The role of professional procurement

1. The role of professional procurement PSMG 15th July 2008 Beth Rogers Author “Rethinking sales management”

2. Objectives • To discuss trends in procurement in UK healthcare • To gain an understanding of the purchasing profession • To explore the impact of procurement changes on selling

3. Provider Physician Payer Product councils Illert and Emmerich, 2008 Patient

4. Power play • Common interest: • Improving the patient’s quality of life • Conflict: • How much should it cost?

5. Procurement professionals are seen as “key business advisors” in the NHS Virtually all procurement specialists in the NHS are vocationally and/or academically qualified Use of purchasing agencies Emergence of specialist procurement per product type Increasing centralisation of purchasing activity New contracts – focus on outcomes rather than activities Use of e-procurement Professional practice managers in PCTs Trends in healthcare procurement

6. Station break • What trends are you encountering: • Secondary care? • Primary care?

7. Purchasing professionalism

8. “Professionalism in purchasing, with its ongoing external trading relationships, is key to supporting and/or enhancing the brand; sometimes this can be the only differentiating factor between companies.” CIPS – Chartered Institute of Purchasing and Supply (in healthcare, can we substitute “reputation” for brand?) The role of purchasing

9. Purchasing and supply chain strategy Strategic sourcing analysis Managing risk Proactive demand management Pre-contract Identification of need, seek suppliers, evaluate suppliers, negotiate contract Post-contract Relationship management Purchasing manager role www.cips.org

10. Distinction between supplier management and contract management

11. External Government policy Patient or pressure group perceptions Media reaction Internal Organisational culture Professional Technical effectiveness Financial viability Quality of support/delivery/service Business relationship Personal How does this purchase affect my career? Influencing factors Risk cannot be eliminated. Attempts to do so just move the risk. Known risks are easier to manage.

12. Station break • How can pharmaceutical companies help procurement professionals to manage risk?

13. Strategic decision-making Leverage Strategic Importance of purchase (profit impact) Non-critical Bottleneck Kraljic 1984 Complexity/risk in supply market

14. 3 types of decision: straight rebuy routinised, response behaviour modified rebuy limited problem solving new task extended problem solving A new task, and sometimes a modified rebuy, requires wider participation in the buying process Perhaps including external expertise (Robinson,1987) Buying situations/Buyclasses

15. A strategic response • Dow Corning (chemicals/silicones) • Spun off e-business subsidiary Xiameter in 2002 • Bulk orders of commodity products online • Process efficient, cost efficient • No human intervention! • Account managers focused on strategic business

16. Station break • Which of your brands fit in which box? • How might that affect the way you sell them?

17. And who else is involved?

18. 7 roles within “decision-making units: initiators users influencers deciders buyers Gatekeepers Control access Standards approval Organisational buying roles Who might play what role?

19. Usually highly qualified and able to apply best practice standards High probability that they have been engaged to reduce price Risk shifting may be an issue Claim to reduce risks for clients May create other risks Purchasing consultants

20. NHS • Consultants PWC advocate balance of power between: • Dept of Health • Primary Care Trusts • Procurement • Patient • …..and provider

21. Station Break • Which stakeholders should get what, in terms of sales resource?

22. Centralisation

23. The local/central dilemma Current trend towards centralisation? E.g. polyclinics

24. Findings in USA • Group purchasing voluntary • Hospitals join groups to achieve best price • But there are still concerns about who gets what • Success dependent on: • Commitment to excellence in purchasing practice • Recognising the importance of relationships with clinical suppliers • Integrating business and clinical interests • Highest skills levels in process • Staff committed to optimises resources to achieve organisational goals Schneller, 2000

25. New types of contract

26. Big picture • Core national framework contracts • Some local tailoring • Some element of payment by results • Janssen Cilag and cancer drug

27. Supplier performancemanagement Relationship, reputation Service and support Price Quality Delivery EODB

28. NHS • Price (always) • Quality / delivery • Payment terms linked to outcomes • Patient choice (but not universally applied) • Service/ support • Importance of consistency • Feedback system / measurement • Relationships? • Reducing number of suppliers used • Encouragement of UK SMEs? • Role for Innovation? • Centre for Evidence-based Purchasing • New (less hassle) models?

29. Strategic or tactical? Innovation or operations? Relationship development Relationship maintenance Buying outsourcinge.g. disease management

30. Station Break • In the “strategic” box, what could we do for buying organisations to “reduce hassle”?

31. E-procurement

32. Drivers • Price reduction • Process cost reduction • IT capabilities • Need for speedy communications • Control over processes • Need for speedy supply chain

33. Rely on four pre-conditions Commodity specifications, e.g. ISO standards Large quantities Sufficient number of suppliers in the market Correct conditions in buying organisation: skills, processes Reverse auctions Smeltzer and Carr 2003

34. Growing concerns about reverse auctions • Supplier exploitation • Poor specifications • Erosion of trust • Media interest • “Locum doctors for sales in e-auctions” • Only suitable for tactical purchases?

35. Station Break • E-procurement: under what conditions should we play the purchasers’ game?

36. The purchasing profession plays an increasingly significant role in supplier selection They own sourcing strategy and the sourcing process They determine to a large degree how successful our sales effort can be Key learning

37. Things to think about • Allocating scarce resource • Highly skilled account managers and expert teams to strategic opportunities • Cheapest process for commodity brands • “Boundary spanning” • Designing solutions from the customer point of view • Creativity • Future scenarios for healthcare buying

38. Thank you! • Contact details: • Beth Rogers • Programme Manager – Sales Management • Portsmouth Business School • Beth.rogers@port.ac.uk