Procurement Strategy Briefing

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Procurement Strategy Briefing
Agenda? HA overview? HA future procurement
strategy? HAs operational requirement? External
communication channel? Observation from
overseas visits? Action items? Time table
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Procurement Strategy Briefing
HA Overview? No. of hospitals 44? No. of
beds 28,344? Population in HK 7m
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Procurement Strategy Briefing
2 Categories of hospitals? Schedule I -
ex-Government hospitals Tenders with value gt1m
are done by Government Supply Department
(GSD)? Schedule II - ex-subvented
hospitals All tenders are done by hospitals
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Procurement Strategy Briefing
Annual Purchase Value? Drugs
HK1.4b? Non-drugs HK2.6b? Total
HK4.0b
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Procurement Strategy Briefing

• Contracts Total No. Non-contract
  Total No. of
• Total Total No. Value/ of Contract/
  Purchase/ Non-contract
• Purchase of Items Annum GSD Items Annum
  Items
• Drugs
• HK1.4b 3,624 HK1,180m 847
  HK220m 2,777
• Non-drugs
• HK2.6b 25,200 HK 349m 3,770
  HK2,251m 21,430

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Procurement Strategy Briefing
HA Catalogue
Asset Types 2,200 Consumables drugs
3,624 non-drugs 23,000 Total 28,824
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Procurement Strategy Briefing
Two Purchasing Units? Drugs? Non-drugs
Medical/General Consumables Medical
Equipment/Devices Contract Out Services
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Procurement Strategy Briefing
Existing Procurement Process? Tendering for
high value purchase (gtHK0.5m)? Quotation
seeking for low value purchase (ltHK0.5m)? WTO
(gtHK4.4m)
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Procurement Strategy Briefing
World Trade Organization (WTO)

• ? HK Government is a member of WTO
• ? HA funded by Government
• need to follow WTOs regulations

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Procurement Strategy Briefing
World Trade Organization (WTO)

• Threshold limit 4.4M
• Tender Process Open Tender
• (a) Web-Site Notice
• (b) Advertisement
• Tender Time 40 Days (Minimum)
• Tender General Requirement Specification
  or International Specification
• (No Brands/Models)

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Procurement Strategy Briefing
HA IT Systems? One system for drugs ? One
integrated system for non-drugs
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Procurement Strategy Briefing
HA IT SystemsDrugs? Pharmaceutical Supplies
System (PHS) Non-drugs? Hospital Based
Financial System (HBFS) ? Inventory Control
System (ICS) Auto-refill System? Assets
Management System (AMS)? Purchase Requisition
Initiation System (PRIS)
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Procurement Supply Systems for non Drug Items
User
Non-routine Stock Request
Stock delivery
Non-Stock Request
Routine Stock replenishment
PRIS PR Initiation PO Raising Goods
Receiving Goods Inspection
ICS - ARF Auto-Refill
MC/CM Materials Catalogue Contract Management
ECM Expenditure Control
PO Details
ICS Inventory Control
APM Accounts Payable
GLM General Ledger
POM Purchase Order
PO
Payment Information
Payment Instructions
EDI
Stock delivery
Non-Stock delivery
PO fax
PO response
Suppliers
Citibank
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Procurement Strategy Briefing
Current Situation? EDI - 26 vendors in
use (5 vendors with exchange of PO, delivery
and invoice information 6 vendors with EDI
PO 10 vendors with EDI PO and PO
response) - 16 vendors in development
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Procurement Strategy Briefing
Issues? Standard Adoption by HA
Trading Partners - Use of EDI - Use of Bar
Code? Existing EDI Service Provider - Limited
number of messaging type - Limited number of HA
trading partners - no cataloguing service

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Finances View in Procurement Strategy
Procurement Strategy Briefing

• Optimize the utilization of HAs resource
• Effective and efficient cash management
• Explore opportunities with our business partners
• Streamline processes
• Introduce simple, efficient, reliable and risk
  free operating cycles

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Finances View in Procurement Strategy
Procurement Strategy Briefing

• Payment
• Seamless procurement and payment cycle
• Consolidate various payment methods
• e.g. e-payment, purchasing card, etc
• Receivable
• Patient based billing cycle (facilitate health
  care financing)
• Timely and quality information for policy making
  and management decision

