Title
Report Author
Ratified by
Purpose of the paper
Procurement Strategy 2012- 2016
Vince Pross, Assistant Director of Finance - Procurement
Executive Management Team
The purpose of this paper is to present the revised Trust Procurement Strategy for Board
approval.
Key messages for the Board and recommendations
This document succeeds the previous strategy document and covers the period 2012 to 2016.
The exercise of refreshing the Trust’s procurement strategy allows a reappraisal of the issues
and objectives for procurement and supply chain management within the Trust.
In addition to this strategy document, two supporting items will soon be established:

Procurement Policies. This will be available to all Trust staff, and sets out the detailed
policies and regulations to which all procurement activity within the Trust should adhere.

Category Management Procedures. This provides the detailed processes for Procurement
and Clinical Product Management staff to effectively identify, validate, define and source
purchasing requirements.
Actions for the Board
To approve the Procurement Strategy and support the recommended actions on an ongoing
basis.
Key risks (linked to Assurance Framework)


Procurement strategy is required to clearly set out governance process for staff to mitigate
risks surrounding poor or incorrect procurement processes.
Other associated and related documents concerning Procurement governance circulated
separately, for approval at other committees.
Impact on our quality of care
Impact on our quality of care
Legal compliance, best value purchases, good commercial dealings with our suppliers,
minimises risk of Trust not receiving vital goods on time for Patients
Has an EIA been carried out
(If not, state reasons)
Yes
Key Issues from Equality Assessment:
None
August 2012
To:
The Trust Board
Submitted by:
Vince Pross,
Assistant Director of Finance-Procurement
A Strategy for Procurement &Supply
Chain Management
for
St. George’s Healthcare NHS Trust
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2
Summary of Changes
Version
1.0
2.0
2.1
2.2
2.3
2.4
2.5
2.6
Date
06/03/12
10/04/12
13/04/12
13/04/12
15/05/12
03/07/12
23/08/12
04/09/12
Author
Vince Pross
Vince Pross
Vince Pross
Vince Pross
Vince Pross
Vince Pross
Vince Pross
Vince Pross
Description of change
Initial draft for discussion
Revised Draft
Revised Draft
Revised Draft
Revised Draft
Revised Draft
Revised Draft
Final Version
Approvals and Distribution
Approvers
Name
Richard Eley
Dominic Sharp
William Boa
Executive (EMT)
Finance & Planning
Committee
Role
Director Of Finance
Acting Director of Finance
Director Of Finance
Exec. Management Team
Executive
Date
13/04/12
15/05/12
08/08/12
04/09/12
March 2013 (tbc)
Role
Date
Distribution
Name
Trust wide
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Index
PART ONE
Subject
Page
A) Introduction: Trust Corporate Strategy
6
B) The Procurement Contribution
6
C) The Environmental Context of Procurement
8
D) Internal Analysis
9
E) The Procurement Vision
10
F) Procurement Services offered
11
G) Procurement Definition & Scope
11
H) Procurement Accountability & Responsibility
11
H1) Definition of Procurement Roles
H2 Trust Corporate Environmental & Social Responsibility
I) Review Mechanisms
14
J) Key Strategic Themes
14
J1
J2
J3
Recruitment
Modernisation
Optimisation
14
17
17
K) Benefits of Strategy
17
L) Key Milestone Plan/Operational Overview
L1 Make or Buy Decision
L2 Information Gathering & Use
L3 Product & Service Design
L4 Supplier Qualification/Legal Issues
L5 Negotiations & Contracting
L6 Receipt & Distribution of Goods
L7 Payment Systems/Transaction Costs
L8 Obtaining Value for Money
L9 Contract Management
M) Moving Forward
18
18
19
20
20
21
21
22
22
23
23
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4
Index (Continued)
PART TWO
Subject
Page
2) Initial Operational Agenda
25
2A)
2B)
2C)
2D)
2E)
2F)
2G
2H)
2I)
2J)
2K
Product Selection
Supplier Selection
Purchase-to-Pay Process
Prices
Stock/Materials Management
Resource Usage Analysis
People, Roles & Responsibilities
Cooperation & Collaboration
Procurement IT Systems
Key Performance Targets
Savings Targets
26
28
29
29
30
31
31
32
32
33
34
Appendices
Appendix 1
Summary of Timescales
35
Appendix 2
Key Performance Indicators
37
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PART ONE
A) Introduction: Overall Trust Strategy
St George’s Healthcare NHS Trust (The Trust) has a demanding target to provide high
quality clinical and support services that meet the health needs of individual patients. Our
mission: To improve the health of our patients and our local community by achieving
excellence in clinical care, research, education and employment
Such services to be provided within a specified level of expenditure.
B) Procurement Contribution to Trust Strategy: Customer Charter
Procurement is the function responsible for ensuring that all services and goods purchased
by the Trust;
a) Represent best value and appropriate quality.
b) Are protected by a legally enforceable contract.
c) Have been tendered in compliance with public sector tendering regulations.
The proper management of Procurement is an important contributor to meeting these
targets.
This document outlines a 4-year strategy for Procurement & Supply Management for this
Trust which is in line with the Trust’s strategic direction and corporate objectives; the Audit
Commission’s Report Goods for your Health, Health Service Circular 1999/143, Review of
NHS Procurement , and the Gershon Review 2004.
Central Procurement Department
This charter is our statement of intent. It sets out what our customers can expect from us as
well as what support we need from them. We aim to be flexible to the changing needs of the
Trust.
We aim to continue developing the procurement function to become world class at St
Georges Healthcare NHS Trust and support provision of a wide range of products and
services that meet our customers’ and patients’ needs at all times. To achieve this
professionally qualified procurement staff have been recruited to a new departmental
structure
Putting our customers at the centre of everything we do
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6
We will seek to understand our customers and their needs.
We will ensure the service you receive is professional, positive and respectful.
What you can expect from us
We aim to provide you with the right information, legal advice and project support in a timely
and constructive manner.
Everyone will be treated fairly and with respect and courtesy.
Our staff and services will be easy to access and will, wherever possible, provide you with
choice.
We strive for continuous improvement.
We will keep you informed and explain any decisions.
Our services will be delivered in a way that ensures we add value and make a difference.
We will adhere to the Trust’s values, vision, policy and strategy.
If we do something wrong, we will put it right as quickly as possible. We accept our
responsibility and the need to be held accountable. We will provide reasons for any failure
and seek to prevent any repetitions or repercussions.
What we need from you
You accept your responsibility in aligning your intentions to the Trust’s vision, values,
policies, annual business plan and overarching strategy.
You understand that the Central Procurement Department will sometimes challenge the
status quo in the interests of organizational improvement and business need. This will
include ensuring compliance with the Trust Standing Financial Instructions and our wider
Public Sector and legal obligations. As such, you will understand and support the team when
such situations arise.
You will work with us, at the point of identifying the business need and in a timely manner, to
develop a mutual understanding of requirements and responsibilities. You will also keep us
updated in relation to any changes in requirements.
You will help design specifications based on your product or service quality requirements and
will then help evaluate the supplier offers so that the best value offer is accepted.
You will then ensure change to the democratically decided best value new product or service
You will provide us with as much relevant information as possible in a timely manner.
You will conduct purchases in line with EU Public Procurement Law, the Trust’s governance
arrangements and Standing Financial Instructions.
You will inform us as soon as possible when problems occur.
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7
C) The Environmental Context of Procurement
There are significant opportunities for creating savings by standardizing product, simplifying
procedures and making suppliers compete for our business. We are starting from a position
(March 2012) with:




