with about 8-10 office supplies providers at the time. "We had one primary supplier in Little Rock," says Lessig. "The rest supplied the other offices."

Consolidating the supplier base was another key driver in Arkansas Blue Cross and Blue Shield's move to e-procurement, says Kelly Ellerbee, senior financial analyst/special projects. Ellerbee worked with Lessig to select an e-procurement provider and implement the new system.

"We had a two-fold mission," says Ellerbee. "It started with Garold needing a system to help provide relief from all the paper pushing they were doing in purchasing. At the same time, the director of corporate accounting approached me, looking for a new financial system."

Deciding on one integrated system, Lessig and Ellerbee selected Clarus eProcurement based on a supplier presentation that best communicated ways the company would meet their needs.

The two started holding kick-off meetings late in February 1999. They actively started working on implementation in March, before going live in June. "We didn't go live across the whole company at that time," says Ellerbee. "We picked a few areas or divisions, starting with financial services. (Purchasing falls under financial services.) From that point, we started migrating out to different areas quickly. We had everyone up by September 1999."

Arkansas Blue Cross and Blue Shield put the eProcurement software on the desktops of 300 users, typically administrators in each of the insurer's offices. "Before we started using the system, I would go to the designated requisitioner in my area if I wanted to order a package of ink pens," says Lessig. "He or she would fill out the paperwork and maybe a week or so later I'd get my order. Now, I approach the same person who places the order online and usually receive my pens the next morning." The purchasing operation maintains the approval process and captures the spending data for its records.

For the office supplies purchase, Lessig selected a long-time Arkansas Blue Cross and Blue Shield supplier, Pettus Office City, as the company's primary provider because of "an established history of good service" and the fact that the company is a small diversity supplier. Arkansas Blue Cross and Blue Shield is required to spend a certain percentage of its Medicare dollars with such suppliers.

With nearly 30,000 items, the office supplies catalog is the largest in the system. "We have up to 300 different suppliers on the system," says Lessig. "Some provide us with one or two items, while others may have a couple of hundred items in their catalogs."

Initially, some requisitioners who work in the company's regional and out-of-state offices had qualms about using a supplier located in Little Rock. At first, they didn't believe they would receive delivery of their orders as quickly as they might have had they used local suppliers. To alleviate these concerns, Pettus contracted with UPS to provide one- and two-day delivery. Arkansas Blue Cross and Blue Shield does not pay shipping charges for these orders.

Clarus provided Lessig and Roncketto with a two-day training class out of its office in Atlanta.

"Before, we had a req for office supplies, another for business forms, and still a third for the print shop," says Lessig. "The system took all that and bundled it into one simplified process. This greatly cut our time, expense and paper handling. That's just part of it."

By using one supplier, Arkansas Blue Cross and Blue Shield was also able to consolidate its purchases and receive volume discounts up to 50% compared to retail prices for some commodities. The company has not determined cost savings from use of the new system. The company spends about $700,000 annually on office supplies.

"We sometimes take it for granted how much this system has streamlined the process," says Lessig. "But it has helped our staff to be more professional. Now, they can go out and find the best products and prices for the company."