Three challenges for public sector procurement professionals
For public sector procurement professionals, who are always under pressure to deliver both efficiency and value, buying IT comes with its challenges.
Digital marketplaces have emerged as one solution to help streamline purchasing and overcome barriers such as prescriptive procurement protocols, disjointed systems and a lack of visibility. But not all of these marketplaces and platforms are created equal – or abide by the same rules.
In a process-driven world, how can buyers ensure they’re procuring the right product at the best price – all while complying with the expected level of governance?
Disjointed systems (and pesky protocols)
Public sector healthcare organisations, for example, often have their own in-house procurement systems – designed to provide a clear path to purchase. This may sound helpful but in practice it can be extremely limiting, especially when it comes to enabling a comprehensive search of products and prices.
Failure to find the right product is hugely frustrating and will ultimately push buyers to other paths. Some buyers will settle for the next best thing (which may not have the right functionality for the task) or pay over the odds for something that does far more than they need. If neither of these is an option, buyers are forced to go off-piste and seek out alternative non-specialist platforms, which means they almost certainly won’t get the right product. For example, a hospital buyer might purchase a TV instead of a large format digital display, or a regular keyboard instead of the one with an anti-microbial finish.
Integrating and configuring multiple systems can help. Crucially, this doesn’t mean getting rid of what’s already in place, but adding to it. The ability to integrate ERP and procurement systems, for example, means that buyers automatically get increased choice, specialist support when needed and can avoid duplicated efforts. Additionally, governance protocols can be automated, providing procurement with a digital audit trail for all company purchases. This gives procurement professionals the reassurances they need, while allowing buyers to operate freely within a safe environment, where all activity is tracked.
The pain of manual systems
We’re all guilty of sticking with what we know, but legacy and manual systems still create one of the biggest obstacles in the path of buyers.
Take signing off a purchase order as an example. This should be straightforward but too often it can take up to two weeks or longer because of inefficiencies, frequently coupled with a complicated sign-off process.
Organisations may have a ‘delegation of authority’ in place which gives certain personnel different levels of spending power. For example, if you’re spending £5k or under, X person will be able to sign it off whereas, if it’s more significant, you may need someone more senior to approve the purchase.
Where this is a manual process, procurement need to hunt down the right person to get a physical signature. Trying to do this in a large and busy hospital environment can lead to delays and even more serious consequences for departments waiting on a vital piece of technology.
Automating these processes means the approval-giver can sign off on a purchase in a matter of seconds – whether via a digital signature or a similar one-button system which gives the green light.
Not only does this remove the paper trail and save time, it enables more flexibility. If one person is absent or goes on holiday, they can grant sign-off privileges to a colleague, via the system. Meanwhile, the buyer will be informed that the purchase is being approved by someone else.
Lack of visibility
Finally, framework agreements – which allow buyers to order from multiple suppliers without having to go through the full tender process – can be extremely complex, especially when it comes to pricing. Take the Crown Commercial Service as an example. While it will have a list of approved suppliers broken down into different lots, it doesn’t have framework pricing in place. This can result in added layers of confusion, especially if buyers end up not having access to the right information and so don’t know what they’re eligible for. A pre-approved platform or marketplace removes this hurdle and allows buyers to order anything they need instantly, without fuss.
Procurement professionals will always need to stay on top of new and emerging technologies, and there are certainly many coming their way. Tailored purchasing platforms are becoming an increasingly popular solution. Not only do they provide safeguards at an incredibly granular level, they also positively impact people and processes to save organisations time and money.
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NTT DATA Services, Remodelling Supply Chains for Resilience
Joey Dean, the man with the coolest name ever and Managing Director in the healthcare consulting practice for NTT DATA and is focused on delivering workplace transformation and enabling the future workforce for healthcare providers. Dean also leads client innovation programs to enhance service delivery and business outcomes for clients.
The pandemic has shifted priorities and created opportunities to do things differently, and companies are now looking to build more resilient supply chains, none needed more urgently than those within the healthcare system. Dean shares with us how he feels they can get there.
A Multi-Vendor Sourcing Approach
“Healthcare systems cannot afford delays in the supply chain when there are lives at stake. Healthcare procurement teams are looking at multi-vendor sourcing strategies, stockpiling more inventory, and ways to use data and AI to have a predictive view into the future and drive greater efficiency.
“The priority should be to shore up procurement channels and re-evaluate inventory management norms, i.e. stockpiling for assurance. Health systems should take the opportunity to renegotiate with their current vendors and broaden the supplier channel. Through those efforts, work with suppliers that have greater geographic diversity and transparency around manufacturing data, process, and continuity plans,” says Dean.
But here ensues the never-ending battle of domestic vs global supply chains. As I see it, domestic sourcing limits the high-risk exposure related to offshore sourcing— Canada’s issue with importing the vaccine is a good example of that. So, of course, I had to ask, for lifesaving products, is building domestic capabilities an option that is being considered?