too many suppliers,
c2,200
a high cost base with
diverse product ranges and
c94,000 lines
little legal protection by way of evidenced, centrally held contracts. 20%
In short we are a long way from reaching a point where we have achieved maximum best
value. Significant savings may be made by application of basic professional Procurement
techniques. It is planned to pursue these local efficiency goals in order to optimise savings
and enable the Trust to contribute fully to future collaboration projects as a proficient member
of any team.
A comprehensive Procurement review has been completed, simply to discover what are we
buying? Who from? At what price? This information is being used to dramatically improve
efficiency and economic effectiveness. However the information is incomplete as at present
(August 2012) only two thirds of non pay expenditure is currently processed by the
Procurement Department. This is being addressed as part of the Wave 1 and 2 work-plan
and savings target creation processes.
Influence-able non-pay expenditure in the Trust amounts to c£140 million in the current
financial year and expenditure on purchasing goods and services via Procurement
represents the majority (c£105m) of this. At the time of writing £60m is identified as
influence-able and shall be analyzed and entered onto a 2-year tendering work-plan.
HSC 1999/143 and the Gershon review require an annual saving target on influence-able
non pay expenditure of 3% (capital and pharmaceuticals are not included). It is most
important therefore that the Trust achieves value for money in respect of all the goods and
services that it purchases. It needs also to be recognised that these figures represent the
full cost spent on supply activity across all the departments of the Trust.
To maximise resources – financial and human – available for the delivery of patient care it
is imperative that management and process costs associated with purchasing goods and
services are at the minimum level commensurate with maintaining a high quality and
effective supply of service. In this context the Trust recognises the benefits of electronic
systems and will be seeking to invest to maximise efficiency. The Trust recognises that this
strategy will pose a challenging agenda that will change traditional ways of working, how
supply work is managed and how goods and services are purchased across the
organisation. It is accepted, however, that changes will need to be planned in conjunction
with each department and that goods and services purchased are acceptable to clinical
staff and specialist managers.
As part of the public service, the Trust is bound by statutory and mandatory public
Procurement regulations and other requirements, including general legislation, for example,
relating to food safety and environmental protection. The Trust reaffirms that all its
purchasing activity must meet all applicable requirements and that due process and
Stratdoc\Reception07 March 2016
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corporate governance standards must be of the highest order in accordance both with legal
requirements and the Trust’s Standing Orders and Standing Financial Instructions.
Both opportunities and threats exist. Threats derive from the current economic climate
causing increasing cost pressures. Also uncertainties exist regarding the future structure and
organisation of the NHS. However there is a great opportunity for this Trust to modernise and
improve efficiency.
D) Internal Analysis
A detailed analysis of the Trust procurement development needs has been undertaken by the
Assistant Director of Finance-Procurement (May to January 2012). Interviews have been
held with Divisional Directors of Operations and other Key Stakeholders. A Procurement
Manager is dedicated to each Division and meets regularly to ensure two-way
communication is maintained.
Strengths


St George’s is a major Trust with a reputation for high quality healthcare and the large
spending power can be used to lever discounts
The Board has supported the rebuilding of a professional in-house procurement
department which shall be populated with experienced, qualified staff.
Weaknesses (at May 2011)
Historically the Procurement function at the Trust has been at the following level:





Clerical administration via a Purchasing & Supplies department.
Lacking in detailed analysis of meaningful product or service ‘families’
Spend information is not readily available as Budgets codes have been set for broad
categories.
The Trust does not yet have an advanced, integrated purchasing IT system.
Little value has been added.
This has led to fragmented purchasing with lost buying power and too broad a range of
products and suppliers. This lack of structured Procurement has led to a reduction in the
opportunity to consolidate demand, manage suppliers, rationalise products used, manage
stock levels and control usage.
Opportunities
Because of past under-development by cataloguing and categorising currently used products
the Trust can greatly benefit qualitatively and financially by a standardisation programme.
Collaboration opportunities exist with other organisations who agree to use similar product or
service classifications.
Increased business opportunities may arise if we are perceived as being a high quality/low
cost provider.
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Threats



Some Trust members may choose-to continue to by-pass procurement
A Departmental silo mentality may prevent optimisation of Trust-wide scale
economies
Clinicians may not engage or be open to changing product
E) Vision
In order to capture the benefits of best practice procurement a major organisation adjustment
is needed. The goal is to achieve appropriate quality goods and services sourced at best
value and at low risk.
This can only succeed with the full support and timely input from all stakeholders and by
building increased clinical engagement in procurement.
Please see Fig. 1. below that summarises the planned strategic direction
Figure 1
START
Position
How do we change?
MODERN VIEW OF
PROCUREMENT
TRADITIONAL VIEW OF
PURCHASING
CONTRACT
MANAGEMENT
ORDER
PLACING
CREATE
VISION
AD HOC
REPORTS
PAPER
SYSTEMS
MANAGE
CHANGES
CONTROL
INSPIRE
OWNERSHIP
AUTOMATED /
FAST SYSTEMS
PARTNERSHIP
HIGH SKILLS
LOW SKILLS
SHARE
KNOWLEDGE
ADMINISTRATIVE CULTURE
Stratdoc\Reception07 March 2016
PERFORMANCE
INDICATORS
EMPOWERMENT
ADVERSARIAL
ISOLATED /
CLERICAL
END Position
INTEGRATED
STRATEGIC
BUSINESS CULTURE
10
F) Procurement Services Offered
This strategy addresses a spectrum of activities that are not currently being managed
holistically within the Trust, but which form part of the total supply chain:
 Contract Management Support & timely renewal
 Efficient Purchase Order Processing and Invoice Payment
 Materials Management Service
 Negotiation support
 Tendering; specification design assistance
 Legal advice re contract law (e.g. OJEU formal tenders and dispute resolution)

This strategy document is intended to cover supply of all goods and services required by the
Trust to enable the delivery of high quality health care services. In parallel to raising the
standard and scope of the Procurement function at St George’s Healthcare NHS Trust, we are
in partnership with our neighbouring NHS Trusts. It is important to note that not all potential
collaboration members begin this project from the same stage of Procurement development.
St George’s NHS Trust has many localised improvements needed before we can fully
collaborate. For this reason a large part of this strategy details our local Trusts’ required
supply chain management improvement actions which will be completed in parallel to the
collaboration and savings objectives.
G). Procurement Definition & Scope of Procurement Strategy
At the same time as pursuing best value and ensuring we have the products & services
required to treat our patients, we must all help to also ensure that all our expenditure and
activities are compliant with relevant law and standing financial instructions. Supply Chain
Management (SCM) covers a wide spectrum of activities as noted earlier. In broad terms
these include:










The ‘Make Or Buy’ Decision –
Information Gathering and Use
Product & Service Design
Supplier Qualification and Tendering
Purchasing Negotiations and Contracting
Receipt and Distribution of Goods
Payment Systems & Transaction Costs
Obtaining Value for Money
Contract Management
Fraud Prevention & Legal Compliance
H) Procurement Accountability & Responsibility
H1;
Definition of Procurement Roles
The Director of Finance has board level executive responsibility for the Procurement
function within the Trust. This Director will be required to meet personal objectives, with the
Assistant Director of Finance-Procurement including achieving annual targets for progress
in implementing the Trust’s Procurement strategy and for resultant improved quality and
cost standards.
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The Trust will ensure that there is a clear chain of accountability for operating and improving
the purchasing and supplies service; that there are adequate skills at every level whether
the staff are directly employed or not – and that the different levels are held to account
through a system of performance measurement. Please see Appendix 2.
In particular, the Assistant Director of Finance-Procurement will be required to
provide the following:

identify all the activity currently undertaken across the spectrum of supply work
and redesign how it could most effectively be carried out, ensuring unambiguous
levels of responsibility for each aspect of that activity and achievement of the
recommended improvements identified in HSC 1999/143. The responsibilities and
authority of each level within the Trust Board, directorate managers, clinicians and
budget holders to be explicitly stated. The role of the Procurement department needs
to be particularly understood across the Trust.

design an annual work programme to achieve this outline strategy with the
responsibility for each task clearly assigned to named individuals with a realistic
timetable for the completion.

establish clear relationships to collaborate with NHS Procurement colleagues and
maximise the advantage to be gained.

identify all key internal and external stakeholders and establish a policy for
developing partnerships with them

implement electronic Procurement systems; plan for the early introduction to
maximise effectiveness and efficiency in the delivery and management of the
strategy.

Obtain Trust Board approval, and develop, in conjunction with relevant
stakeholders, a system of performance management to enable the board and
Department of Health to assess and monitor the implementation of the strategy and
the resultant outcomes.
H2 Trust Corporate Environmental and Social Responsibility
POLICY STATEMENT
St Georges Healthcare NHS Trust recognises that it has a responsibility to carry out its
procurement activities in a manner that is environmentally and socially responsible. In
accordance with our Environmental Policy and this Procurement Strategy, we will commit to
incorporating environmental and social considerations into the processes by which we
procure products and services. We also recognise that is our responsibility not only to
encourage our suppliers and subcontractors to minimise any negative environmental or
social effects that may be associated with the products and services they supply, but also to
offer help to source viable sustainable alternative products. We will also strive to ensure that
locally based and niche suppliers are not discriminated against during our procurement
processes and specifications.
St Georges Healthcare NHS Trust’s Specific Aims
We aim to:
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Give our Trust employees an awareness of the social and environmental effects of
purchasing products and services. This includes evaluating ‘Whole Life’ and recycling or
disposal costs and providing guidance to relevant members of staff to allow them to properly
select sustainable products and services.
Aim to achieve best value and give preference and promote products that can be made, used
and recycled of in an environmentally and socially responsible way.
Continually review our core and non-core item lists of goods and services to reduce usage,
packaging and wastage where possible
Develop categories for products and services based on sustainable principles
Ensure that all supplier and tender specifications include all appropriate sustainability criteria
and that this is used in the evaluation of tenders regarding the consideration of environmental
credentials in supplier and subcontractor appraisal processes.
Work with existing and potential suppliers and subcontractors to investigate environmentally
friendly products, services, processes and procedures.
Ensure that locally based and niche suppliers are not discriminated against in full recognition
of the Trust’s social responsibilities.
Provide training to our employees about our sustainable procurement processes and
procedures
To meet these aims we will:
Progress with our clear sustainable procurement strategy
Maintain our sustainable procurement buying guide
Continually develop clear objectives with all of our stakeholders to minimise the negative
environmental and social effects associated with the products and services we purchase
Incorporate environmental and social aspects into our procurement processes
Clearly measure our progress
Clearly identify roles and responsibilities for sustainable purchasing and provide the relevant
training
Further Reading
Please read the Trust’s Corporate Citizen Framework as an important cross reference.
The procurement process is a key vehicle in delivering some of the stated targets.
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I) Review Mechanism
A Divisional Procurement Workshop will be re-established in Year 1 to review current
progress / problems (please see remit in diagram) and will meet monthly. In addition and
support of this an User Group (comprising both Trust and Contractor middle management)
will meet weekly to resolve ad hoc tactical issues and monitor / perform current actions
required to fulfil the longer term strategic objectives. Clear roles and responsibilities are
defined. In support of this a structured approach will exist regarding ensuring projects are
performed efficiently and on time:
J) Key Strategic Themes
This document not only identifies these activities, but also sets out the process for defining
the objectives of, and responsibility for, each of them within the Trust.
In this way improvement will be made.
Major components of this purchasing strategy are:
J1) Recruitment of qualified procurement staff and a major departmental restructure
J2) Modernisation of the ‘Purchase to Pay’ (P2P) or ‘Requisition to Pay’ cycle
J3) Optimisation of collaboration opportunities to pursue increased economies of scale
These major components are explained below:
J1) Recruitment
Professionally Qualified MCIPS (Chartered Institute of Purchasing & Supply) Purchasing
Managers/Buyers are sought who are experienced and capable of conducting tendering,
contracting and research projects. Originally only 2 people in the department have the
required qualifications for this essential function.
The new post-holders will not only share the existing workload savings targets but will add
value by enabling us to cover ground more quickly. It is envisaged that the relatively senior
level and experience of the new post-holders will be used to support a professional buying
team, transfer knowledge and help deliver the strategic procurement goals.
The rationale behind the restructure is as follows:

To support the Divisional Directors to improve quality of services and increase CRP
savings by generating a higher level of negotiated contract cover.

To enable a more strategic input by developing communications via the Clinical
Product Management Committee and better liaison with stakeholders.
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14

To reduce legal challenge risks associated with poor procurement and to comply with
all relevant public sector obligations.

