The Future of Higher Education Procurement: Strategic Sourcing, AI, and Cooperative Purchasing Organizations
How Is Higher Education Changing?
There’s been a bit of a debate for a while about the end state for higher ed. Leaders at Harvard have surmised that there will be an incremental evolution to adapt to changing conditions. Clayton Christensen, a renowned business school professor who developed the theory of “disruptive innovation” has argued differently. Christensen said the changes will be so large that higher ed as we know it will be disrupted, making traditional models obsolete and driving many schools into bankruptcy and closing.
You can make the argument that both of these theories are playing out in real time.
Financial Challenges
Financial pressures at colleges and universities are real. Declining enrollment, reduced public funding, and increasing operational costs are squeezing budgets. Higher Ed Dive tracks college closings and reports more than 100 shutdowns since 2016. About half came about in the past two years. It’s even worse for smaller colleges. Bloomberg News reports that 170 small schools are dealing with significant financial stress. That’s five times what it found a decade ago.
Now, consider that the number of high school graduates is forecast to peak around 2025 and after that, the college-age population is expected to shrink for the next five to 10 years. New strategies are critical.
Shifting Expectations
Beyond the financial implications, other undercurrents are shaping higher ed. Today’s students are more diverse and tech-savvy than ever before. They expect modern, technologically advanced learning environments and services, putting pressure on institutions to invest in cutting-edge resources and infrastructure.
Online/Hybrid Learning
The rise of online and hybrid learning models requires significant investments in digital platforms, content creation tools, and IT infrastructure. Procurement teams must navigate complex technology purchases to support these new educational paradigms.
Sustainability and Social Responsibility
There’s a growing demand for universities to demonstrate commitment to environmental sustainability and social responsibility. More than 330 colleges and universities have committed to net-zero carbon emissions by 2050. Some have pledged carbon neutrality by 2025 or 2030.
Students are taking note. A Princeton Review survey revealed that 75% consider a school’s record on sustainability when deciding where to apply. This changes the approach to procurement decisions, with a greater emphasis on sourcing eco-friendly products and services.
Social responsibility is also high on the list. Yet, a study of more than 100 procurement professionals by Northeastern University found a significant gap between their institution’s commitment to sourcing diverse suppliers and the practical steps taken to achieve it. Procurement professionals cited limited resources, complex procurement processes, and challenges in identifying qualified diverse suppliers.
What Is Strategic Sourcing, and Why Is It Significant?
All of these challenges require a rethinking of the approach to procurement. Traditionally, higher ed procurement has focused primarily on cost reduction and compliance. Those continue to be fundamental, but as schools evolve, procurement teams must also take a more strategic and value-driven approach.
Modern procurement demands strategic sourcing, balancing cost with quality, and prioritizing long-term value creation that aligns with institutional goals.
What is strategic sourcing, and why is it significant?
Strategic sourcing is a systematic approach to procurement, including practices such as:
Benefits of Strategic Sourcing
Why do colleges need strategic sourcing? Here are four reasons:
- Cost savings and efficiency gains: By leveraging spend data and market intelligence, institutions can negotiate better terms and reduce the total cost of ownership.
- Improved supplier relationships: Strategic sourcing fosters long-term partnerships with key suppliers, leading to better service, innovation, and risk management.
- Risk mitigation and compliance: A strategic approach helps identify and mitigate supply chain risks while ensuring regulatory compliance.
- Support for institutional goals: Procurement can align with broader objectives such as sustainability, diversity, and local economic development.
Achieving these goals takes time—time that many finance leaders and procurement teams don’t have. Cooperative purchasing organizations can help streamline procurement and free up time to work on strategic initiatives, such as developing deep category expertise.
The Need for Category Expertise
What are procurement categories? Typical categories include:
- Athletics
- Facilities & MRO
- Financial Services
- Food & Food Services
- Information Technology (IT)
- Logistics & Travel
- Office & Classroom, Interiors
- Professional, Consulting & Administrative Services
- Research & Scientific
It is extremely challenging for procurement teams to be experts in every one of these categories. This is another area where cooperative purchasing organizations can be a significant resource. For example, E&I Cooperative Services has a team of procurement professionals and category specialists who track trends across industries, producing deep insight into goods and services within each category.
What Are the Procurement Process Steps?
The strategic procurement process typically involves these steps:
- Needs identification and requirements definition: Documenting what needs to be procured and why.
- Market research and supplier identification: Understanding the supplier landscape and identifying potential partners.
- RFP development and issuance: Creating a comprehensive RFP that communicates requirements and evaluation criteria.
- Bid evaluation and supplier selection: Objectively assessing proposals against predefined criteria to select the best supplier.
- Contract negotiation and award: Finalizing terms and conditions that protect the institution’s interests while fostering a positive supplier relationship.
- Contract management and performance evaluation: Ongoing monitoring of supplier performance and contract compliance.
- Continuous improvement: Regularly reviewing and optimizing procurement processes and strategies.
It can take months and multiple staff members to navigate this process effectively.
The Role of Cooperative Purchasing Organizations in Higher Education
Cooperative purchasing organizations play an increasingly important role in higher education procurement. By aggregating demand across multiple institutions, cooperative purchasing organizations obtain volume pricing from suppliers and negotiate favorable contracts. Typically, these contracts contain price breaks that individual institutions could not get on their own. Savings of 15% to 25% are not uncommon. For many schools, this results in millions of dollars in cost reduction while accelerating the procurement process.
