Over the past 10 years, colleges and universities have faced significant funding challenges as federal/state funding has steadily diminished. Since the Great Recession, state funding for public colleges has decreased by $10 billion as compared with pre-recession levels, according Center on Budget and Policy Priorities.
As a result, more universities are increasing tuition rates to offset the difference. However, this approach could make the costs of higher education out of reach for a greater number of families. Over the past 40 years, tuition as public colleges has increased by 274 percent, substantially outpacing the median household income growth of 7 percent, according to the Center on Budget and Policy Priorities.
While many colleges and universities are currently faced with budget constraints due to reduced funding, there are cost-reduction measures that can offset such challenges.
Here are three steps to take to streamline costs:
Review current purchasing patterns
When determining where savings can be found from within your school’s current purchasing, the first thing to do is develop a process to review each department’s collective purchasing needs. By reviewing each department’s purchasing history, you’ll find savings opportunities that may have previously been overlooked. For example, if your supplier agreement specifies what items are under contract and a review reveals that a department is purchasing 40 percent of items off-contract, a significant amount of savings could be recouped by switching to on-contract products.
Consolidate purchasing across departments
Within some universities—especially smaller, private schools—purchasing processes may be fragmented across multiple departments or campuses. As a result, multiple suppliers may be providing similar services to separate departments within the same university. Consider consolidating contracts among multiple departments or across the entire campus, as this is an opportunity to provide a supplier with a larger scope of business and can lead to better pricing for services rendered.
Utilize one main supplier for greater savings
In addition to consolidating contracts among multiple departments consider giving one supplier the majority of your organization’s business across a particular spend category. For example, if three suppliers provide office supplies that each receive 30 percent of your university’s total business, you may consider reaching out to each supplier to discuss what kind of discount they could provide if they received 80-90 percent of your university’s business. You may be surprised that they are willing to provide a significant discount if they can be guaranteed the majority of your supply needs. This approach also improves processes for accounts payable as it streamlines supplier payments.
By following the above-mentioned steps, your school will be on its way to finding savings from within current expenses that can be incorporated back into the budget and redeployed towards initiatives that might otherwise lack funding – all without raising tuition. If your university has a lean procurement staff, it may be worthwhile to outsource supplier management to a knowledgeable third party to handle contract negotiations and manage departmental purchasing, while your staff focuses on larger priorities.