adam crowe - portland group - supplier engagement programmes and their different levels of srm and...

Supplier Engagement Programmes

30th Oct 2015

National Hospitals

Procurement Conference

2

What are the different supplier consolidation programmes that are being

deployed by hospital organisations in Australia?

How can they be differentiated from each other?

What are the performance risks and how can they be mitigated?

How can flexibility be built into the programmes?

Introduction

Supplier engagement programmes and the different levels of SRM and CRM

requirements

Contents

3

1. Industry Opportunities – data empowerment, improved surgical

procedures, cost visibility and stakeholder engagement

2. Infosys Portland Healthcare Experience

3. Supplier Engagement Programmes

4. Differentiation, Performance Risks, Enablement Strategies & Flexibility

5. Examples of Industry Programmes

Industry Opportunities

Source : Hunter Review June 2015 and Lord Carter NHS Review June 2015

4

“absence of access to data to inform strategy and

strategic policy decisions impacted critical decisions

such as purchasing activity and performance

management”

Recent reviews in both Australia and England find system enablement and effective surgery as

the key to improved efficiency and patient care thus freeing up capital for front line services

June 2015, Hunter Review on Qld Health

June 2015, Carter Review on the NHS in the UK

Identified £5bn in savings a year by 2019-20

through:

o data empowerment

o improving surgical practices such as orthopaedic

revision rates

o encouraging medium-sized hospitals (district

generals) to reduce surgical specialisation and

to pool resources with neighbouring

establishments (already occurring in Australia).

o building social care facilities for out-patients to

avoid delayed discharges of patients

The Key Equation for Procurement

Without functional, dedicated resources to drive effective category management, benefits from

sourcing activities often deteriorate over time

Co

st

Sourcing

Activity

Ongoing Category & Demand

Management Activities

Time

Category

management

benefit

Poor category

management

Sourcing cost

reduction

Best practice

category

management

An end-to-end view is required to sustain benefits

Sourcing

Category

Management

Demand

Management

Continually challenging consumption and

specifications, and influencing expenditure

through policy, processes and procurement

systems

Selecting vendors (now and in the future) to

provide the lowest total cost products and

services on a sustainable basis

Sustaining and improving the value from the

sourcing process by monitoring and

managing internal purchasing practices as

well as the vendors contractual deliverables

5

The Sustainable Equation for Procurement & Suppliers

Best practise Procurers strive to achieve benefits for both parties when implementing new

supplier engagement programmes

Co

st

Sourcing

Activity



Time

Category

management

benefit

Sourcing cost

reduction

Best practice

category

management

6

Re

ve

nu

e

Sourcing

Activity



Time

Sourcing cost

reduction

9

Preferred

Supplier

Hospital Supplier

Revenue

growth

New revenue

streams

Improved

efficiency

Comments

The Sustainable Value Equation for Procurement & Suppliers

Both revenue and cost impacts need to be considered for both parties

• Significant benefits are likely for

suppliers and buyers through

establishing true partnerships in

health facilities

• Award of preferred status or

appointment to a panel will drive

long term benefits such as:

Higher market share in

existing products

Ability to leverage into new

products

Improved efficiency through

better forecast models, and

new supply chain

opportunities that will exist

with health facilities

7

Va

lue

– C

ost

& R

ev

en

ue

Time

Product revenue

growth

New revenue

streams

Improved

efficiency

Win-Win Approach:

Preferred Supplier Benefits

Cost reduction

growth

Revenue

enhancement

Improved

efficiency

Hospital

Supplier

Sourcing

Activity



Organic & Efficiencies

New

Contents

8







Healthcare

Facilities & Property

Management

Equipment Services &

Support Services Supply Chain & Logistics

Portland was established in 1999 and purchased by Infosys in 2012

It has over 8 years experience in the health industry and has assisted clients with

over $1 Bill. of addressable spend in the last 2 years

We possess a team of subject matter experts and procurement specialists in the

health sector with extensive experience across a significant number of health and

related categories

Projects cover clinical and non-clinical materials, equipment and services,

property and facilities, information and communications technology

Our key ability is to deliver sustainable outcomes – not just a report!

