queensland health transforming procurement rodney.pdf · queensland health 2 ... 50% spend / long...
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Procurement & Logistics in Queensland Health
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Queensland Health’s operating
budget $13.622 billion FY14–15
Employs approx. 80,000 people
across 182 hospitals and the
department
Procurement & Logistics sits in a
broad group of support services
in Health Support Queensland
(HSQ) a commercialised
business unit within Queensland
Health.
Supports the state’s 16
independent Hospital and Health
Service Boards (HHS’s) with
their supply and procurement
needs.
The independent boards were
established in 2012
We are responsible for leading and coordinating the sourcing, contracting
and end-to-end supply of medical and non-medical goods and services on
behalf of the Department and 16 Hospital and Health Services.
Procurement & Logistics Role
Provides overall governance,
coordination and support for
strategic procurement activities
across QH
Circa $3b Addressable Spend
(exc. Grants, IT, Infrastructure)
Top 83 Suppliers represent
50% spend / Long Tail
Strategic Procurement
Complete end to end supply
chain service spanning
Purchasing, Warehousing,
Distribution, and Imprest
Management Service
2 DCs, 5 warehousing facilities,
7 Purchasing hubs
Throughput of $830m per
annum
3.2m transactions p.a.
Supply Chain
One Stop Shop for the supply
and distribution of
Pharmaceuticals across the
state
Includes a state of the art
manufacturing facility
COGS = circa $300m
Over 3000 SKUs
Central Pharmacy
QH Procurement & Logistics
Macro health trends and challenges
• Queensland is a geographically dispersed population requiring a service platform to
all corners of the state
• Increasing burden of chronic diseases
• 15% of population represent 60% of the costs
• Declining workforce participation and productivity rates impairing capacity to deliver
healthcare services and
By 2026:
Growing Population – Qld will increase by 1/3 to 6.1m
People living longer - 1.1m in Qld will be over 65 – an 83% rise since 2011
Queensland Health will consume the entire forecasted State Budget if we do not
contain our spend projections
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Key Procurement Challenges Customers, People & Processes
• Centralised Model is not customer centric
• Systems are high effort, and drive errors and off contract purchasing
• Capability is operational not strategic
• Clinical customer behaviour drives inflexible purchasing practices
• Lack of data and purchasing transparency make governance and compliance
challenging
• Manual workload means we are focussing on managing a system rather than
improving it.
Key:
Multiple aging systems and manual processes unable to support data requirements of
modern strategic procurement
Key Procurement Challenges Systems
Vision
We strive to be the benchmark healthcare procurement and logistics service
across Australia.
Where do we want to
be?
Strategic Focus
Areas
Outcome Measure
Optimise Customer
Experience
Become a trusted and
responsive ‘Supplier of Choice’ - Net promoter score
Develop
Our
People
Build a highly capable and
engaged workforce
- Engagement score
- Personal Development Plans in place
Innovate Service
Delivery
Leverage technology and
strategic partnerships to
optimise service delivery
- DIFOT
- Spend under Management
- % benefits from Innovation
Adopt Commercial
Principles
Embrace performance
benchmarking and significantly
shift customer ROI outcomes
- Realised benefits ($ against target)
- Average cost to serve per volume unit
- Price Benchmark for ‘Basket of Goods’
We strive to be a benchmark healthcare procurement and logistics service in Australia
Procurement Transformation
Horizon plan
1.0 1.5 2.0 2.5 3.5 5.0 3.0
Laggard Foundation Established Leading Excellence
1.8
• Functional Siloes across the
Procurement Value Chain
• No basic Procurement processes
or capability
• Procurement is highly reactive,
with no collaboration with
customers
• Commercial contracts managed
outside of procurement
• No reporting
• Limited strategic sourcing
• No category management
• Highly transactional and manual
– no automation.
• Systems insufficient for
procurement purposes.
• Basic collaboration across end to end
Procurement functions
• Processes in place, but not enforced
effectively
• Procurement has limited collaboration
with customers – no governance
• <25% spend managed
• Many major contracts not managed by
Procurement
• Mainly Compliance focused –
excessive approvals
• Category strategies focused on basic
price / cost re-negotiations
• Paper heavy
• Capital and
FTE intensive
• Systems very
limited -
manual workarounds required to
extract data
• Integration across the entire value
chain occurring for some spend
categories
• Solid processes with some strong
capability in place
• Collaboration on specific categories or
initiatives
• New Governance developed
• <50% spend managed
• Category strategies
include demand mgt,
• product standardisation, & waste
control projects.
