Discovering different approaches to implementing

procurement systems, models and strategies

Natalie Budovsky

Head of Strategic Sourcing, Healthdirect Australia

Introduction

Health Services Pyramid

Strategic Sourcing Functions: foundations of success

Factors Contributing to Implementation Success

Procurement Systems

Procurement Models

Procurement Strategies

Conclusion

Q & A

2

What is one most important

factor that makes your

Strategic Sourcing Function (or any other function)

successful?

?

3

Healthdirect: 2007-2011

NHCCN 2007

2010

2011

4

5

Preventative Health

ACUTE/ Tertiary Care

Palliative care

We are responsible for the

FUTURE of HEALTH and the

HEALTH of its ECONOMICS

6

Preventative Health

Nurse

Triage Healthdirect

Healthdirect Australia Services

ACUTE/ Tertiary Care

Palliative care

Wel

l Hea

lth

Palliative care Preventative Health Self Care

Dentists Psychologists

Health literacy

Sporting Groups Schools Community Groups Activity Groups

General Practice

Specialists

Hospitals

Respite Facilities

Day Surgeries

Community Health

Aged Care

ACUTE/ Tertiary Care

Future of Health Health of its Economics

What is one most important

factor that makes your

Strategic Sourcing Function (or any other function)

successful?

?

8

Assembling the right structure and capabilities to enable

Strategic Sourcing interact with the business

Focusing on outcomes that matter to everyone, including

those not in Strategic Sourcing

Foundation of Success

9

Make it as simple as it can be, but not simpler

10

Procurement System

“A procurement system refers to the use of integrated

information and communication technologies to carry out

individual or all stages of the procurement process including

search, sourcing, negotiations, ordering, receipt, and post-

purchase review.”

Croom and Brandon-Jones, 2004

…end-to-end solution that integrates and streamlines many procurement processes

throughout an organisation

Business need

Market development

RFX

Negotiations

Contract Execution

Requisition

Approval

PO

Delivery

Contract & Relationship Management

Reporting PARTERNSHIP

BUILDING

Approval to pay

Payment

12

Factors that will influence the mix of systems:

• Range of products and services

• Whether they are specialised or commoditised

• Supplier portfolio

• Transactional volumes

Your choice:

• Procure-to-Pay

• Spend analysis

• Category Management

• Supplier Performance

Management

• eRF(x)

Procurement System

Business need

Market development

RFX

Negotiations

Contract Execution

Requisition

Approval

PO Delivery

Contract & Relationship Management

Reporting PARTERNSHIP

BUILDING

Approval to pay

Payment

13

End-to-end solutions are rarely achieved and system

implementation generally involves a mixture of models

At a minimum your basic procurement system should be fully

integrated with the accounting system

Best practice strategic sourcing is data intensive

Procurement System: success factors

Remember:

spreadsheets do not make decisions, people do

14

Purchase: acquire (something) by paying for it

Procure: obtain (something), especially with care and effort

Source: obtain (something) from a particular source

Purchasing vs Procurement vs Sourcing

Strategic Sourcing is an institutional process that

continuously re-evaluates and improves the purchasing,

procurement and sourcing activities of an organisation

Networked

Centralised

Federated

Decentralised=local

Procurement Models

Centrally Led Network

16

Procurement Models

What are they about?

• Decision Making

• The “doing”

• Control

Your choice

• Decentralised (local)

• Centralised

• Networked

• Federated

• Centrally led network

17

Imposition is less effective than providing excellent service

The ideal model is dictated by the way business needs to be

conducted

In Healthcare safety and quality trump everything

Procurement Models: success factors

Ensure that the responsibility is vested with the right people

18

The main objective of the sourcing strategy:

building industry leading capabilities to deliver best value arrangement

to the stakeholders

Sourcing Strategy

When implementing a sourcing strategy clearly

identify upfront how your business maxims are

translated into a sourcing maxims

Plan

Source

Procure

Manage

Analyse

Sourcing Objective:

To have industry leading capabilities to deliver best value arrangements to the

stakeholders

Macro-level Organisational

Objectives:

Cost Efficiency

Programme Delivery Market

Business Maxim

Sourcing Maxim

Plan

Source

Procure

Manage

Analyse

Business Intelligence

Procurement Systems

Contract Management Systems

Contract Management

Procurement

Sourcing Objective:

To have industry

leading capabilities to deliver best value arrangements to the

stakeholders

Macro-level Organisational Objectives:

Cost Efficiency

Programme Delivery Market

Strategic Sourcing Capabilities and Enablers

21

Market Analysis and Development Supplier Negotiations Subject Matter Expertise Process Efficiency and Standardisation

Business Intelligence and Analytics Project Management Tools and Systems Governance

22

GM CPO

General Management

Sourcing Expertise

Ensure that the responsibility is vested with the

right people

23

Sourcing Strategy: success factors

People

Models

Systems

Process excellence and effective use

of technology

Strong Leadership and business

alignment

Capable, engaged and

engaging people

People

24

“Everything should be as simple as it

can be, but not simpler.”

Keep it simple!

Thank You

?