Partnering with a cooperative purchasing organization provides multiple benefits for colleges and universities, such as:
- Access to pre-negotiated contracts with competitive pricing
- Reduced administrative burden for individual institutions
- Leverage of collective expertise and market intelligence
- Compliance with procurement regulations
Cooperative purchasing organizations can act as an extension of your procurement team to help streamline processes and broaden your sourcing with access to suppliers that might not respond to your individual RFPs.
How Is AI Impacting the Future of Procurement?
Digital transformation is impacting nearly every sector, and higher education is front and center, whether it’s procuring the latest technology and AI tools for research or study, adopting AI tools for business process efficiency, or deploying AI for the procurement process itself.
AI is being applied to procurement in several ways:
- Spend analysis and optimization: AI can quickly analyze vast amounts of spend data to identify savings opportunities and optimize category strategies.
- Predictive analytics: Machine learning algorithms can forecast demand, predict price fluctuations, and identify potential supply chain disruptions.
- Chatbots and virtual assistants: AI-powered tools can handle routine inquiries, freeing up procurement staff for more strategic tasks.
- Automated contract management: AI can extract key terms from contracts, monitor compliance, and flag potential issues.
- Supplier risk assessment: AI can continuously monitor supplier performance and external factors to identify potential risks.
Whether applying AI specifically to the procurement process or meeting broader university needs, you need deep category expertise. It’s estimated there are more than 70,000 AI companies doing business globally, and new products and services pop up almost every day. Staying on top of emerging trends is crucial and challenging.
Cooperative purchasing organizations can be a significant resource for finance and procurement teams that need to invest in AI and technology.
Sustainability and Social Responsibility in Higher Education Procurement
Sustainability and social responsibility have become integral components of modern procurement strategies in higher education.
Sustainability Initiatives
Procurement teams now incorporate environmental criteria into supplier selection processes and product specifications. This integration of sustainability goals into procurement practices involves several key strategies:
Life Cycle Assessment
Colleges and universities are considering the entire life cycle of products, from raw material extraction to disposal, when making purchasing decisions. This approach helps identify products with lower environmental impacts.
Green Specifications
Procurement teams are developing and including green specifications in their RFPs and contracts. These might include requirements for energy efficiency, recyclability, or reduced packaging.
Supplier Environmental Performance
Institutions are evaluating suppliers based on their environmental management systems, sustainability reports, and carbon footprint reduction initiatives.
Circular Economy Principles
There’s a growing focus on products that are designed for longevity, repairability, and recyclability, supporting the transition to a circular economy.
Renewable Energy Sourcing
Many universities are prioritizing suppliers that use renewable energy in their operations or are working towards carbon neutrality.
Ethical Sourcing
Besides sustainability, there is also an emphasis on ethical sourcing, ensuring fair labor practices and ethical standards throughout the supply chain. This includes areas such as:
- Labor Rights: Universities are requiring suppliers to adhere to fair labor practices, including safe working conditions, fair wages, and the absence of child or forced labor.
- Human Rights: Procurement policies are being updated to address human rights concerns in supply chains, particularly for products sourced from regions with known human rights issues.
- Conflict Minerals: Institutions are paying closer attention to the sourcing of minerals used in electronics and other products to ensure they are not funding conflict or human rights abuses.
- Animal Welfare: For institutions procuring products tested on animals or using animal-derived materials, there’s growing attention to animal welfare standards.
- Transparency: Universities are demanding greater transparency from suppliers about their sourcing practices and supply chain management.
Supplier Diversity Initiatives
Higher education institutions are increasingly setting targets for sourcing from minority-owned, women-owned, and local businesses. This focus on supplier diversity serves multiple purposes:
Economic Impact
By sourcing from local and diverse businesses, universities can contribute to local economic development and help create a more inclusive economy.
Innovation
Diverse suppliers often bring unique perspectives and innovative solutions to the table, benefiting the institution.
Alignment with Institutional Values
Supplier diversity initiatives align closely with universities’ commitments to equity and inclusion.
Compliance
For some institutions, particularly public universities, supplier diversity may be part of regulatory compliance requirements.
Frequently Asked Questions — FAQs
What is the goal of procurement?
The primary goal of procurement in higher education is to acquire goods and services that meet the institution’s needs at the best possible value. This involves balancing cost, quality, timeliness, and alignment with institutional objectives such as sustainability and social responsibility.
What is a good procurement service for higher ed in the USA?
There are various options on the market, but E&I Cooperative Services stands alone in its approach to educational procurement. E&I is the only member-owned, non-profit cooperative purchasing organization that focuses solely on the education sector. This focus results in a deep understanding of the unique needs of higher ed and category expertise to produce contracts that are tailored to meet these needs.
What is the negotiation process in procurement?
The negotiation process in procurement involves discussing and agreeing on terms with suppliers. Key steps include:
- Preparation and planning
- Opening the negotiation and establishing ground rules
- Clarifying and justifying positions
- Bargaining and problem-solving
- Reaching and implementing an agreement
What are key documents in the procurement process?
Key documents in the procurement process include:
- Request for Information (RFI)
- Request for Proposal (RFP)
- Purchase Orders
- Contracts
- Supplier Performance Reports
- Spend Analysis Reports
How can small colleges benefit from strategic sourcing and cooperative purchasing?
Small colleges can significantly enhance their procurement practices through strategic sourcing and cooperative purchasing. By joining cooperative purchasing organizations, smaller schools gain access to better pricing through aggregated demand to tap into the collective buying power of multiple institutions. This approach also allows small colleges to tap into expertise and resources they might not have in-house. Smaller colleges also benefit from access to a wider range of suppliers and products, which might be challenging to source independently.
If you would like to learn more about how E&I Cooperative Services can benefit your college or university, reach out to one of our procurement professionals or give us a call at (800) 283-2634.