To improve customer service by deploying Senior Buyers to fulfil category and
catalogue management roles working closely with the Purchasing Systems Manager.
This structure and staffing level is consistent with the CIPFA Value for Money
benchmarking research 2011.
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15
Figure 2
Procurement Department Restructure Plan 2012 (status at 03/12)
1) Assistant Director of Finance—Procurement
Vince Pross
4) Deputy Head of
Procurement VACANT
6) Logistics
Manager
7) Procurement IT
Systems & Catalogue
Manager
8) Procurement
Manager Estates
& Facilities &
10) Procurement
Manager Medicine
& Cardio
11) Proc. Manager
Children’s&
Womens & CSW
5) Contract
3) Head of
Manager
Clinical
Products
IT,
45) Senior Contracts
Officer
17) Buyer
13)
Data
Analyst
Trainer
9) Procurement
Manager
Surgery
2) Procurement Dept. P.A.
18) Buyer
19) Buyer
20) Buyer
35) Buyer
16)
Data
Analyst
14) Contract
Officer
12) Sen. MM Supervisor—
15) Contract
Assistant
37) R&D Supervisor—
21) Mat Man Band
3
24) Mat Man Band
3
22) Mat Man Band
3
25) Mat Man Band
3
23) Mat Man Band
3
26) Mat Man Band
3
36) R&D Band 2
37) R&D Band 2
38) R&D Band 2
39) R&D Band 2
40) R&D Band 2
41) R&D Band 2
27) Mat Man Band
3
30) Mat Man Band
3
33) Mat Man Band
3
28) Mat Man Band
3
31) Mat Man Band
3
34) Mat Man Band
3
29) Mat Man Band
3
32) Mat Man Band
3
42) R&D Band 2
43) R&D Band 2
44) R&D Band 2
J2) Modernisation;
The ‘Purchase to Pay’ cycle will be modernised. This will help create a culture of ‘rightfirst-time’ and will dramatically reduce errors and reworking by Accounts Payable.
Current improvement projects (April 2012) include:
1. Product Categorisation into Eclass to enable product grouping into related
‘families’. Currently many of the products in the system are entered as free
text which prevents any future spend aggregation analysis.
Benefits; easy to find products and easier spend analysis/quicker tendering.
2. Electronic Catalogues created and installed into purchasing system; currently
many invoice queries are created by inaccurate data
. Benefit; easy to find products and accurate pricing.
3. EAuctions; an online ‘request for quote’ system (MultiQuote) has been
implemented. Uncontracted items may be charged at list price.
Benefit better savings for commodity items.
4. Contract Register implemented to ensure evidence of legal compliance.
Benefit; to ensure timely renewal of contracts and to drive improvement projects.
Planned strategic projects:
Purchasing Cards; Benefit; help support efficient use of EAuction system and enable
simple emergency orders if required for non-account suppliers.
J3) Optimisation;
Once the product data is cleansed there will be collaboration opportunities with other
NHS organisations and London procurement Programme (LPP) to pursue increased
economies of scale. Once the above infrastructure is fully in place the clean product data
and controlled prices will enable us to be a strong partner in collaboration projects where
greater economies of scale are sought. This will include an important strategic alliance
with the St George’s University Hospital Medical School.
K) Benefits of this Strategy are:
1. Savings creation
2. Legal protection for the Trust and regulatory compliance
3. Establishment of a coded and structured Trust Catalogue of Approved Products as a
starting mechanism for standardisation and consolidation.
4. The development of an integrated purchasing IT system which permits easy access to
approved products via remote user requisitioning.
5. Automation of purchase order processing, via maximisation of electronic catalogues
6. Introduction of automated Key Performance Indicators monitoring leading to improved
service delivery.
7. Simplification of the requisitioning to payment process.
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It is recognised that St Georges Healthcare NHS Trust is part of a complex network of
manufacturers, suppliers and a range of stakeholders, including patients &the rest of the
NHS. In recognition of this, the strategy sets out the Trust’s expectations of itself, including
the need to identify the boundaries with collective activity.
L) Key Milestone Plan: Strategic Overview
This strategy document is intended to cover supply of all goods and services required by
the Trust to enable the delivery of high quality health care services. In parallel to raising
the standard and scope of the Procurement function at St George’s Healthcare NHS Trust,
we are in partnership with our neighbouring NHS Trusts. It is important to note that not all
potential collaboration members begin this project from the same stage of Procurement
development. St George’s NHS Trust has many localised improvements needed before
we can fully collaborate. For this reason a large part of this strategy details our local
Trusts’ required supply chain management improvement actions which will be completed
in parallel to the collaboration and savings objectives.
At the same time as pursuing best value and ensuring that the Trust has the products &
services required to treat our patients, we must all help to also ensure that all our expenditure
and activities are compliant with relevant law and standing financial instructions. Supply
Chain Management (SCM) covers a wide spectrum of activities as noted earlier. In broad
terms these include:
A)
B)
C)
D)
E)
F)
G)
H)
I)
The ‘Make Or Buy’ Decision –
Information Gathering and Use
Product & Service Design
Supplier Qualification and Tendering
Purchasing Negotiations and Contracting
Receipt and Distribution of Goods
Payment Systems & Transaction Costs
Obtaining Value for Money
Contract Management
L1) The ‘Make Or Buy’ Decision
Definition: Deciding what services are to be done in house and what may be outsourced.
For example; deciding when external professional expertise is needed to deliver specific
short term projects?
Scope: Many areas of purchasing have transferred to our private sector partners: e.g. MITIE
Building Services. Activities covered include Household Services, Catering, and Estates etc
thus transferring some risk but arguably reducing some control. Remaining non-core
activities and services may need to be reviewed depending on market conditions. A good
example of this strategic decision is the engagement of consultancy/Interim Project Managers.
These engagements must be notified in advance and approved by Human Resources. Procurement
must help contractually by using the procurement template based on standard NHS terms as the
basis of the agreement.
Objective: To concentrate on Trust ‘core businesses’ to include consideration of the most
efficient service provision.
Stratdoc\Reception07 March 2016
18
Time-scale: 3 years in conjunction with potential collaboration partners.
Responsibility: Executive Management Team and Trust Board where required under SFI’s
Roles: Executive Management Committee to identify those existing service areas where
improved patient care may be provided by outsourcing via local consortia contracting and
then implement change.
L2) Information
Gathering and Use
Scope: Spend / portfolio EClassification: data analysis of all products, and services.
Objectives:

To accurately categorise collate, analyze all Trust non-pay expenditure. This data is
then to be made into useful information and Product Groups. These categories are
then to be analyzed for potential quality improvement, via competitive tendering and
contracting. Efficiency savings are sought with a reduction of process cost.

To optimize deployment of a fully integrated Purchasing IT system populated with prechecked electronic catalogues, with remote user access.

To allow appropriate purchasing strategy to be applied to categories, such as
increasing use of materials managed(i.e. ward top-up) system, increasing the number
of standing orders and expanding the number of items covered by a formal contract.

To use the above ‘clean’ data to help create useful spend reports to help Budget
Holders control expenditure.
Methodology
At the time of writing this strategy (March 2012) the top 250 suppliers (determined by spend
via the Procurement department) have been formally contacted. These suppliers have been
advised of our electronic cataloguing plans and have been requested to complete a prepopulated and coded product template.
This approach invites improved discount offers with details of currently paid prices. In this
way it is envisaged that savings will be quickly available and easily accessed.
Following this short term solution, full tendering procedures will be conducted on appropriate
spend categories as part of a structured work-plan
Time-scale: 1 year: Completion due Jan 2013
Responsibility: Assistant Director of Finance-Procurement, Procurement Managers,
Roles: Assistant Director of Finance-Procurement to implement via use Procurement
Managers and IT Systems Manager
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L3) Product &Service Design
Scope: Specifications creation (improved consultation and communication process via
Project Teams comprising Clinicians, General Management, Finance and Procurement.)
Objective: To create generic output based specifications and evaluation criteria to enable
open competition in tenders.
Time-scale: 1 year and ongoing
Responsibility: Project Team to be created for each project to include;
a) Main Users Project Lead
b) Clinical Lead
c) Finance manager with
d) Procurement guidance.
Roles: Procurement utilizes local and external expertise (e.g. London Procurement
Programme/NHS Supply Chain) and consults with potential NHS collaboration colleagues.
L4) Supplier Qualification and Obtaining Legal Offers
Scope: All Formal tender processes (over £50K), capital purchases, and Product or Service
contracts over EU threshold £113K and for Works £4.34m.
Objective: Establishment of a formal, standardized procedure for