Clinical & Non-Clinical

Materials & Equipment

Health Industry Capability & Experience Overview

Portland has been delivering value in Australia & Asia via our best practice procurement

framework for 16 years and across the health industry for over 8 years

9

Introducing Infosys Portland

Infosys Portland is a recognised leader of end-to-end procurement & supply chain services

focused on making our clients successful by increasing their efficiency & profitability

10

KE

Y F

AC

TS

& F

IGU

RE

S

• Global leader in procurement

& supply chain consulting,

operations & BPM

• Focused on making our

clients successful by

increasing their efficiency and

profitability

• Comprehensive coverage of

strategic, tactical and

transactional services

• Significant local & global

experience and knowledge

• Largest specialist presence in

the Asia Pacific region

• Track-record in delivering

results and innovation

• Consistently rated as a top

quartile performer by

Industry analysts

Global Clients

Includes 20 in

Fortune 500

100+

Spend processed

annually

95B+

$9B+

Delivery Centers

14

Revenue

2,000+ Procurement & Supply

Chain professionals

10-15x ROI through sourcing

/ category

management

11

Our Procurement & Supply Chain practice has 2,000+ employees dedicated to delivering

strategic and operational services to clients across 14 global centres

Our Global Footprint

Australia

New Zealand Sydney, Melbourne,

Brisbane, Perth,

Auckland

• ~200 FTEs

• ~80+ clients serviced

Services Delivered

Opportunity Assessments

Strategic Sourcing

Category Management

Purchasing Operations

CM

SS

OA

Pur

CM

SS OA

Procurement Delivery Centres

United States Atlanta, other US

• ~40 FTEs

• ~10-15 clients serviced

India Pune, Bangalore, Chennai,

Gurgaon

• ~1,000 FTEs

• 18 clients serviced Pur CM

SS OA

Mexico Monterrey

• ~50 FTEs

• 3 clients serviced

China Hangzhou, Hong Kong

• ~25 FTEs


Pur

CM

Pur SS

Brazil Belo Horizonte

• ~25 FTEs


CM SS

Pur

Poland &

Czech Republic Lodz, Prague

• ~150 FTEs


Pur

Philippines Manilla

• ~20 FTEs

• 5 clients serviced Pur

OA

Pur

Singapore Singapore

• ~20 FTEs


CM

SS OA

Pur

CM

SS OA

Pur

United Kingdom London

• ~50 FTEs

• 5 clients serviced CM

SS OA

Costa Rica San Jose

• ~100 FTEs


Infosys Portland’s Service Offerings

Portland offers procurement and supply chain services at all life-cycle stages, from early

assessment and strategy through to value delivery and ongoing operations

12

Key Health Sector Clients – Infosys Portland

Infosys Portland has provided procurement and supply chain consulting services across a wide

range of businesses in the healthcare industry for the past 8 years

13

Comprehensive Healthcare Coverage

Infosys Portland has comprehensive experience across sectors and products covering all

