Smart business processes to offset higher ed enrollment challenges

Creating advanced cost-savings approaches can help bottom line
By: | Issue: May, 2018
April 6, 2018

Alarming demographic shifts mean university admissions departments are facing a new reality. By 2026, it is predicted that the number of college-aged students will drop almost 15 percent – much of this driven by a plummet in births due to the Great Recession of 2008.

While many higher-education institutions have pivoted towards online learning that attracts older students to increase enrollment, there is much more that can be done from a business process perspective to financially offset the revenue loss from these enrollment challenges.

One area that can be examined in more detail is spending. While universities have tremendous purchasing capabilities, many of the buying processes and contracts with suppliers lead to unnecessary overspending. From lab equipment to information technology to even paper and printing services, the amount of purchasing line items can be overwhelming and can spread through many different schools within a campus.

In addition, the schools within universities often operate autonomously when it comes to supplier management. As a result, these individual schools don’t take advantage of blanket purchasing agreements and other purchasing standards that have been set at the university level.

This often un-intentional overspending can be best managed by taking a “cost savings as revenue generation” approach. This means developing comprehensive processes for identifying any and all areas of savings, which could even mean effectively renegotiating all supplier contracts.

For example, we have seen one particular university achieve a $2 million savings based on a review of its $10 million spend by simply renegotiating contracts, stopping paying catalog list prices for supplies, and creating new standards across all of the commodities they were purchasing.

One of the core purchasing areas that require the right purchasing standards is IT. For instance, by creating a unified approach to spending – from laptops to desktop computers to printers – we saw a university achieve a $500,000 savings in IT purchasing by creating standards for three types of computers, and what kinds of equipment could be purchased and used by whom within the university.

When it comes to office supplies and peripherals, there has been a year-over-year price drop, which many universities don’t fully leverage. As a result, we saw an institution pay higher than retail for office supplies, due to working off of an expired contract. A new contract was renegotiated, and the university received a $250,000 rebate from the supplier.   

In another example, a university had multiple schools purchasing paper at retail. When they shifted to an existing print contract at the university level – for all schools – a $300,000 savings was achieved.

When you peel back the onion at every school within a large university, the opportunity for savings is tremendous. The key is being able to identify savings wherever possible. From there, it’s a matter of creating university-wide standards and procedures, and renegotiating less-than-optimal supplier contracts. From an individual school perspective, these types of controls can also be implemented to minimize any contract leakage.

Culturally, there may be some challenges in getting buy-in from all schools to adhere to these new standards – especially as individual schools often embrace their purchasing autonomy, especially with regards to IT. The key is to maximize budget dollars for the long-term benefit and viability of a university, at all levels.

In the end, these types of smart business processes benefit the bottom line of any university as a whole. And, with new enrollment challenges on the horizon, new business processes are something that senior university leadership are embracing, and will likely be doing more of in the future.

Mark Warren is the Director of Business Consulting at Gorfine, Schiller & Gardyn, and an adjunct professor at Stevenson University.