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Higher education has been in the news a lot lately, but not always for positive reasons. The high cost of education and more than $1.7 trillion in student loan debt have many questioning the value of a college education.
Enrollment has plateaued. For some colleges and universities, incoming freshman enrollments are in decline. Inflationary prices over the past few decades certainly are not helping, and administrative costs continue to eat up large chunks of budgets. Analysis by the National Center for Education Statistics reported in US News & World Report that public four-year schools over the past decade showed a significant decrease in spending for instruction while admin costs have declined only slightly.
SPEND ANALYSIS AT PUBLIC FOUR-YEAR SCHOOLS | |||
CATEGORY | 2010 | 2021 | CHANGE |
Instruction as % of budget | 32.1% | 27.4% | ▼ 14.6% decrease |
Administrative as % of budget | 23.7% | 22.9% | ▼ 3.3% decrease |
To be fair, admin costs have also grown to accommodate more student services, including mental health services, workforce preparation, student entertainment, and diversity, equity, and inclusion (DEI) initiatives.
These seismic changes are not showing signs of slowing down. While enrollments have stabilized and increased slightly in 2024, a College Board survey showed that only 62% of graduating high school seniors plan to attend a higher education institution, compared to 70% in 2015.
Traditional cost-cutting measures like budget cuts and hiring freezes are often temporary solutions. Despite long-standing traditions, many colleges and universities are being forced to examine current practices and look for new solutions. Financial procurement leaders are under intense pressure to find cost savings without reducing the quality of goods and services.
So, what does all of this mean for financial procurement? Is financial procurement meaning changing amid this new economic reality?
Given the challenges facing higher education institutions, the meaning and role of financial procurement have indeed evolved significantly. Leaders must adapt their procurement strategies to mitigate the impact.
Here’s how financial procurement meaning has changed and what procurement teams can do to address the situation.
Financial procurement can no longer be viewed as a transactional process for acquiring goods and services. Procurement teams now play a crucial strategic role in cost management and optimization. Procurement leaders must actively seek opportunities to reduce costs and find hidden savings without lowering quality.
While cost reduction remains a high priority, the focus has shifted from negotiating the lowest prices on commodity goods to maximizing value across the procurement lifecycle. This includes considering total cost of ownership (TCO), supplier performance, risk management, and alignment with institutional goals and sustainability initiatives.
Effective financial procurement now requires close collaboration with various stakeholders, including academic departments, facilities management, and student services. Procurement professionals must understand the unique needs of each area and work collaboratively to find suitable solutions that balance cost-effectiveness and operational requirements.
With the increasing availability of data and analytics tools, financial teams must now act as data analysts, leveraging data to identify spending patterns, negotiate better contracts, and make decisions based on comprehensive spend analysis and market insights.
Finding creative solutions requires a different approach. While some of these processes may already be in place, an aggressive approach to spend management is required in today’s environment.
Strategic spending analysis can provide opportunities to consolidate procurement to achieve greater volume discounts, uncover spending patterns that can be adjusted, and find more spending that can be brought under contract to lower prices.
Strategic sourcing should break down categories to negotiate better pricing with suppliers. Consolidation can improve bargaining power. Leveraging cooperative contracts through sourcing cooperatives like E&I can also reduce costs.
Collaborating more closely with key suppliers can enhance SRM and uncover innovative ways to find common ground. Sharing goals and requirements can yield process and product improvements.
Technology can be used to streamline financial procurement. For example, deploying an eProcurement platform can reduce maverick spend and help departments make better purchasing decisions, selecting preferred suppliers and bringing more spend under contract.
Automation can also help screen purchases for compliance and reveal redundancies.
Procurement leaders should explore alternate sourcing strategies. Many industries are being disrupted by technology and new competitors. There may be lower-cost options that provide similar solutions. Exploring these options can find additional savings or help inform negotiations with existing suppliers to leverage better deals.
The meaning of financial procurement has shifted in today’s higher education environment. This provides a great opportunity for procurement teams to step up and provide solutions. As colleges and universities search for answers, procurement teams can take a leadership role in helping higher education find solutions in turbulent times.
Explore cooperative contracts and innovative ways to reduce spending and streamline administrative overhead by talking to the procurement experts at E&I Cooperative Services.
