Collaborati on across the Supply Chain through ERPS 24 September 2007

1. Collaboration across the Supply Chain through ERPS 24 September 2007

2. Overview ofBusiness Support Services

3. Hospital Authority Structure and Organization 3 RegionalAdvisoryCommittees ExecutiveManagement 38 HospitalGoverning Committees 40 Hospitals47 Specialist Outpatient Clinics74 General Outpatient Clinics HospitalAuthorityBoard AuditCommittee FinanceCommittee HumanResourcesCommittee MedicalServicesDevelopmentCommittee PublicComplaintsCommittee MainTenderBoard SupportingServicesDevelopmentCommittee PlanningCommittee Staff Committee StaffAppealsCommittee

4. Executive Management Structure and Organization

5. Business Support Services Department (BSSD) • BSSD is a corporate multi-skilled team under the Cluster Services Division of the Hospital Authority. • BSS encompass a wide range of non-clinical support activities and operational systems development for the provision of : • hospital support services (e.g. food service, linen & laundry, transportation, domestic service, security.) • procurement and materials management services • biomedical engineering services and medical equipment maintenance • medical equipment planning and management

6. Organization of BSSD Biomedical Engineering Service & Medical Equipment Maintenance Support Services Management at Clusters Medical Equipment Planning & Management Procurement & Materials Management Support Services Development BSS Systems Development

8. Ms. May Yip Chief Supplies Officer (PTA) Mr. Stephen Siu Senior Nursing Officer (PTB) Ms. Cindy Chu Senior Supplies Officer (PTC) Mr. Dennis Chan Manager (PTD) Mr. Stephen Lee Chief Supplies Officer (PTE)

9. Roadmap of HA Procurement and Materials Management Objectives Vision • To explore and implement improvements to procurement services by raising the skills and competency of staff, pursuing service excellence and industry best practices, and achieving best value for money. To establish VFMand seamless supplychain operation withmaximal riskmanagement 2. To provide the best value-added products and services to end-users and patients through the supply chains in healthcare. Our Strategies – Five Elements of Success HospitalsRelationshipsManagement Partnership withStakeholders BusinessTransformation Staff Trainingand Education ChangeManagement Sharing of information with vendors Enhancingcommunication Market Researchand ProductStandardization Establishing partnership with vendors Our Target / Key Results Areas Procurementsaving in price; saving in operational cost; user interface & satisfaction; reduction in lead time Warehousinglower inventory; lower operational cost; near-zero wastage; just-in-time delivery; high product safety

10. HA Head Office - Product - Product Policies and Policies and Procurement Standardization Standardization Guidelines Guidelines Planning Systems - Bulk Contracting Systems - Bulk Contracting Risk Risk Formulation Formulation Management Management Development - Tendering Support Development Product - Tendering Support And Setting And Setting Standardization - Suppliers - Suppliers Standard Standard Partnership Partnership Performance Monitoring and Review Inventory Inventory Tendering/ Vendor Tendering/ Vendor Risk and Control/ Order Cycle Control/ Order Cycle Information Purchasing Performance Purchasing Performance Logistics Planning Logistics Planning Management Support Monitoring Support Monitoring Support Support Clusters/Hospitals Delineation of Roles and Responsibilities HA Head Office Clusters / Hospitals

12. Performance Review on Procurement & Supply Chain Management in HA against a Maturity Model (2001 - 2007) (Total Solution) (PPP) (With ERP) (With ERP)

13. Performance Review on Procurement & Supply Chain Management in HA against a Maturity Model (2001 - 2007) (With ERP) (With ERP)

14. Procurement & Materials Management Critical Milestones : Take-over of procurement from Government Logistics Department • Non-drug (July 2003) • Drug (April 2006) • Centralized procurement • Strategic outsourcing • Total solution contract on general consumables • PPP Project on food service • Bulk contracts on medical equipment maintenance, domestic services, security, landscaping, pest control etc. Areas of Continuous Enhancement : • Inventory management (since 1998) • Vendor Managed Inventory/Consignment Stock (since 2002) • Internal/external partnership (since 2002) • ISO9001(QMS) accreditation (since Nov 2003) • Professional services – legal, auditing, advertising, telecommunications (since 2006) • Green procurement (2007)

