The 32nd International Hospital Federation Congress
Hong Kong
15 – 18 May 2001
Eric Jackson
Background
NHS Purchasing and Supply Agency
• an executive agency of the Department of Health
established on 1 April 2000
• modernise and improve purchasing and supply in the NHS
• remit includes any body or organisation providing NHS services
The goals of the government
• to modernise government (“Information Age Government”)
• the UK to be the best environment in the world for E-commerce
Government targets
• all departments to have e-business strategiese-business strategies by October 2000
• by 2001 90 per cent low value goods (by volume) purchased
electronically
• in central civil service government 50 per cent of tenders will be sent
and received electronically by 2001
• the above figures will be increased to 100 per cent by 2002
Modernising governmentstructure
Information AgeMinisterial Network
Information Age Government Champions Group
Gisela Stuart
Ron Kerr
E-commerce drivers in NHS
e-business agenda e-commerce agenda
Activity at the level of government
Activity at the level of the NHS
Cabinet Office
Modernising
Government
(e-business targets)
OGC
(e-commerce strategyfor central government
Departments)
Building the Information
Core – Implementing
The NHS Plan
NHS PaSA
(e-commerce strategyfor the NHS)
The changed NHS environment
• 37 financial ledger systems
• 20 purchase order systems
• national approach – national HR and payroll system shortly to
be awarded
• Agency collaborating with the finance function on a national
integrated e-trading and e-finance IT solution
• collegiate approach – global company
Vision for E-commerce
• definition – “exchange of information across electronic networks
at any stage in the supply chain, whether within an organisation,
between businesses, between business and consumer, or
between the public and private sectors”
• B2B
• not an IT system – business relationships, information and
culture
• just about technology
• a panacea
• a quick fix
• a substitute for good procurement practice
• an end in itself
• a mechanisation of existing processes
E-commerce – what it’s not
The NHS in England
• £11 billion annual non-pay revenue spend
• £5.7 billion annual revenue spend on goods and services
Spend on goods and services£5.7 billion
£5.7 billion annual spend 1998/1999
Medical and scientific supplies
29%
Pharmaceuticals 21%
Non-medical supplies 50%
A typical trust• fragmented buying arrangements
• limited systems integration
• fragmented receipt and invoice matching arrangements
• departmental/functional receipt and storage arrangements
• low internet access for buying departments
• almost no internet procurement
• almost no EDI ordering – except for Pharmacy
major buying departments:major buying departments:- purchasing - use trust purchase order system linked to
financial systems- catering - independent catering system- pathology - manual paper based system- estates - independent estates system- pharmacy - independent pharmacy system
Trust requisitioning and ordering
• paper system
• over 20 different purchase order systems in use in supplies
departments
• some departments order manually – no IT system
• some departmental IT systems are not linked to the financial
systems
Trust requisitioning and ordering (cont)• purchase order processing in a typical trust ranges from:
- handwritten
- paper – typed or purchase order system generated
- fax or phone
- on-line
- supplier provided (download) order system
- direct order links with suppliers
• high process costshigh process costs
Research in acute trust A
• 3,500 suppliers
• seven per cent of suppliers provide 80 per cent of goods by value
• 43 per cent of supplier invoices average less than £100
• it takes 11 days from raising a requisition to placing an order
• delivery of goods takes a further 21 days
• management information very poor
• data quality is poor causing significant levels of rework
Research in acute trust B
• 3,000 suppliers
• 60 per cent of requisitions average less than £50
• 30 per cent plus of requisitions require modification
• it takes five days from raising a requisition to placing an order
• ‘walking across’ the requisition is common but costly
• delivery of goods takes a further 21 days
• people find ways around the system e.g. abuse of call off
information
• management information very poor
The NHS supplier base
• fragmented market
• many suppliers are small and local to trusts – ‘SME’s’
• 5000 + suppliers to the NHS???
• 1428 suppliers contracted to the Agency
• no logistics consolidation
• no integrated supply chain
• degree of IT sophistication varies dramatically
• culture to change varies enormously
Strategic supply information
Lack of information at the level of whole NHS:
• suppliers
• goods
• services
Leads to risk:
• lost opportunities
• missing cumulative effects
• red faces?