• Limited key partnerships
• Some system enablement – e.g.
QContracts / Dashboard / eCatalogue,
but still clunky.
• S2P strategy commenced.
Procurement embedded across all sourcing
and category mgt activities
• Governance model mature
• Processes / capability strong
• <90% of spend managed
• Supply chain partnerships piloted across
state
• Category strategies look at transforming
TCO & Total Patient Care outcomes, and
exploring joint supplier projects
• Procurement Consortia / LCCS explored
• Full S2P technology enablement 50%
implemented
• Lean, fully integrated end to end
Procurement value chain based on cat.
mgt approach
• Processes institutionalised &
systematised
• Procurement proactively sought after &
fully integrated with customers at
operational & executive levels
• >90% spend managed
• Supply Chain partnerships fully
implemented. P&L focus on being a
contract mgr rather than service provider
• Category Strategies pursue new
product/service designs, CSR &
Sustainability activities
• LCCS projects implemented
• Full S2P fully implemented
4.0 4.5
• Significant collaboration across the value
chain
2014 2015 2016 2017
Imperatives of building competitive procurement and
supply model
• Customers budgets under growing pressure seeking Procurement & Logistics to deliver
savings now.
• Time without results is our enemy. If we cannot engage customers with quick wins
along this lengthy and complex transformation journey, we risk customers finding their
own solutions.
• Risk of system fracture if we cannot deliver, diluting state-wide negotiation capability
and adding incremental consultant costs.
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Key to success Structure, governance, people & systems
capability, and engaging customers
Structure & Governance
Better compliance, pricing and service, both locally and state-wide
• \
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HHS
HHS
HHS
Operational
hubHHS
HHS
HHS
Operational
hub
Operational
hub
HHS
HHS HHS
Operational
hub
HHSHHS HHS
HHS HHS
HHS
Operational
hub
State
wide
hub
Key Features
Hybrid model incorporates the best of both worlds -
system wide strategy, local execution
• Attractive all of state pricing on high volume
commoditised products.
• Attractive hub pricing on items that may have
attracted higher pricing in a centralised model.
• Local needs identified and supported.
• Local management of purchasing behaviour
The results of the QH procurement capability maturity assessment indicate
that the overall level of maturity is perceived to be 2.7 however was
independently observed as 1.8
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• We need an injection of strategic capability quickly to deliver value, maintain momentum and build credibility.
• We have filled critical skills and leadership gaps with short term contractors to build the capability of our
workforce
QH Procurement Maturity Assessment - 2014
People
Systems
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Objectives
• Deliver quick wins to reduce customer effort through simple non system integration initiatives.
• Timeliness and quality of the management, sourcing, procurement, inventory and payment processes
• Decrease transactional activities to free up capacity for strategic activities
• Increase information availability and reduce need for information analysis costs
• Reduce resources and costs associated with transaction processing and governance
• Reduce contract non-compliance and off-contract buying which erode sourcing benefits
• Reduce the cost of purchased goods and services
Phase 1
Qu
ick W
ins
E-Catalogue to reduce customer data entry effort and improve contract compliance
Manual category data extraction to enable quick win savings initiatives
Ph
ase
2
Sourc
e to
Pay
Syste
m
Software as a Service systems
Intuitive user interface & familiar user experience
Workflows via system, emails and apps across delegations, rules and work instructions managing governance, approvals and staff daily duties.
Agile systems for “bespoke” changes administered “in house”.
Real-time visibility, control and management of expenditure and staff workloads.
Future “Source to Pay” System
S2P, refers to the business processes that cover activities of finding (sourcing),
requesting (requisitioning), purchasing, receiving, inventorying, paying for and
accounting for goods and services.
Scope of process improvement and system
UPSTREAM PROCESS
DOWNSTREAM PROCESS
Customers
• Engage early to understand their needs.
• Encourage collaboration to build future solution.
• Encourage investment so they have skin in the game.
• Deliver quick wins to maintain buy in.
• Provide regular progress and outcomes reporting and updates.
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