The University announced last week that it plans to save an estimated $40 million annually by overhauling and centralizing the way it purchases goods and services.

“The University is at a critical juncture and if we are going to devote more of its funds to our core mission, we must agree collectively to spend less on administering the institution,” President David Skorton said in a University statement. “Streamlining and directing our procurement process is a critical step toward reducing expenditures without major impact on our core mission and minimizing the effect of the budget deficit on our employees.”

This new system will centralize purchasing throughout the University. “There’s not going to be excessive centralization, but I would be disingenuous and dishonest if I didn’t tell you I think we’re too decentralized in general,” Skorton stated.

Vice President of Finance Joanne DeStefano stated that the University system of purchasing was inefficient. “Our administrative systems have been inadequate to provide the reporting needed to identify procurement opportunities for savings,” DeStefano stated in an e-mail. “In June, the University and the Board of Trustees approved funding for a new financial/procurement system ... Finally, on July 1 an electronic ordering system known as e-SHOP was implemented for our suppliers with negotiated rates. The savings will come from the use and monitoring from these tools. Without the investment in the technology, we could not consider the savings potential of this project.”

The improved procurement system, as the University has dubbed the plan, will aim to ensure that goods and services are purchased at the best possible prices. The University will limit the range of vendors and the methods by which faculty and staff procure necessary products and services. The University plans to mandate the use of an improved e-SHOP online ordering system. A new software system will analyze purchasing to help negotiate the best possible contracts for the University. The University estimates that all the proposed changes will yield savings of 10 percent from Cornell’s $450 million operating budget.

“Our procurement system was developed almost 20 years ago using outdated technology, is not user-friendly and is difficult to maintain,” DeStefano said in a University statement. “And it doesn’t capture the data necessary to maximize management decisions on vendor and pricing strategies.”

According to DeStefano, the Office for Supply Management Services in the Division of Financial Affairs has already begun development of a three-pronged approach to streamline University procurement.

First, the University is creating the new software called “Spend Visibility” to enable the tracking and analysis of spending in all departments across the University. Second, the e-SHOP online purchasing system is being made simpler and more efficient. Third, savings will be sought for necessary office supplies and technologies.

In order to save money, new vendors will be considered, including smaller, local vendors to minimize the cost of shipping, according to DeStefano.

With the University looking for a $50 million budget reduction from its unrestricted revenues in Ithaca, cutting costs in the administrative realm will mean fewer budget cuts in other departments. For instance, with more money to spend on salaries and wages, the University could likely curtail the number of personnel layoffs.

“We are counting on this program to save jobs as we continue to reduce the University budget. Every dollar we save by buying items for less money will reduce the need to cut budgets elsewhere,” Skorton stated. “The reason we’re working on procurement first is so that we can preserve jobs while protecting the core mission of the University.”

On Oct. 21, DeStefano will be meeting with senior finance advisers. “The advisers will guide us on the various campus constituencies that need to be involved in developing the project,” DeStefano stated in an e-mail.