15. CostManagement Supply Chain Component Collaboration Standardization • Significant savings • achieved through “Bulk • Purchase” - $163M $113M (non-drugs) p.a. • $50M (drugs) p.a. • PPP for Food Service • Total Solution Contract • for general items • Outsourced equipment maintenance services • Bulk contract coverage ( for non-drugs ) increased from 26% to 44% from Year 2002 to Year 2006 • > 90% for drugs Sourcing P ROCURE P A Y • 1,304 Bulk Contracts • - 925 for drugs - 379 for non-drugs • Clinical Interface • Drug Selection Committee • Specification of Equipment & Consumables Procurement MaterialsManagement • Stock turnover rate increased from 3 to 6 • SKU reduction by 5% • VMI and Consignment stock for critical items • Common supplies items • 100% standardized • Cluster Warehousing • Auto-refill at Point of Care • Central monitoring of Personal Protection Equipment (PPE) • Electronic transmission for • all internal supply chain processes Logistics • E-Invoice • E-Payment • Centralized Payment Payment Strategic Milestones in Procure to Pay Process

16. Non-drug Stock Management and Supply Chain Initiatives

17. Implementation Progress ofEnterprise Resource Planning System (ERPS)

18. ERPS Implementation PlanPhase I/II – 1st April, 2008 Asset Management Patient Billing Clinical (Phase I/II – Non-drug items only)

19. Procure-to-Pay Process Procure to Pay Create & Maintain Purchase Requisitions & Orders Develop & Implement Procurement Strategy Maintain & Evaluate Suppliers Identify Need Develop Specs & Solicit Bids/ Proposal Manage Contracts Order Goods & Services Receive, Inspect & Accept Goods & Services Manage Disposition of Inbound Goods Manage Accounts Payable Enable Payments

20. Adoption of ERPS Better Practices Through Business Process Re-engineering Sub-Process Area Best Practice • Standardized nomenclature and classification to facilitate procurement planning, inventory control and data analysis. Product Codificationand Classification Regulatory Compliance • Adoption of UMDN / GMDN for medical devices in compliance with the MDACS program. Sourcing Strategies • Rationalization in overall numbers of suppliers and concentrated spending to leverage purchasing power. • Maintenance of central database of spend information. Procurement FunctionManagement • Single integrated procurement system to enable quick and easy sharing of data and definitions across HA

21. Adoption of ERPS Better Practices Through Business Process Re-engineering Sub-Process Area Best Practice Requisition &Purchase OrderProcessing • Routing and approval verification automatedthrough workflow. • Embedded bar code information used to record receipts in purchase orders. On-line GoodsReceipt • Three-way / Four-way matching with automateddelegation to speed up payment. Payment Vendor Master • Centralized vendor master file maintenance across HA. • Contracts for high value and strategic purchases centrally negotiated and monitored. Supplier Selectionand Negotiation

22. Market Interface & Supplier Engagement Moving Towards E- Commerce Use of Technology • Electronic exchange and transaction of supply chain data which include purchase orders, delivery notes, invoices and inventory information using standard protocols, i.e. EDI, XML, Fax, email, etc. • Use of comprehensive universal data standards such as UNSPSC, and E-Healthcare data standards such as EAN and HIBC. Collaboration with Suppliers • Extension of business / supply chain models to enhance information sharing e.g. Vendor Managed Inventory (VMI )

23. Product Codification & Classification • Item Classification – United Nation Standard Product and Services Code (UNSPSC) • Item Description Nomenclature • Drugs : International Non-proprietary Name (INN) • Medical Device : • Primary - Universal Medical Device Nomenclature (UMDN) • Secondary - Global Medical Device Nomenclature (GMDN) • Non-Medical Device : AUSLANG • Product Identification Standard – EAN / HIBC

24. Vendor Master Maintenance • Central vendor creation and maintenance by Procurement and Materials Management Section in Head Office with effective 1 September, 2007 • Designated multiple currency bank account to receive remittance from HA • Vendors to provide update information, if any before October, 2007

25. e-Transmission of Purchase Order • E-mail • Fax • EDI/XML

26. ERPS Rollout Plan • 1st Rollout (1st April, 2008) • Kowloon East Cluster • Hong Kong East Cluster • Hospital Authority Head Office • 2nd Rollout (1st July, 2008) • 3rd Rollout (1st October, 2008)

27. Payment Documentation Requirement effective 1st April, 2008 • Suppliers to send invoices direct to Head Office/Cluster Finance Offices • PO number must be specified • Name of the staff, name of his/her department, and hospital (for direct invoices without PO) be provided • Payment will be settled in the specified currency in the PO (local and foreign currencies) • For purchase with Trade-in, suppliers to split invoice lines into • Gross amount for the new purchase equipment • Trade-in amount for the old equipment

28. Medical Device Administrative Control (MDACS) • Regulatory compliance with the MDACS requirement on purchase of medical device • Requirement to register with Department of Health under consideration in HA

29. Q & A