group procurement approach to bbbee · • 17 companies dominate 50% of global market top 5 (in...
TRANSCRIPT
GROUP PROCUREMENT
&
APPROACH TO BBBEE
EBITDA OF HIRSLANDEN VS
MEDTRONIC, J&J AND EDWARDS
30.65%
28.91%
35.89%
31.49%
29.87%
44.22%
25.87%25.35%
30.32%30.65%
36.29%
37.66% 37.41%
31.39%
19.50% 19.70%20.00%
18.30%
16.00%
15.00%
20.00%
25.00%
30.00%
35.00%
40.00%
45.00%
2015 2016 2017 2018 2019
Edwards Lifesciences
Medtronic
Johnson & Johnson
Hirslanden Group
MEDTECH MARKET SHARE
AND M&A ACTIVITY
THE MEDTECH INDUSTRY IS CONSOLIDATING RAPIDLY
• Many large volume deals
• 17 companies dominate 50% of global market
Top 5 (in revenue): 25% global market share
Top 10 (in revenue): 39% global market share
WHERE DOES IT LEAVE HOSPITALS?
(1) Individual hospital procurement is „doomed“
– no matter how large the hospital
(2) Global hospital groups are still „small“ in terms of procurement volume
– even if annual volume is > $500 million
(2) Large group purchasing organizations (GPO) with a national focus need to think about int‘l expansion („large“ = > $2 billion annual spending)
MedTech M&A Activity in Q1/Q2 2017
HIRSLANDEN JOINEDA GERMAN GPO IN 11/2018
SUPPLY CHAIN RISK MANAGEMENT
POLICY STATEMENT
• Patients first – quality care
• Carry out business fairly, honestly and transparently
• Protect company brand and reputation
• Process improvement and increased efficiencies
• Products and Services meet minimum standards
NB:
Group commitment to implement systems and controls to support
GENERAL PRINCIPLES AND RULES
• Supported by Anti-Bribery policy
• Balancing rewards against risks – lowest price not always best
• Legal compliance, including BBBEE
• Good corporate governance throughout procurement process
• Total cost of ownership approach
• Reduce impact on environment
• Implement procedures related to supplier and product selection
• Procurement undertaken by suitably skilled staff
SUPPLIER AND PRODUCT SELECTION
SUPPLIERS
• Ethical behavior
• Proven track record for service delivery
• Stable brands and relations
• Training of end-users
PRODUCTS
• CE and/or FDA, ISO 13485, etc.
• New technologies – credible Health Technology Assessment
• HTA Safe – Strategic decision possible
• Total cost of ownership
MODERN SLAVERY
IS A REALITY
SOME STATISTICS
• An estimated 40.3 million men, women, and children were victims of modern slavery on any given day in 2016
• Of these, 24.9 million people were in forced labour and 15.4 million people were living in a forced marriage
• Women and girls, make up 71 percent of victims
• Arab States hosts 17.6 million migrant workers and estimated 1 in 4 are victims of modern slavery
• China imports $1bn-worth of coal a year from North Korea, dug out by miners who toil because of an inherited-worker
• The cotton industry in Central Asia depends on migrant labourers
• Supply chains based on modern slavery may reach into the West
https://www.globalslaveryindex.org/2018/findings/global-findings/
PROCUREMENT SPEND CATEGORIES
• Ethical products (medicine, drugs) ± R3 Bn.
(No opportunities in MCSA and Hirslanden)
• Capital Investments ± R1,2 Bn.
• Surgical & Implants products ± R5 Bn.
• Medical consumable products ± R1 Bn.
• Centralization
• Standardization
• Total cost of ownership approach
• Appropriate technology
• Volume incentive agreements (7 Suppliers ± 65 % of spend)
• Bulk buying
GROUP CONTRACTS
CAPITAL INVESTMENTS
OPERATIONAL EFFICIENCY
MCSA - 30 Suppliers sold hip and knee implants into Mediclinic in 2017
26%
19%
13%
13%
6%
5%
3%
3%
3%
2%2% 2%
PRODUCT DECISION MAKING
„simple“ „special“ „medically critical“
use of
product
daily business and
routine patient care
more important
for patient care
highly relevant for
medical outcomes
examples • swabs, syringes • drapes, surgical gloves • heart valves
criteria • high quality and
experience with products
necessary
• cost effectiveness and
stability
• quality standards and
experience
• cost effectiveness and stability
• consideration of medical
expert opinions
• scientific evidence
who
decides?
strategic procurement
(e.g. product group manager)
strategic procurement together
with clinical experts
medical expert groups
GROUP CONTRACTS
SURGICAL SUPPLIERS
• Multi-year agreements
• Price reductions
• Efficiency projects
• Service delivery – KPI’s
• Volume commitments
MEDICAL INNOVATIONS
GPO ESTABLISHED JANUARY 2017
PROJECTS OVERVIEW
PROJECTS OVERVIEW
MEDICAL INNOVATIONS
PROJECTS OVERVIEW
TRANSPORT AND STORAGE
QUALITY STANDARDS
DIRECT IMPORTS
CUSTOMISATION
ICU and operating room Pendants
Medical InnovationsWorkshop
Pendant Customization
Outsourced Logistics
SINCE 2014LAUNCH OF DIRECT CONSUMABLES
Nitrile examination gloves - over 220 mil. pieces sold to date
DIRECT IMPORTS
PRODUCTS
MEDICLINIC SOUTHERN AFRICA
BBBEE STATUS
MEDICAL INNOVATIONS
BBBEE STATUS
BBBEE
OPENING COMMENTS
• Quarterly review meetings – Top 30 suppliers present their BBBEE plans
• Scoring applied during tenders (both capital, outsourced services and
medical device consumables)
• Sometime no differentiator, then we make a decision based on BBBEE e.g.
the beds at a recent new hospital
• Drive active strategy of engagement - 14 of top 30 suppliers increased their
score over the past 12 months
• Active strategy on medication - all major medication suppliers have level 4
or better
• International agreement with BBBEE written into the agreement and penalty
is supplier does not increase
• Results, managed to improve Preferential Procurement score by more than
double during the last 2 verification processes
BBBEE
QUESTIONS & ANSWERS
• How much focus and weight will be put on BBBEE in the adjudication of
period tenders and daily quotations?
‒ It differs depending on the category - usually between 10-20%
• Would procurement strategies include minimum BBBEE levels, and pre-
qualifications related to BBBEE?
‒ New suppliers minimum BBBEE level 4
‒ New product application, if similar product is already in market and
supplier has bad BBBEE rating, we will decline the product as we do not
want to grow business with suppliers that have bad BBBEE
• Which categories of products would we be applying these BBBEE
procurement strategies to
‒ All categories
BBBEE
QUESTIONS & ANSWERS
• Would Mediclinic be willing to accept offers from smaller BBBEE
companies at a premium, rather than going direct?
‒ Generally no, it must still make business sense
• How will the new B-BBEE regulations impact existing contracts?
‒ Challenge will be during renewal if supplier does not take pro-active
steps regarding their status
• Of late, Mediclinic has been purchasing in bulk direct from international
suppliers rather than utilising local companies referencing cost saving
initiatives as their reason for doing so. How will their BEE procurement
policy focus on utilising local business vs these initiatives?
‒ Same rules apply, Medical Innovations under pressure to improve
BBBEE score to al least level 3
GENERAL
QUESTIONS & ANSWERS
• If Mediclinic is currently purchasing in bulk direct from international suppliers,
how will you ensure that you meet the requirements of the medical device
regulations?
‒ Same rules apply, Medical Innovations complies to same product
application process