healthcare categories

14

Services & Products Sectors Healthcare Categories

Strategy

• Operating Model & Organisation

Structure Advisory

• Capability Assessments &

Opportunity Identification

• Shared Services Advisory

Procurement

• Strategy & Diagnostics

• Sourcing Advisory

• Benchmarking reviews

• Demand Planning

• Offshore Procurement & Sourcing

Hub Advisory

• Procurement Managed Services

• Business Process Outsourcing

Supply Chain

• Network & Inventory Optimisation

• Cost to Serve Analysis

• Warehouse Review

Technology Solutions

• Procurement Data Management

• Gamification

• Inventory, Tracking & Route

Optimisation systems

• Government Health Organisations

• Public Hospitals

• Private Hospitals

• Not-for-profit Hospitals

• Aged Care

• Pharma – manufacturing

• Pharma – wholesale & retail

• Medical Equipment manufacturing

• Medical Devices

• Healthcare Products Distributors

• Pathology

• Radiology

• Diagnostic Imaging

• Health Insurance

• Primary Health

• Ambulance Services

• Medical Consumables

• Prosthetics

• Pharmaceuticals

• Medical Equipment

• Medical Devices

• Pathology services

• Radiology services

• Contrast Media

• Bedding, Laundry & Linen

• Medical Gases

• Nursing agency placements

• Physiotherapy & Pain Management

• Rehabilitation Services

• Property & FM

• Catering Services

• Waste Management services

• ICT

• All Indirects

Contents

15







Category Management is a holistic process driving value over category life-cycle

16

What is Category

Management?

End-to-end process to

proactively collaborate with

stakeholders and suppliers to

develop and implement strategies

to deliver recognised value

Deliver Value that is

Recognised by

Stakeholders

Category Management Process

16

Category Management is a holistic process driving value over category life-cycle

17

Ensuring contract

compliance and dispute

resolution

Quality stakeholder &

supplier relations

Opportunity Assessment -

define key priorities

Sourcing & implementation

of priorities

Ongoing value delivery

e.g. innovation

Update strategy & supplier

engagement approach

regularly

Category Management Process

17

Contract Management and Sourcing are part of the Category Management process

18

Negotiate

T&Cs

Ensure

compliance to

T&Cs

Agree &

document

changes

Assess

impact &

correct

course

Communicate

& manage

change

Partner with &

guide business

stakeholders

Develop

category

strategies

Develop sourcing

strategy &

source

Manage end-to-

end project

Implement

strategy

Category Management vs Sourcing vs Contract Management

18

SRM

The Complete Hospital Process – Best Practice

Procurement strives to incorporate all processes including localised demand

management at hospital level K

EY M

ILES

TON

ES

ENA

BLE

RS

PR

OC

ESSE

S

Innovation Workshops, Supply Chain Efficiency and Demand Management

Operating Model Defined

Category Management

Opportunity Assessment

Continuous Improvement

Sourcing

Stage 1

Foundation projects

Contract Management

Category Management Activities

Sourcing Stage 2

Diagnostics

End of

Contract

Term

Issue

RFP/T

Contracts Instituted:

• One Deed with schedules

attached covering categories

or sub-categories

• Group wide coverage

• Preferred suppliers

potentially

• Volume commitments Group

wide

Issue

RFI Local schedules

concluded:

• Pricing

Addendum

• Local KPI’s

Commence

Diagnostics

Steady State: • Review • Re-engage • Renegotiate • Continuous

improvement

19

But where does SRM Fit?

A best practice SRM program can deliver significant benefits to both buyers and suppliers

through enhanced cost, service, risk and value add outcomes

20

Benefits to Suppliers

New products and

exclusive arrangements

Benefits to Buyers

Supplier Relationship Management

SRM aims to develop more strategic relationships with suppliers

based on trust, collaboration and mutual benefits

Cost

Service

Risk

Value Add New revenue streams

Joint cost savings and

supply chain efficiency

Reduce cost to serve

Increase competitiveness

Long term improvement in

supplier operations Improved service levels

Avoid loss of client or

reputational damage

Mitigate major operational

risks

Higher growth on existing

revenue streams

Infosys Portland SRM Framework

We utilise a comprehensive SRM program framework that includes strategy, process,

systems and people

21

000

SRM Framework & Reporting Stakeholder Engagement Plan

Value Proposition

Supplier Planning

& Innovation

Segmentation

& Governance

Supplier Performance

& Analytics

Contract

Management

Benefit

Tracking

Structure, capability & performance management

Str

ate

gy

Pro

cess

S

yste

ms

P

eo

ple

v

Performance

Management

Contract &

Risk Management

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SRM Key Activities

A comprehensive SRM framework should include supplier segmentation, planning & innovation,

performance management and contract & risk management

22

Key A

cti

vit

ies

• Supplier segmentation

• Relationship investment

aligned to classification

• RACI for Procurement

& BU stakeholders

• Structured governance

and communication

• Annual strategic plan

& ongoing collaboration

• Joint product roadmaps

and collaboration

• Joint total cost of

ownership models

• Supply chain integration

• Tailored SPM to

supplier segments

• KPI scorecard

framework & templates

• Data collection

(BU and supplier

surveys)