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Procurement Strategy Briefing
HA future procurement strategy
1) Product Standardization and consolidation2)
Centralization of ProcurementBenefits? product
standardization? bulk leverage ? reduced
processing cost (HA suppliers)? reduced
equipment maintenance cost? risk management

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Procurement Strategy Briefing
3) e-ordering, e-receiving e-payment4) partne
rship with key stakeholders/ sharing of
information ? products development ? IT system
development linkage ? point-of-use/inventory
information sharing
HA future procurement strategy (continued)
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Procurement Strategy Briefing
HAs Operational Requirements1) Products
Standardization and Development ? product
standardization (7030)? product research/market
development with consideration on ? biomedical
engineering safety ? OSH ? environmental
issues ? infection control ? end-users
concerns ? price
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Procurement Strategy Briefing
HAs Operational Requirements2) Streamlined
process and improved inventory
management? paperless requisition and
approval ? 2-3 weeks stock? JIT delivery

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Procurement Strategy Briefing
HAs Operational Requirements3) System
Integration? Use of EDI ? Use of
bar-coding? Sharing of inventory information

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Procurement Strategy Briefing
External communication channel? new product
introduction/development - OSH/environmental/infec
tion control? bio-medical engineering
support - equipment safety? IT systems
application development - EDI/bar-code
? sharing of information - consumption
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Procurement Strategy Briefing
Observations from oversea visitA delegation
comprising senior managers, hospital chief
executive, chief pharmacist, procurement, IT and
finance managers visited a private healthcare
group in Singapore and the NSW Health in
Australia in end April1) Singapore? e-communicat
ion ? e-ordering ? e-paymentThe delegation
was impressed by the efficiency and the
potential benefits of e-procurement
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Procurement Strategy Briefing
Observations from oversea visit
(continued)2) Australia, NSW? State contract
establishment? compulsory buying? product
standardization? e-tender return? area
procurement to handle local area purchasing
and supply functions
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Procurement Strategy Briefing
Things being considered ? set up Technical
Advisory Working Groups (Centre of Excellence)
to drive product standardization and to
establish new products? establish a product
manager position (usually a nurse) to
bridge the product knowledge gap between buyers
and clinicians
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Procurement Strategy Briefing
Things being considered (continued) ?
strengthen supplier management policy e.g. no
free products to be offered, no undercut of
pricing after award of contract ? compulsory
buying from bulk contracts application for
exemption need to be enforced? no quantity
commitment on Bulk Contracts
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Procurement Strategy Briefing
Things being considered (continued) ? barcode
scanning for receiving and auto-refill should be
adopted ? reduction of stock holding to 2-3
weeks, improve stock turnover rate
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Procurement Strategy Briefing
Action items? stock reduction (2-3 weeks
stock) I.e. turnover rate from 3-4 to 13 -
14? EDI with all major contractors ? Bar-code
on high volume consumables? paperless purchase
requisition and approval
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Procurement Strategy Briefing
Action items (continued) ? bulk buying
contract development? period contract with no
commitment on quantity but with commitment
on technology upgrade? central bodies to be
formed for product standardization/ development
? suggestion from all of you
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Procurement Strategy Briefing
Time table? follow-up briefing in Mid June,
2001 ? proposed time table for short-term
initiatives
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Procurement Strategy Briefing
Proposed time table for short-term initiatives
1) formation of expert groups (16) to
facilitate product standardization2)
equipment standardization for high volume,
high total purchase value followed by
standardization of consumables medical
equipment general consumables
general medical consumables
2Q01
continuous
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Procurement Strategy Briefing
Proposed time table for short-term
initiatives (continued)
3) formation of working groups to speed up
the use of EDI and bar-code4) pilot Vendor
Managed Inventory (VMI) for certain
products
2Q01
2Q01
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Procurement Strategy Briefing
Proposed time table for short-term
initiatives (continued)
5) revision of the tender terms and
conditions to incorporate the new HA
strategies application of EDI
application of Bar-code contract bound by
period not by quantity
2Q01
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Procurement Strategy Briefing
Proposed time table for short-term
initiatives (continued)
6) implementation of the in-house
paperless purchase requisition system
4Q01
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Procurement Strategy Briefing
Thank You
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Procurement Strategy Briefing
Questions and Answers