Obtaining Pre-qualification Questionnaires (online NHS Supplier Information
Database or direct via electronic tendering)
Formal tendering and obtaining quotes: from suppliers and potential suppliers in
compliance with relevant law and Trust standing financial instructions.
Timescale: 1 Year
Responsibility: Contract Manager Assistant Director of Finance-Procurement, Procurement
Managers
Roles: Procurement to create and perform a Vendor Rating project utilising Dunn &
Bradstreet for the top spend 250 suppliers. Then produce and publish a Procurement User
Guide which explains the Procurement stages and process This same system to be used for
all price enquiries (including the Business case scenario) linking to Standing Financial
Instructions and Standing Financial Orders.
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20
L5) Negotiations and Contracting
Scope: All contracts and purchases of services, medical and surgical goods and services.
Objective: To ensure all purchases and contracts are appropriate to needs, are in line with
Trust standardization strategy, offer legal protection / minimal risk and represent good value.
Method:




Analyze all known expenditure;
optimise the use of consortia and NHS Framework agreements;
increase the use of the materials management (ward top up) system.
Maintain physical copies of the known agreements to be categorized and uploaded
into an electronic Contract Register with trigger points to enable timely renewal.
Current percentage of spend under demonstrable formal contract = 22%
Target percentage of spend under formal contract
= 75%
Timescale: 2 Years
Responsibility: Contract Manager, Relevant Divisional Procurement Manager, Trust Lead
Clinicians via Project Teams.
Roles: Procurement having analyzed spend data / patterns/ usage/ vendors to seek to
maximize the percentage of purchases which are covered by a formal contract by creating
and agreeing contracting work-plans with stakeholders.
L6) Receipt and Distribution of Goods
Scope: All goods purchased and delivered to the Trust (with only pre-agreed formal remit
exemptions re Pharmacy and Facilities)
Objectives: To improve audit recommended processes and maintain an efficient and
accurate service
Method




To utilize the Agresso IT system to perform timely goods receipting on to purchase /
accounts payable system on arrival at the Goods Receipt Point relevant items.
To ensure Trust-wide formal processes are established to cover all receipts of items are
checked against the purchase order and booked in (such as Pharmacy and Pathology).
To organize Vendors deliveries in to pre-arranged timeslots thus reducing process costs
To formalize internal distribution into pre-arranged timeslots with Authorised Signatory
checking and signing for goods.
Stratdoc\Reception07 March 2016
21

To ensure goods are tracked accurately at all stages to the end user.
Timescales: 1 Year
Responsibility: Procurement Lead (Logistics Manager).
Roles: Procurement (Logistics manager, Receipt & Distribution Manager) to operate a twostage receipting system:


Stage 1 receipt from Vendor in to the Trust,
Stage 2 internal distributions of goods with signature for receipt by end user.
L7) Payment Systems & Transaction Costs
Scope: All payments
Objective: Minimise process/transaction cost and maximise accuracy for invoice payment.
Method
Timely goods receipt via linked purchase order to pre verified electronic catalogues and
accounts payable systems for reduced process costs are essential. The product catalogue
project should dramatically reduce invoice price anomalies and reduce the supplier base
Improve invoice verification (invoice manager system).



Maximise early payment discounts if practicable.
Establishment of a clear audit trail by insistence of exclusive use of Purchase Order.
Government Procurement Cards (GPC) Procurement supports the major overhaul of
the current paper-based inefficient system (March 2012) and feels major potential
economies exist in this area. Government Procurement Cards (GPC) are
recommended for non-contracted low value spend or emergency purchases. These
will also enable savings via ‘spot prices’ for the recently implement reverse auction
item; Multiquote.
Timescales: 1 Year
Responsibility: Deputy Director of Finance, Assistant Director of Finance-Procurement,
Financial Controller
L8) Obtaining Value for Money
Scope: All goods and services purchased by the Trust
Objective: Establish and achieve constant quality and cost improvement targets,
benchmarking projects of top 20% of items (representing c80% of spend). Obtaining the
appropriate quality for the most competitive cost.
Stratdoc\Reception07 March 2016
22
Method




Research and actively participate in collaboration opportunities,
Optimise use of Framework Contracts or formal competitive tendering as appropriate.
Adopt a Whole Life Costing Model
Ensure appropriate weightings are given regarding specification quality and cost
Timescales: 2 Years / ongoing
Responsibility: Procurement Lead and all Trust employees
L9) Contract Management
Scope: All Trust contracts and currently non-contracted expenditure: i.e. all non-pay spend.
Objectives:



Maximise formal contract cover.
Ensure legal compliance.
Ensure Trust has appropriate legal protection.
Method
Create and maintain a database of all current contracts (which links to a Trust catalogue of
Approved Products for end user guidance) Contract expiry dates and criticality to be recorded
with appropriate advance notice markers to allow thorough tendering and evaluation
processes and consideration of collaboration opportunities: Contract Register
Timescales: 2 Years
Responsibility: Procurement lead (Contracts Manager), Trust authorize via Procurement
Workshop. Trust Contracts Manager responsible for contract management and review of all
within remit contracts.
All of the above will be encapsulated in a Trust-wide annual contractual work-plan.
M) Moving Forward
This supply strategy will generate a significant workload aimed at making the best
use of The Trust’s resources and ensuring that best practice applies across the
supply spectrum. It will be necessary to identify priorities, establish an annual set of
objectives and to assign responsibilities to named individuals. That will be done within the
strategic framework set out in this document and be included in the Trust’s Annual Business
Plan.
In partnership key stakeholders the Trust will be modernising purchasing processes and
improving efficiency by the adoption of formalised procedures and the development of an
integrated E-Commerce system. The method by which this Trust will move forward is
encapsulated in the time-scales set out in Appendix 1 which detail actions for 2012/13 and
Stratdoc\Reception07 March 2016
23
for both the implementation of the recruitment, E-Commerce system and the targeted supply
chain improvements.
As may be seen by the above target for supplier base reduction it is the intention to forge
closer links with fewer, yet key suppliers. It is intended to achieve this via a vendor rating
project post E-Commerce and electronic catalogue implementation. The increased
informational capabilities are envisaged to allow more ‘open book’ relationships intent on
removing costs for mutual benefit. User specified service level agreements with regular
performance reviews / monitoring is seen as the way to achieve this quality improvement with
ecommerce / electronic tendering/ data sharing the means to target potential cost reduction.
A summary of key service performance indicators is enclosed at Appendix 2.
The strategic aims will be met as long as the recommended resources are made available
and with the Trust working in partnership together.
Vince Pross
Assistant Director of Finance-Procurement
Stratdoc\Reception07 March 2016
24
PART TWO
Initial Operational Agenda
It is intended to set annual targets for all procurement activity. An initial Wave 1 agenda has
been agreed. However it is realised that many of the target dates are dependant on prompt
implementation of the staff restructure and improvements to the P2P IT system and therefore
contain a medium/high risk element. The Trust will initially improve supply management in
collaboration with key stakeholders in five areas as identified by the Audit Commission in its
report ‘Goods for your Health.’ These are:
A) Product Selection – choosing and standardising on the right goods
B) Supplier Selection-legally obtaining goods or devices from the right source
C) Procurement – ensuring that the goods are ordered, received and paid for in the
most efficient way possible, are best value and have the protection of a legally binding
contract
D) Prices– achieving best possible value (appropriate quality and low cost) for goods
and services; benchmarked against other organisations...
E) Stock – ensuring reliable supply while optimising stock levels.
F) Resource Usage - using the right amount of goods and ensuring that there is no
waste.
G) People, Roles & Responsibilities
H) Cooperation and Collaboration
I)
Procurement IT Systems
J) Performance Targets
In the following section the above headings are defined and explained in greater detail.
Stratdoc\Reception07 March 2016
25
2A) Product Selection
The Trust accepts that staff that use consumables and equipment have an important part to
play in their selection. It is well established, however, that failure to balance individual
preference with the corporate needs of an organisation can increase costs unnecessarily. It
can also lead to cost and quality problems when poor choices are made. The Trust,
therefore, will develop systematic procedures for the improvement of product selection and
standardisation, which will:

Ensure the proper planning and evaluation of the purchase of significant items of
equipment, including the use of business cases complete with an analysis of full life
costs.