• SPM reporting systems

• Contract changes

and renewals

• Compliance to T&Cs

• Operational standards

and risk management

• Environmental, OH&S

& human rights audits

Performance

Management

Supplier Planning

& Innovation

Contract &

Risk Management

Segmentation

& Governance

Supplier Relationship

Management

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Supplier Segmentation & Engagement Models

Supplier classification normally falls into 4 segments which provides guidance on which supplier

engagement model should be adopted. However, this relationship is not mutually exclusive.

23

Supplier

Segmentation

Tier 1: Strategic

High Impact, High Risk

Tier 2: Managed

High Impact, Low Risk

Tier 3: Preferential

Low Impact, High Risk

Tier 4: Tactical

Low Impact, Low Risk

Tier 1:

Partnerships

Tier 2:

Dedicated Category

Management

Tier 3:

Preferred Panels

Tier 4: Cluster

Management

e.g. Catalogue

Supplier

Engagement Models

Infosys Portland would welcome providing more information on how these models differ from each other regarding their T&C’s

Contents

24





4. Category Differentiation and Enablement Strategies


Operating Model Matrix Tool

Operating Model Matrix

Key factors for determining the appropriate operating model for managing categories can be

strategic importance of the category and the degree of commonality between sites

25

Non-

Strategic

Strategic

Site Specific All Business Units/Sites

Str

ate

gic

Im

po

rta

nc

e

Degree of Commonality

Office Supplies

Travel

Energy Contract Labour

Property Development

Logistics

Telecoms Repairs & Maintenance

Waste

Site Services

IT

Marketing

Fleet

Region/Division Specific

Category Management Approach

Regional/Divisional:

Regional/Divisional Procurement team

completes sourcing & category

management with operational local site

support

Central:

Group Procurement delivers sourcing

and category management with

divisional/regional procurement and

operational local site support

Pharmaceuticals

Prostheses

Major Medical Capital Equipment

Local:

Sourcing & Category Management

delivered at site level by operational

resources

Labour

Medical Devices

Medical Consumables

Minor Medical Capital Equipment

The correct model may differ with

each hospital organisation

Supplier Engagement Model Matrix Tool

Supplier Engagement Model Matrix

Using a similar valuation approach, the appropriate supplier engagement model for each

category should consider the strategic importance of the category and its total spend profile

26

Non-

Strategic

Strategic

Str

ate

gic

Im

po

rta

nc

e

Spend ($)

Property Development

Labour

Contract Labour

IT

Pharmaceuticals

Medical Devices

Medical Equipment

Prostheses

Medical Consumables

Logistics

Travel Repairs & Maintenance

Waste

Marketing

Fleet

Office Supplies

Energy

Telecoms

Site Services

Supplier Engagement Model

Preferred Supplier Panels

Partnership Programmes

Cluster Management

e.g. Catalogues

Dedicated Category

Management

Aggregated Spend

Sourcing Model

Food & Beverage

The correct model may differ with

each hospital organisation

Comments

Supplier Engagement is Multi-Dimensional

While strategic importance, commonality and spend are key factors, a multi-dimensional

approach is required to address the ideal supplier engagement model

3D Supplier Engagement Model Matrix

• Additional factors to consider in

determining an engagement

model for a category :

