Queensland Health Transforming Procurement
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1 Queensland Health Transforming Procurement
2 Procurement & Logistics in Queensland Health Queensland Health s operating budget $ 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 ( s) with their supply and procurement needs. The independent boards were established in
3 Procurement & Logistics Role QH Procurement & Logistics 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. Strategic Procurement 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 Supply Chain 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. Central Pharmacy One Stop Shop for the supply and distribution of Pharmaceuticals across the state Includes a state of the art manufacturing facility COGS = circa $300m Over 3000 SKUs
4 Macro health trends and challenges Queensland is a geographically dispersed population requiring a service platform to all corners of the state Increasing burden of chronic diseases 15% of population represent 60% of the costs Declining workforce participation and productivity rates impairing capacity to deliver healthcare services and By 2026: Growing Population Qld will increase by 1/3 to 6.1m People living longer - 1.1m in Qld will be over 65 an 83% rise since 2011 Queensland Health will consume the entire forecasted State Budget if we do not contain our spend projections 4
5 Key Procurement Challenges Customers, People & Processes Centralised Model is not customer centric Systems are high effort, and drive errors and off contract purchasing Capability is operational not strategic Clinical customer behaviour drives inflexible purchasing practices Lack of data and purchasing transparency make governance and compliance challenging Manual workload means we are focussing on managing a system rather than improving it.
6 Key Procurement Challenges Systems Key: Multiple aging systems and manual processes unable to support data requirements of modern strategic procurement
7 Where do we want to be? Vision We strive to be the benchmark healthcare procurement and logistics service across Australia. Strategic Focus Areas Optimise Customer Experience Develop Our People Innovate Service Delivery Adopt Commercial Principles Outcome Become a trusted and responsive Supplier of Choice Build a highly capable and engaged workforce Leverage technology and strategic partnerships to optimise service delivery Embrace performance benchmarking and significantly shift customer ROI outcomes Measure - Net promoter score - Engagement score - Personal Development Plans in place - DIFOT - Spend under Management - % benefits from Innovation - Realised benefits ($ against target) - Average cost to serve per volume unit - Price Benchmark for Basket of Goods
8 Procurement Transformation Horizon plan We strive to be a benchmark healthcare procurement and logistics service in Australia Laggard Foundation Established Leading Excellence 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. Significant collaboration across the value chain 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
9 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. 9
10 Structure & Governance Key to success Structure, governance, people & systems capability, and engaging customers Better compliance, pricing and service, both locally and state-wide \ Operational hub State wide hub Operational 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. Operational hub Operational hub Operational hub 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 10
11 The results of the QH procurement capability maturity assessment indicate QH Procurement Maturity Assessment that the overall level of maturity is perceived to be 2.7 however was independently observed as 1.8 People 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 11
12 Phase 1 Quick Wins Phase 2 Source to Pay System Systems 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 E-Catalogue to reduce customer data entry effort and improve contract compliance Manual category data extraction to enable quick win savings initiatives Software as a Service systems Intuitive user interface & familiar user experience Workflows via system, s 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. 12
13 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
14 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. 14
15 Q&A Thank You 15
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