A success story - £500 million a year
In the English NHS:
• at least 85,000 active requisition points
• 36 million requisition lines per annum
70 per cent of NHS transaction volume is already handled by NHS Logistics70 per cent of NHS transaction volume is already handled by NHS Logistics
• through a singlesingle electronic system (Resus)
• interfacinginterfacing with all trust financial systems
• aggregating aggregating demand for the whole NHS
• supported by logistics consolidation logistics consolidation
and 50 per cent 50 per cent of this is already paperlessis already paperless
The supply chain to the NHS
manufacturers
and
importersNHS
Hospitals
Clinics
Community
GP surgeries
etc
Wholesalers and
Distributors
NHS Logistics Authority
• high supply chain costshigh supply chain costs
Problem points along the current supply chain
• contract compliance difficult to measure (reliant on information from suppliers)
• maverick purchasing (non use of purchase contracts)
• purchase data not readily available
• difficult to aggregate information quickly or comprehensively
• inefficient tender process
• different supply chains – for example stationery, sutures
Supply cost savings
• studies show that 48 per cent of United States medical supply chain process costs are avoidable (A T Kearney)
• savings achieved by greater efficiency in the sharing of information, management of orders and movement of products
NHS policy on E-commerce
• embraces and integrates all business processes from demand
through to payment
• embraces all key players in the NHS supply environment
• changes the function of purchasing from transactional to
strategic
E-commerce solutions must provide for :• integrationintegration
- with trust financial systems / supplier sales order systems- integrate with (or replace) trust purchase order systems- applicable to all types of purchase order systems in a trust
• catalogue managementcatalogue management- one central catalogue maintained by suppliers- hospital supply strategies and ‘product view’ management
• transaction managementtransaction management- requisitions, orders, receipts, invoices and payments
• supply chain managementsupply chain management- logistics consolidation- information sharing
Main business changes – English NHS
• every transaction with a supplier will be electronic
• the process will be standardised
• the process will be integrated with other systems
• ability to customise choice
• ability to aggregate across English NHS trusts
• ability to aggregate across the whole English NHS
Identify requirement
Specification /cost estimate
Request
Authorise
Catalogue check
Tender/quote
Evaluate
Source decision and
award
Check availability
OrderOrder promise
Order fulfilment
Expedite
Visibility
Delivery arrangement
Receipt processing
Supplier invoice
Invoice matching
andverification
Passed for payment
Enters ledger
Payment OperationsOperations
((transactionstransactions))
Consumptiondemand analysis
Risk analysis
Variety management
Cost control
(New) supplier
development
Contract performance
Supplier performance
Product, supplier, expenditure information
Reconciliation and financial report
ManagementManagement
Opportunity analysis
aggregation and
substitution
Compliance regulation
Sourcingstrategy Integrated
supply chain
Strategicanalysis
Supplystrategy
StrategyStrategy
PolicyPolicyBoard
decisionsInter-organisation collaboration
HR SupplymanagementIT Systems
Impact onpatient care
EnvironmentalMaterials Management
VFM Delegation and empowerment
3
10
15
20 % Savings
Automate processesAutomate processesempower employees forempower employees fordesktop requisitioningdesktop requisitioning
CollaborationCollaborationB2B SCM, projectsB2B SCM, projects
Strategic sourcingStrategic sourcingnew buying modelsnew buying modelsnew bids, aggregationnew bids, aggregation
Supplier consolidationSupplier consolidationpurchasing analysis internal purchasing analysis internal conformance all purchasesconformance all purchases
How the Internet changes purchasing
Progress in 2000-2001
• E-commerce team established (September 2000)
• E-commerce paper - Building the Information Core: Implementing the NHS Plan (January 2001)
• E-commerce project board established working closely with the Shared Financial Services Project Board (joint membership) January 2001
• Web-based catalogue – first CD Rom catalogue ever to use XML
• Links to contracted suppliers’ websites – product and technical information
Progress and Targets for 2001/2002• outline business case for e-trading and e-financial system June
2001
• OJEC advertisement July 2001
• full business case for national integrated e-trading and finance
system January 2002
• contract awarded for national integrated e-trading and finance
system – February 2002
• e-tendering pilot successful and implemented
• EU contract notices – electronic
• purchase cards - £9m turnover
What is the Agency doing?
research into e-commerce B2B solutions, their scope and functionality
establish standards in e-solutions for tendering, cataloguing, ordering, invoicing and integration
central source of advice and guidance to trusts on best practice, pilot lessons and market trends
monitoring the e-commerce marketplace and conducting due diligence assessments of providers
using web technology for sharing information on suppliers, products and added value services
research
standards
advice
monitoring
information
work with suppliers to understand their e-commerce strategiessuppliers
the Agency will establish a long term, ‘big picture’ and inclusive e-commerce strategy for the NHS strategy