Include in its business planning process the identification of equipment needing
replacement.

Enable the standardisation as far as possible of consumables and equipment throughout
the Trust through continued use of user groups.

Recognise the environmental impact of purchasing decisions, and incorporate this within
the decision making process.
Method: This will involve working closely with our Clinicians and stakeholders to establish
through the Clinical Products Group a Trust Catalogue of Approved Products which have
passed trials to establish suitability, quality and economy.
The following diagrams (Figs 3 & 4) summarise the stages and actions planned in order to
select the right products from the right suppliers
Stratdoc\Reception07 March 2016
26
Consumable Product Selection Methodology
Fig.3
CONSUMABLE PRODUCT SELECTION
START
DATE
ANALYZE CURRENT WIDE RANGE OF
PRODUCTS / PRICES
END
DATE
LEAD
PERSO
N
A
Barrow
Dec-11
Mar-12
Identify & Code all items: create
database,
Create Access project to sort database
Dec-11
Dec-11
Jan-12
Jan-12
Establish generic Product Groups
(Eclass)
Establish weighted average prices
Jan-12
Jan-12
Feb-12
Feb-12
A
Barrow
Feb-12
Mar-12
A
Barrow
Mar-12
Mar-12
V Pross
DIVISIONAL PROCUREMENT WORKSHOP
GROUP ESTABLISHED
Mar-12
Mar-12
V Pross
Database presented showing best value product
per category& potential savings projects
Mar-12
Mar-12
V Pross,
PMs
PRODUCT TRIALS: APPROVED ITEMS PER
PRODUCT GROUP SELECTED
July-12
July-12
Clinical
Nurse
Mar-13
S
Butterfiel
d
BASELINING PROJECT:
Baseline Cost Established
GENERIC PRODUCT GROUPS AGREED
Product
Group A
Product Group B
Approved Generic Product B
SAVINGS
STANDARDIZATION:
QUALITY
Stratdoc\Reception07 March 2016
A
Barrow
A
Barrow
Product
Group C
APPROVED PRODUCT CATALOGUE CREATED
Approved
Generic
Product
A
A
Barrow
Mar-13
Approved
Generic
Product
C
Mar-13
Mar-13
Weighted av. Price
Reduced range
Appropriate
27
2B) SUPPLIER SELECTION
Fig.4
OBJECTIVE: REDUCTION OF SUPPLY BASE TO AN APPROVED SUPPLIER LIST & ACHIEVE
SAVINGS BY NEGOTIATION WITH CURRENT SUPPLIERS
SUPPLIER SELECTION
START
FINISH
LEAD PERSON
CURRENT NO. OF SUPPLIERS Jan 2012:
2107
TARGET REDUCTION FIGURE TO 500by
2015
Sep-11
Jan-14
Vince Pross
1
ANALYZE CURRENT WIDE RANGE OF
SUPPLIERS, LINKING PRODUCT RANGES
TO SUPPLIERS
Sep-11
Jan-12
Chris Hughes
2
SELECT TOP 250 SUPPLIERS OF
ESSENTIAL GOODS/ SERVICES & SEEK
ELECTRONIC CATALOGUES
&DISCOUNTS
Jan-12
Sep-12
Chris Hughes/Sam
Butterfield
3
VENDOR RATING & CATALOGUE
PROJECT: INFORM SUPPLIERS OF TEST
PERIOD
Jan-12
Sep-12
Vince Pross
4
INVITE OFFERS AGAINST TRUST
PRODUCT USAGE S/SHEET
Jan-12
Sep-12
Chris Hughes/Sam
Butterfield
7
COLLATE DATA & ANALYZE DATA
Jan-12
Sep-12
Chris Hughes/Sam
Butterfield
8
NEGOTIATE PRICES & TERMS: SEND
SUPPLIERS SORTED SPREADSHEET OF
PAST PURCHASES & INVITE
DISCOUNTED ENTRIES
Jan-12
Sep-12
Vince Pross/PMs
9
END EVALUATION PERIOD
Oct-12
Oct-12
10
SUMMARIZE RESULTS
Oct-12
Oct-12
Sam Butterfield
11
IDENTIFY AREAS FOR IMPROVEMENT
AND NOTIFY SUPPLIERS
Oct-12
Oct-12
Vince Pross/PMs
12
REMOVE BADLY PERFORMING OR LOW
SPEND SUPPLIERS FROM APPROVED
LIST. SWITCH PRODUCTS
Oct-12
Oct-12
Clinical Lead/ Sam
Butterfield
13
FORM CLOSER RELATIONSHIPS WITH
REMAINING QUALITY SUPPLIERS &
POPULATE/ REFRESH TRUST
CATALOGUE
Nov-12
Nov-12
Clinical Lead/ Sam
Butterfield
Stratdoc\Reception07 March 2016
28
2C) Purchase-to-Pay Process
The aim is to ensure that goods are ordered, received and paid for in the most efficient way
possible. The Trust recognises the benefits available from electronic tendering and will
implement a suitable system at the earliest opportunity. The full benefits of electronic
systems can only be achieved in the context of an overall supply strategy and associated
policies and procedures that enable the most effective Procurement. The Trust will take
steps to achieve the following:
a) Reduce the cost of ordering and the number of low-value orders by rationalising the
supplier base, standardising product ranges, aggregating order across the Trust,
introducing minimum order size, and examining the use of purchase cards as considered
appropriate.
b) An optimal number and location of receipt points and arrangements to ensure prompt
delivery of items to the point of use.
c) consolidate deliveries wherever possible and explore the potential of all deliveries via a
single carrier
d) Effective payment systems including invoice matching arrangements electronic trading
systems will enable this objective.
2D) Prices
15. Price is an important but not the only element of total acquisition and supply cost,
which is why this strategy addresses all aspects of supply chain management. The
steps that the Trust will take to minimise the price element of total supply costs are as
follows:

use competition wherever appropriate

Aggregate demand for products over time across the whole Trust, through effective
business planning, co-ordination and IT.

establish longer term contracts with suppliers which commit the Trust to volume in return
for lower prices

Maximise early payment discounts including use of purchasing cards to capture ‘one-off’
discounts revealed from an on-line reverse auction tool (Multiquote; December 2011).

explore how poor Procurement practice at the year end can be avoided both by
appropriate spending throughout the year and some budgetary flexibility for budget
holders

