Rethinking procurement Presented by Health Purchasing Victoria Director Procurement, Alba Chliakhtine
INTRODUCING HPV 3 Health Purchasing Victoria | Achieving best-value supply chain outcomes for Victoria’s health sector
HPV organisation • Appointed by Governor in Council Minister for Health • Achievement • Department of Health • Collaboration • Department of Treasury and Finance Department of • Respect • Health Service CEOs Health • Integrity • Health Service Execs • Communication • Independents Board • TeamWork Audit and Risk Procurement Committee Committee HPV Secretariat Health Purchasing Victoria | Working with Victoria’s health sector to achieve best-value 4 supply chain outcomes
HPV core functions under Health Services Act 1988 5 Health Purchasing Victoria | Working with Victoria’s health sector to achieve best-value supply chain outcomes
6 Health Purchasing Victoria | Achieving best-value supply chain outcomes for Victoria’s health sector
• Understanding data through category management • Leveraging collective procurement efficiency • Leveraging category management opportunities • Rationalisation and process improvement • Managing supplier performance 7
Med-Surg Spend Distribution excl Metro (~75%) 8 Health Purchasing Victoria | Working with Victoria’s health sector to achieve best-value supply chain outcomes
THE VICTORIAN LANDSCAPE 9 Health Purchasing Victoria | Achieving best-value supply chain outcomes for Victoria’s health sector
The Challenge How do we ‘act as a system’ in an environment that funds, rewards and measures activity as individual hospitals? 10 Health Purchasing Victoria | Working with Victoria’s health sector to achieve best-value supply chain outcomes
Why price savings alone are NOT sufficient Easier To See Price Total Cost of Ownership Process Cost Utilization Cost Sourcing Cost Standardization Evaluation/ Demand Mgmt Order Mgmt Labour Productivity Returns Mgmt Maintenance Logistics Mgmt Shrinkage Supplier Mgmt Damages Recall Mgmt Waste Compliance Mgmt Disposal Training Recall Mgmt Harder Payment Mgmt Revision Procedures To Inspection Infection Rates See 11 Etc. 11
What Logistics Reform is trying to do? TOTAL COST to PATIENT Order Processing Hospital Supply Chain Reduce! Inventory Cost Cost (Hospital) Benefits through Transport PURCHASE PRICE automation & economies of Order Processing Supply Chain scale Inventory Cost (Supplier) Transport Profit Sales Selling Cost Supplier Cost Research, Product Cost Manufacturing, Packaging, etc
Med-Surg Spend Distribution excl Metro (~75%) 13 Health Purchasing Victoria | Working with Victoria’s health sector to achieve best-value supply chain outcomes
NOW (in Victoria) Patient Supplier Distribution Hospital Ward 14 Health Purchasing Victoria | Working with Victoria’s health sector to achieve best-value supply chain outcomes
The fundamentals of SUPPLIER ENGAGEMENT 15 Health Purchasing Victoria | Achieving best-value supply chain outcomes for Victoria’s health sector
Key supplier engagement success factors What works What doesn’t… •Two-way collaboration •One-way communication •Recognise the common ground – •One-off, token attempts to involve not profit vs savings suppliers •Find ways to empower your •Lack of holistic approach to suppliers by making them part of a sourcing longer term picture •Not recognising that suppliers are •Create an opportunity or an integral part of the supply chain compelling business reason to seek their involvement 16 Health Purchasing Victoria | Working with Victoria’s health sector to achieve best-value supply chain outcomes
How do you start? Plan Measure Improve Action 17 Health Purchasing Victoria | Working with Victoria’s health sector to achieve best-value supply chain outcomes
Communication Invitation to Supply • Ensuring access & level playing field for all potential suppliers Post-sourcing • Focus on probity inhibits deeper engagement during • Building longer-term this phase value with contracted • Focus on fair and suppliers Pre-sourcing equitable evaluation of • Involving suppliers in • Two way proposals. business and engagement (what is • Need to be objective operational decisions on offer) and factual • Conducting regular • Joint understanding supplier business of opportunities to reviews deliver value • Involving suppliers in • Proactively briefing strategic initiatives suppliers about the category 18 Health Purchasing Victoria | Working with Victoria’s health sector to achieve best-value supply chain outcomes
