The 32nd International Hospital Federation Congress

1

• The 32nd International Hospital Federation
  Congress
• Hong Kong
• 15 18 May 2001
• Eric Jackson

2
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

3
The goals of the government

• to modernise government (Information Age
  Government)
• the UK to be the best environment in the world
  for E-commerce

4
Government targets

• all departments to have e-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

5
Modernising governmentstructure
Information Age Ministerial Network
Gisela Stuart
Information Age Government Champions Group
Ron Kerr
6
E-commerce drivers in NHS
e-business agenda e-commerce agenda
Cabinet Office Modernising Government (e-business
targets)
OGC (e-commerce strategy for central
government Departments)
Activity at the level of government
Activity at the level of the
NHS
Building the Information Core Implementing The
NHS Plan
NHS PaSA (e-commerce strategy for the NHS)
7
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

8
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

9
E-commerce what its not

• just about technology
• a panacea
• a quick fix
• a substitute for good procurement practice
• an end in itself
• a mechanisation of existing processes

10
The NHS in England

• 11 billion annual non-pay revenue spend
• 5.7 billion annual revenue spend on goods and
  services

11
Spend on goods and services5.7 billion
5.7 billion annual spend 1998/1999
12
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 - 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
13
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

14
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 costs

15
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

16
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

17
The NHS supplier base

• fragmented market
• many suppliers are small and local to trusts
  SMEs
• 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

18
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?

19
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 Logistics
• through a single electronic system (Resus)
• interfacing with all trust financial systems
• aggregating demand for the whole NHS
• supported by logistics consolidation
• and 50 per cent of this is already paperless

20
The supply chain to the NHS

• high supply chain costs

21
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

22
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

23
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

24
E-commerce solutions must provide for

• integration
• - 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 management
• - one central catalogue maintained by suppliers
• - hospital supply strategies and product view
  management
• transaction management
• - requisitions, orders, receipts, invoices and
  payments
• supply chain management
• - logistics consolidation
• - information sharing

25
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

26
(No Transcript)
27
How the Internet changes purchasing
Collaboration B2B SCM, projects
Strategic sourcing new buying models new bids,
aggregation
Supplier consolidation purchasing analysis
internal conformance all purchases
Automate processes empower employees for desktop
requisitioning
28
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

29
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

30
What is the Agency doing?
research into e-commerce B2B solutions, their
scope and functionality
research
work with suppliers to understand their
e-commerce strategies
suppliers
establish standards in e-solutions for tendering,
cataloguing, ordering, invoicing and integration
standards
central source of advice and guidance to trusts
on best practice, pilot lessons and market trends
advice
monitoring the e-commerce marketplace and
conducting due diligence assessments of providers
monitoring
using web technology for sharing information on
suppliers, products and added value services
information
the Agency will establish a long term, big
picture and inclusive e-commerce strategy for
the NHS
strategy