Use, where appropriate, Procurement procedures such as operational requirements to
include clinical preference and choice within purchasing activity.
Stratdoc\Reception07 March 2016
29
2E) Stock / Materials Management
A Central Theatre Store has been implemented in April 2012 to ensure ready availability of
essential items by Theatres. This will release space and free up Clinician’s time. Holding too
much stock at the point of use is undesirable for a number of reasons. Stock may become
obsolete; it is expensive to store; it is vulnerable to damage, loss and theft; and, it commits
resources that could have been used for another purposes. Please see Fig.5 below for a
summary of planned key improvement actions
Fig.5
OBJECTIVES:
ESTABLISH A CENTRAL THEATRE STORE
IMPROVE THE MATERIALS MANAGED SERVICE
MAXIMISE VALUE FROM CLINICAL PERSPECTIVE & MINIMISE COSTS
ENSURE ALL APPROPRIATE LOW VALUE, HIGH TURNOVER ITEMS ARE INCLUDED IN THE
TOP UP SYSTEM REGARDLESS OF SOURCE
REDUCE STOCK TO APPROPRIATE LEVELS
STREAMLINE SYSTEM TO REDUCE CLINICAL INPUT (BARCODING, 1 WARD LOCATION FOR
STOCK, PRODUCT & LEVELS REVIEW
1
2
3
4
5
MATERIALS MANAGEMENT
Prepare Shelving and layout completion
for Central Store
Install Stock management system:
SmartUse
Decant stock from Theatre areas to
central Store
START
FINISH
LEAD PERSON
Jan-12
Feb-12
Andrew Whyte
Jan-12
Mar-12
Andrew Whyte
Feb-12
Mar-12
Andrew Whyte
Open Central Store
SURVEY ALL CLINICAL AREAS:
DETERMINE WHICH AREAS ARE NOT
BEING MATERIALS MANAGED:
PREPARE BUSINESS CASE TO ADD
THESE AREAS
Mar-12
Mar-12
Andrew Whyte
May-12
Jul-12
Andrew Whyte
6
REVIEW ITEMS BEING MATMAN'D:
May-12
Jun-12
Andrew Whyte
6a
6b
ENSURE ALL ITEMS ARE HELD IN A
CENTRAL AREA FOR EACH WARD
ENSURE ALL ITEMS ARE BAR-CODED
Jun-12
Jun-12
Jun-12
Jul-12
Andrew Whyte
Andrew Whyte
7
ANALYZE NUMBER OF PRODUCTS
PER AREA
Jul-12
Jul-12
Andrew Whyte
8
REVIEW & ADJUST MIN & MAX
LEVELS TO MAX 1/6TH ANUAL: HOW
MANY TIMES WAS ITEM
REPLENISHED LAST YEAR?
Jul-12
Jul-12
Allison Murphy
9
CHECK BASELINE PROJECT ITEMS:
ADD LOW VALUE/HIGH TURNOVER
ITEMS TO MAT/MAN (NON-STOCK &
STOCK)
Jul-12
Aug-12
Andrew Whyte
10
RETRAIN SUPPLIES STAFF FOR
CUSTOMER FOCUS
Aug-12
Sep-12
Andrew Whyte
11
ARRANGE WICS TO HOLD PRODUCT
& LEVEL REVIEW MEETINGS WITH
CLINICIANS.
Sep-12
Sep-12
Allison Murphy
12
ONGOING UPDATE OF PRODUCTS &
LEVELS
Oct-12
Ongoing
Allison Murphy
Stratdoc\Reception07 March 2016
30
In this way the Trust will aim to achieve best practice by:
a) Reviewing existing stock levels, both stock and non-stock, and set target stock levels,
taking account of product lead time, criticality, historic demand pattern and cost.
b) exploring contractual arrangements that would reduce on-site stockholding where
appropriate (e.g. consignment stock review)
c) ensuring maximum use of materials management systems
d) monitoring high-value stocks in high spending departments
e) reviewing security, ensuring a proper balance of risk and process costs
2F) Resource Usage Analysis
The overall spend on goods and services is heavily influenced by the amount of
consumables used and the way equipment is utilised. As part of the Trust’s strategy it is
considered important to aim at the most appropriate usage rates. This will require the
following actions:
a) examination of the causes of significant and unexplained variation in usage within the
Trust
b) working with suppliers to benchmark usage patterns in other organisations
c) involving Clinical Audit and other specialist groups in the Trust in the analysis of variation
d) defining guidelines for the use of consumables and equipment
e) Increasing equipment utilisation through effecting pooling (via a medical equipment
library), but not to the detriment of patient care.
2G) People, Roles & Responsibilities
The vital contribution that people will make to the success of the strategy is fully
acknowledged. Action will be taken to identify the right mix of skills and abilities. This will
include a clinically trained Head of Clinical Products role to drive forward best value
standardisation. It is the long term objective that all staff involved with procurement are,
or be working towards professional membership of The Chartered Institute of Purchasing
& Supplies (CIPS) accreditation or similar qualification
Post full implementation of this strategy and the purchasing IT systems all orders will be
via the centralised Procurement department who will have authority to re-direct
requisitions to Trust approved alternative products or suppliers.
It is the responsibility of every Trust department to assist in product trials / User groups
so that a Trust catalogue of approved products may be produced optimising quality and
economy.
Stratdoc\Reception07 March 2016
31
The existing of a purchasing matters representative (Finance Director) at Board level will
help ensure ‘buy in’. This Board member also ensures the progress of the action plan.
The Assistant Director of Finance-Procurement is responsible for providing liaison and
assistance to the Board in achieving agreed strategic goals.
In the event of any disputes or dissatisfaction with the operational purchasing service the
relevant Divisional Purchasing Manager will investigate Trust members concerns and
press forward quality improvements.
2H) Co-operation and Collaboration
The strategy identifies that co-operation with other Trusts is likely to bring benefits. It
includes the sharing of operational resources, and Trust commitment to specific cross Trust
projects. This reflects the Trust strategy in developing relationships with other Trusts in the
immediate area. It also reflects the benefits of economies of scale that can be achieved in
operational activity, and in amalgamating commitment in specified specialist areas. The
Trust will also participate in professional networks to facilitate sharing of best practice and
benchmarking, particularly those facilitated by the London Procurement Programme or NHS
Supply Chain.
The task of achieving co-operation within the Trust is a delicate issue: historically the
Procurement function has been mistaken for the supplies function and has been regarded as
the clerical exercise of purchase order processing; merely adding delay. Suspicion of recentralisation is high. However it is intended that through high profile communication with key
personnel, the value adding aspects of procurement may be emphasised such as enabling
high quality at greatest economy with reduced impact on Clinicians time. It is important to
also note the mandatory legal requirements regarding public sector expenditure.
2I) Procurement IT Systems
At present the Agresso Purchasing and Finance System has not been fully configured to
maximise efficiency. As previously stated projects are underway in 2012 to firstly maximise
functionality of the existing system as a prelude to adopting one of the ecommerce systems.
Improvements scheduled (please see Fig.6 below) include:
Fig.6
Topic
1
2
3
4
Contract & Project Management system (Optimise) implemented with
Contract Register functionality
Enabling emailing/faxing of purchase orders/invoices/ remittance advice
to suppliers, Accounts Payable and Requisitioners
Implement online Request for Quote system for ‘one-off’ spot pricing
savings
Review of Government Purchasing Card use to reduce process cost for
low value orders.
Due
Status
complete
Jul-11
complete
Aug-11
complete
Feb-12
Dec-12
complete
5
6
Implement Electronic tender management system/E Commerce; Bravo
Trust Electronic Catalogue creation top 250 suppliers with negotiated 12
month fixed prices
Stratdoc\Reception07 March 2016
Apr-12
complete
Jul-12
32
Following the above improvements a longer term decision must be taken regarding the
implementation of an ecommerce purchasing system capable of accessing supplier websites,
ordering and paying for goods and services electronically, on-line.
As we currently use Agresso the options include:
a) Upgrade Aggresso using installation by Concept; the Trusts’ incumbent maintenance
provider; Low Risk
b) Abandon Aggresso purchasing modules and purchase a new ecommerce system
capable of interfacing with a web based Supplier marketplace and with the legacy
Aggresso financials system; Medium risk
c) Replace Agresso: High Risk
2J) Performance Targets
The Trust in its contract with the out-sourced service provider Procurement has specified that
a quantifiable output must be provided. This has been produced as part of the
implementation process, via negotiation and is itemised below (Fig.7) for the initial 4 year
period of the strategy. Please note that the stated standards represent the minimum
performance expectation.
Fig.7
Activity
Contracts
Contract spend as % of
total spend
On time Placement(within
24 hours)
Vendors (>£2k spend)
Performance appraisal
Reduce Supplier Database
Deliveries
On time from Suppliers
Savings: Influence-able
Revenue non-pay (including
cost increase avoidance)
Savings: Capital
No of orders raised
Product Standardisation/
Reduction of items
Stratdoc\Reception07 March 2016
Present
Performance
Indicator
Base year
June 0211
20%
60%
0
2107
Not available
£93m
40,000
98,000
Target
Yr 1
2012
Yr 2
2013
Yr 3
2014
Target
Date
Yr 4
2015
40%
70%
80%
90%
70%
85%
90%
95%
50 per month (Post P2P
implementation)
20%
20%
10%
Ongoing
10%
1687
1267
847
637
91%
2%
95%
3%
96%
4%
97%
4%
5%
5%
5%
5%
500
-3%
-5% minimum year on year
33
2K) Savings Targets
23. The table below at Fig. 8 is an estimation of net savings derived from collaborative
procurement via the London Procurement Programme in addition to local, St Georges
Healthcare NHS Trust efficiency drives. The figures are based on the target % savings stated
in Fig. 7 (above).
Fig.8
FY
12/13
FY
13/14
FY
14/15
FY
15/16
5 yr cum
total
£000s
£000s
£000s
£000s
£000s
London
Procurement
Programme
Framework
Contracts
£100
£100
£100
£100
£500
Purchase to PayReverse Auctions
£20
£30
£50
£50
£200
£1860
£2,790
£3720
£3,720
£12,090
£1,980
£2,920
£3,870
£3,870
£12,790
Local Procurement
Initiatives (inc
collaborations)
TOTAL
It must be emphasised that these savings targets are estimates only. The true savings
figures will only be known on completion of full tendering and negotiation processes. There
may be capacity limitations on these. However this strategy is designed to maximise the
potential savings in the shortest practical time. Risk areas include:




The ability to recruit, train and create an operationally effective procurement team.
The materialisation of National Framework Contracts from NHS Supply Chain and LPP
The degree of success of local NHS collaboration savings projects.
The willingness of St George’s Trust members to participate and collaborate with
Procurement projects
Recent Changes to Date (August 2012)
Since the appointment of an Assistant Director of Finance-Procurement in May 2011 a major
improvement program has been undertaken. Service provision is a high prioritisation in
addition to the pursuit of savings. To achieve the required improvements the Procurement
department has been restructured to provide professional procurement. Recruitment is
complete and training is continuing at the time of publication of this strategy (August 2012).
Spend analysis and procurement work has already delivered potential efficiencies and the
stated savings delivery is on schedule. It is envisaged by this strategy that the Trust will build
on these early improvements which will continue year on year.
Stratdoc\Reception07 March 2016
34
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Stratdoc\Reception07 March 2016
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SUMMARY OF TIMESCALES
Appendix 1
Procurement Strategy from November 2011
Procurement Objectives
To June 2012
To Dec 2012
To June 2013
12 to
18months
To Dec 2013
18 to 24
months
0 to 6 months
6 to 12 months
6 to 12 months
Automate
matching of
electronic
catalogue
orders
12 to
18months
18 to 24
months
Local OJEU
tenders
Collaborative
Tenders
Contract
Management
& renewal
Reduce direct
orders & 'back
office'
Reduce
delivery points
Strategic Objectives
A
1
2
Build a professional team to deliver a good
service
Create cash releasing savings
3
Ensure legal compliance
4
Restructure & recruit
Ecommerce deployed
Maximise contract
coverage
Smooth processes,
ensure accurate
pricing/invoicing
Improve Purchase-to-Pay
IT Systems
0 to 6 months
How?
Develop & train
team, establish
service KPIs
Help clear
invoice backlog, redesign
work-flow,
automate
processes
Operational Methodology
B
1
2
Maximise contract coverage
Optimise
Maximise usage of
NHSSC or LPP
Frameworks
Ensure compliance to SFIs
Aggresso
workflow,
Invoice
Manager
Reduce maverick
spending. Enforce PO
policy
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3
4
Create cash releasing savings
Healthlogistics
'Hybris'
Multiquote
Create coded electronic
catalogues,
Implement
'request for
quote' system.
Analyze spend
data. Create
savings
Workplan for
2012-13
Supplier Control & Management
Exodus
market
Research.
Dunn &
Bradstreet
Obtain agreement to StG
terms, catalogue
provision, accuracy
Implement D&B
Tracker
5
Stock Control / Materials management
1
Tactical Sequence of Actions for Strategy
Topics
Optimise short-term benefit of NHSSC
Frameworks
C
2
NHS Solo,
SmartUse
Review options
Electronic
Invoicing
Reduce stockholding,
rationalize
products
Expand
Materials
management
to wards,
review
cabinets
Benefit to Trust
Savings, legal compliance
Spend Control, risk reduction. Legal
compliance
3
centralise procurement, ensure SFI PO policy
Collate all known contractual agreements
(Contract Register)
4
Cleanse Data on Agresso product Master File
Spend Control, error reduction
5
Analyze data; apply VP savings target formula
Savings
6
Create savings work-plan for 2012-13
(including timely contract renewals)
Savings, legal compliance
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Recruit staff,
Implement
Central Store
Deliver agreed
savings
Workplan
Risk reduction. Legal compliance
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Appendix 2
SUMMARY: Key Performance Indicators
A list of specific targets and anticipated improvements referred to in Section 2 of the Supply Strategy Documents are tabulated below:-
Activity
Present
Performance
Indicator
Target
Yr 1
Contracts
Current
Expired
On time Placement
Contracts as % of total
spend
14
35
30%
Vendors (>£2k spend)
Performance appraisal
0
Reduce Supplier Base
Not available
Yr 2
30
19
70%
55
Not available
Savings
No of orders raised
Product Standardisation
Reduction of items
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100%
0%
100%
75
91
20%
95
10%
96
Achievement
Details
Yr 4
100%
0%
100%
85
50 per month (Post GPC
implementation)
20%
Deliveries
On time from Suppliers %
49
0
100%
65
Yr 3
Target
Date
Ongoing
10%
97
-5% on existing prices and indexation
?
-3%
-5% minimum year on year
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