HOW DOES THIS DRIVE VALUE? 19 Health Purchasing Victoria | Working with Victoria’s health sector to achieve best-value supply chain outcomes
Dimensions of world-class procurement 20 Health Purchasing Victoria | Working with Victoria’s health sector to achieve best-value supply chain outcomes
Measuring performance “ You cannot improve what you do not measure ” Edward Deming Validation of assumptions (in particular at the 1 st sourcing iteration – • greenfield) • How are we tracking against the performance targets? • Two-way temperature check • Are they still realistic? • Is there a need for fine-tuning? • What are the inhibitors to performance (overall contract performance)? • Post-implementation blues • Supplier performance • Opportunities 22 Health Purchasing Victoria | Working with Victoria’s health sector to achieve best-value supply chain outcomes
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Supplier Performance & Collaboration Continue to drive Contract Value Supplier Collaboration Nirvana Supplier Performance Management Lost Value “75% of sourcing savings can be lost within 18 months without SRM” - Geller & Company Survey Contract Start Date Strategic Sourcing Value Time No SRM Program 24
Victorian health supplier ‘musts’ Support GS1 data standards through National Product Catalogue (NPC) and Recallnet Goods approved by TGA Ability to meet the specific (& diverse) operational needs of health services Understand two-way nature of Supplier Relationship Management process 25 Health Purchasing Victoria | Achieving best-value supply chain outcomes for Victoria’s health sector
Data Compliance - Sales Report Sales Report Compliance - November 2013 100 90 80 70 60 Submitted on time (%) 50 Data Quality 40 30 20 10 0 26 Health Purchasing Victoria | Working with Victoria’s health sector to achieve best-value supply chain outcomes
Delivery Performance – DIFOT “ Self Assessment” "Supplier" DIFOT Compliance 100 97.5 95 92.5 90 Delivered in and on-time full 87.5 85 82.5 80 27 Health Purchasing Victoria | Working with Victoria’s health sector to achieve best-value supply chain outcomes
Meeting category dynamics: one size does not fit all Defibrillators TCO Approach •Tender completed and approved by the Board Collaborative Approach with health Physiological Monitoring services and suppliers Equipment •Invitation To Supply released 12 March Sourcing approach that encourages •Proposed ‘Group Buy’ program innovation Anaesthetic Leveraging health services’ skills •Invitation To Supply released 12 March and competence (business unit •Proposed ‘group buy’ program managers, clinicians) Medical Imaging Creating efficiency in the sourcing •Analytical work commenced process •Medical Imaging Strategy for 2014-15
WHERE TO FROM HERE? 29 Health Purchasing Victoria | Achieving best-value supply chain outcomes for Victoria’s health sector
Waves of Supply Chain Reform Wave 5 – Demand management Wave 4 – Product standardisation Wave 3 – Consolidated distribution (Economies of scale, ward box delivery) Wave 2 – Technology platform (Visibility, common product master, Imprest everywhere, increased collective procurement) Wave 1 – VPC (NPC integration & HPV pricing) 30 Health Purchasing Victoria | Working with Victoria’s health sector to achieve best-value supply chain outcomes
FUTURE ? Supplier Distribution Hospital Ward Patient Consolidation Picked to ward Economies of scale Process efficiency Optimised distribution Reduced inventory, obsolescence Returnable packaging 31 Health Purchasing Victoria | Working with Victoria’s health sector to achieve best-value supply chain outcomes
Technology enablers TBC – slide on Strategic Sourcing Suite and the process efficiencies it is creating 33 Health Purchasing Victoria | Achieving best-value supply chain outcomes for Victoria’s health sector
Future Strategies • Identify ways of measuring Product/Service performance • Patient outcome • Value for money • Expand our SRM beyond the Top 20 Spend • Create a more interactive environment for supplier information • Long range Sourcing plans information (increase visibility of the sourcing program) • Investment in automation (e-procurement platform) that takes effort out of the sourcing process and enables more time to engagement and strategy. • More integration with clinicians 34 Health Purchasing Victoria | Working with Victoria’s health sector to achieve best-value supply chain outcomes
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