Technology - the relative

strength of technological

adoption within each health

facility

Readiness for Change -

within categories and within

stakeholders

Clinical preference - the

embedded preferences and

required specifications for

products

CEO buy-in - strategic focus

of each health facility’s Chief

Executive

Supplier market – monopoly

or other

27

Str

ate

gic

Im

po

rta

nce

Procurement’s Role in Supplier & Clinician Collaboration

28

Chief Executive Enablement

• Extra theatre staff, new equipment, room refurbishments, charity support from suppliers

Digital Preference Cards

• Digital preference cards are an enabler to align clinician’s supplier choice with procurement

consolidation programmes

• Provides insight to theatre nurses and surgeons on alternatives to their first preference suppliers

RFID Enablers

• Active tagging reducing waste and increasing visibility

Patient Product Testing

• Procurement managers & suppliers can assist each other in investing or co-investing in patient

experience testing

Reducing Revision Rates

• The Australian Joint Registry provides excellent insight into revision rates

• However, the missing link is transforming this information to total episodic care

• Any cost analysis requires support from clinicians, theatre staff, hospital executive management and

procurement/finance. This insight is provided and greatly utilised in the U.S.

• Procurement can work with suppliers, clinicians and universities to facilitate

Procurement together with their suppliers can support collaboration projects with executive

management and clinicians in areas of theatre management & reduction in surgical revisions

Contents

29







Qld Government Procurement Transformation

30

• Focus on moving from service provider to enabler

• Aim to deliver smarter simpler outcomes that are more responsive to customers

• Centre-led collaborative approach to deliver benefits, access and grow capability

Discovery /

Diagnostic

Wave 1 – Sourcing &

Category Mgt Initiatives

(Proof of Concept)

Wave 2 – Sourcing &

Category Mgt Initiatives

• High-level procurement

diagnostic covered $16B in

external spend across six

“mega-categories”

- Medical

- Building Construction &

Maintenance (BCM)

- ICT

- Roads Construction &

Maintenance

- General Goods & Services

- Social Services

• Identified $600M - $1.3B in

annualised savings via WoG

approach

Late 2012 Jun – Oct 2013 Nov – Dec 2013 Nov 2014 – Jan 2015

• Categories included:

- Telecoms

- Software Asset Mgt

- Business Advisory Services

- Legal Services (Review)

- Office Supplies

- Medical Consumables

- Pharmaceuticals

- Prosthetics (Ortho)

- Contingent Labour (Nursing)

- Contingent Labour (Blue Collar)

- Travel

- BCM (Housing)

- Roads Contingency Mgt

• Whole of Government value

diagnostic and detailed

sourcing initiative planning

across all six mega-categories

for 2015 objectives:

- Medical

- Building Construction &

Maintenance (BCM)

- ICT

- Roads Construction &

Maintenance

- General Goods & Services

- Social Services

Category Deep Dive

Review


- ICT Consultants and

Contractors

- IT Labour Hire

- IT Hardware

- Facilities Maintenance

- Building Trades

- Prosthetics

- Pathology Consumables

- Engineering Consultants

Wave 3 Planning –

2015 Sourcing Plan


- Telecoms

- Print as a Service

- Contingent Labour (White Collar)

- Engineering Consultants

- Legal Services (Sourcing)

- Pharmaceuticals

- Prosthetics (Cardio, et al)

- Freight & Couriers

- Marketing Services

- Buildings Facilities Mgt

- Buildings Capex Negotiations &

Contingency Mgt (Health,

Education)

- Furniture

- Uniforms

- Utilities

- Air Charter

- Tyres

Apr 2014 – April 2015

The Qld Govt Procurement Transformation commenced in late 2012 with Portland as the primary

implementation partner to evolve and execute initiatives to pursue cashable benefits in an

extensive range of categories

Category Strategy Overview

A two-phase approach was recommended for Prosthetics to establish the supply model of state-

wide SOAs and HHS specific SOSs, which supports HHS autonomy and drives maximum value

for money through increasing transparency and accountability

31

Contract Vehicle: State-wide SOA(s)