“Domestic supply chains are sparse or have a high dependence on overseas centres for parts and raw materials. There are measures being discussed from a legislative perspective to drive more domestic sourcing, and there will need to be a concerted effort by Western countries through a mix of investments and financial incentives,” Dean explains.
Wielding Big Tech for Better Outcomes
So, that’s a long way off. In the meantime, leveraging technology is another way to mitigate the risks that lie within global supply chains while decreasing costs and improving quality. Dean expands on the potential of blockchain and AI in the industry.
“Blockchain is particularly interesting in creating more transparency and visibility across all supply chain activities. Organisations can create a decentralised record of all transactions to track assets from production to delivery or use by end-user. This increased supply chain transparency provides more visibility to both buyers and suppliers to resolve disputes and build more trusting relationships. Another benefit is that the validation of data is more efficient to prioritise time on the delivery of goods and services to reduce cost and improve quality.
“Artificial Intelligence and Machine Learning (AI/ML) is another area where there’s incredible value in processing massive amounts of data to aggregate and normalise the data to produce proactive recommendations on actions to improve the speed and cost-efficiency of the supply chain.”
Evolving Procurement Models
From asking more of suppliers to beefing up stocks, Dean believes procurement models should be remodelled to favour resilience, mitigate risk and ensure the needs of the customer are kept in view.
“The bottom line is that healthcare systems are expecting more from their suppliers. While transactional approaches focused solely on price and transactions have been the norm, collaborative relationships, where the buyer and supplier establish mutual objectives and outcomes, drives a trusting and transparent relationship. Healthcare systems are also looking to multi-vendor strategies to mitigate risk, so it is imperative for suppliers to stand out and embrace evolving procurement models.
“Healthcare systems are looking at partners that can establish domestic centres for supplies to mitigate the risks of having ‘all of their eggs’ in overseas locations. Suppliers should look to perform a strategic evaluation review that includes a distribution network analysis and distribution footprint review to understand cost, service, flexibility, and risks. Included in that strategy should be a “voice of the customer” assessment to understand current pain points and needs of customers.”
“Healthcare supply chain leaders are re-evaluating the Just In Time (JIT) model with supplies delivered on a regular basis. The approach does not require an investment in infrastructure but leaves organisations open to risk of disruption. Having domestic centres and warehousing from suppliers gives healthcare systems the ability to have inventory on hand without having to invest in their own infrastructure. Also, in the spirit of transparency, having predictive views into inventory levels can help enable better decision making from both sides.”
But, again, I had to ask, what about the risks and associated costs that come with higher inventory levels, such as expired product if there isn’t fast enough turnover, tying up cash flow, warehousing and inventory management costs?
“In the current supply chain environment, it is advisable for buyers to carry an in-house inventory on a just-in-time basis, while suppliers take a just-in-case approach, preserving capacity for surges, retaining safety stock, and building rapid replenishment channels for restock. But the risk of expired product is very real. This could be curbed with better data intelligence and improved technology that could forecast surges and predictively automate future supply needs. In this way, ordering would be more data-driven and rationalised to align with anticipated surges. Further adoption of data and intelligence and will be crucial for modernised buying in the new normal.
These are tough tasks, so I asked Dean to speak to some of the challenges. Luckily, he’s a patient guy with a lot to say.
On managing stakeholders and ensuring alignment on priorities and objectives, Dean says, “In order for managing stakeholders to stay aligned on priorities, they’ll need more transparency and collaborative win-win business relationships in which both healthcare systems and medical device manufacturers are equally committed to each other’s success. On the healthcare side, they need to understand where parts and products are manufactured to perform more predictive data and analytics for forecasting and planning efforts. And the manufacturers should offer more data transparency which will result in better planning and forecasting to navigate the ebbs and flows and enable better decision-making by healthcare systems.
Due to the sensitive nature of the information being requested, the effort to increase visibility is typically met with a lot of reluctance and push back. Dean essentially puts the onus back on suppliers to get with the times. “Traditionally, the relationships between buyers and suppliers are transactional, based only on the transaction between the two parties: what is the supplier providing, at what cost, and for what length of time. The relationship begins and ends there. The tide is shifting, and buyers expect more from their suppliers, especially given what the pandemic exposed around the fragility of the supply chain. The suppliers that get ahead of this will not only reap the benefits of improved relationships, but they will be able to take action on insights derived from greater visibility to manage risks more effectively.”
He offers a final tip. “A first step in enabling a supply chain data exchange is to make sure partners and buyers are aware of the conditions throughout the supply chain based on real-time data to enable predictive views into delays and disruptions. With well understand data sets, both parties can respond more effectively and work together when disruptions occur.”
As for where supply chain is heading, Dean says, “Moving forward, we’ll continue to see a shift toward Robotic Process Automation (RPA), Artificial Intelligence (AI), and advanced analytics to optimise the supply chain. The pandemic, as it has done in many other industries, will accelerate the move to digital, with the benefits of improving efficiency, visibility, and error rate. AI can consume enormous amounts of data to drive real-time pattern detection and mitigate risk from global disruptive events.”