• Able to be utilised by all HHSs

• Establishes contractual framework for HHSs to extract additional value through

supplier/contract Management & Demand Management initiatives without having to re-

engage market in costly sourcing activity

• Generic Scope of Supply defined, to be evolved for each of the HHSs in Phase 2

• Establishes consistent performance management framework across State

• Brings significant level of spend onto contract, therefore reduced risk of procuring off contract

Discount HHS commitment

15% $xxx

10% $xxx

5% $xxx

Sourcing &

supplier/

contract

Management

framework

establishment

Supplier/

Contract &

Demand

Management

execution

HHS

specific

negotiated

supplier

price

lists

Pri

cin

g

Contract Vehicle: HHS Specific SOA Variations

• Scope of Supply defined for each HHS (or a group) as a result of HHS focused requirements

gathering process

• Supplier price list negotiated using state-wide SOA as a basis and adding a discount based

on the volume commitment and/or exclusivity

Value Levers

Value Levers

• Volume

aggregation

• Competitive

bidding

• Specification

improvement

• Competitive

bidding

• Specification

improvement

• Usage

initiatives

• Internal

compliance

• Supplier

compliance

• Supplier

performance

management

Phase 1

Phase 2

Contract Management & Sourcing Strategy

Through delivery of Phase 1, one deed was implemented with each supplier for multiple

Prosthetic sub-categories; in Phase 2 the specific requirements of each HHS was to be

incorporated

SOA 1

Supplier A

Supplier B

Supplier C

Deed with Supplier A

Cat 1 Cat 2 Cat 3

Co

ntr

ac

t s

tru

ctu

re

Ou

tco

me

s

Multiple SOAs/Deeds with one supplier (e.g.

4 x Cardio SOAs)

HHS-specific specifications

• Multiple tenders for similar products • Single tender for multiple categories • State-wide SOA provides platform for HHS

procurement initiatives

• Overlapping product types and

specifications

• Products priced, classified and reported on as

per Category Dictionary

• Phase 1 pricing and service levels utilised

in Phase 2 initiatives

• Limited supplier performance management • Structured supplier performance reporting

implemented

• Supplier performance management is

optimised against HHS’s requirements

SOA 2

Supplier A

Supplier B

Supplier C

SOA 3

Supplier A

Supplier B

Supplier C

Deed with Supplier A

Cat 1

HHS A

HHS B

Cat 2 Cat 3

…

…

One Deed with each supplier governing

specifications for multiple categories

Current state Phase 1 Phase 2

32

Summary

33

The success of the chosen supplier engagement model will be largely based on 8 key enablers

and activities

1. Executive Management Support

2. Clinician Champions and/or Executive Champions

3. Supplier Belief

4. Product Specification Design

5. Contract Design

6. User Ratings (or Testing if unavailable)

7. Technology Enablers

8. Supply Chain Efficiency Drivers

Awards

The improvements generated by our services have been recognised through industry awards for

our clients and our company

INDUSTRY AWARDS

CIPSA Awards

• “People Development Award” (Winners, 2014)

• “Most improved Procurement Operations” (Winners, 2014)

• “Best Process Improvement” (Commendation, 2014)

• “Best Cross Functional Team” (Winners, 2010)

• “Best Process Improvement Initiative” (Winners, 2009)

• “Most Improved Procurement Operation” (Commendation, 2009)

“Global Outsourcing 100“

Ranked 2nd in 2010

International Association

of Outsourcing Providers

INFOSYS Awards

“World’s Most

Innovative Companies”

Ranked 15th in 2011

(the only professional

services firm on the list)

PASA Awards

• “Category Manager of the Year - ICT” (Winners, 2015)

• “Category Manager of the Year - HR” (Winners, 2015)

34

Contact Details

[email protected]

W : +61 2 9210 4355

M : +61 421 613 986

Adam Crowe - Healthcare Practice Lead

[email protected]

M : +64 21 31 1036

Larry Klassen – Regional Manager

35