Key questions to answer for improving procurement
Some might say procurement in the NHS is a “Cinderella” function: perceived as failing to fulfil its potential and frequently forgotten in the deepest darkest recesses of hospitals.
The review of NHS procurement by the Parliamentary Account Committee finally brought into sharp focus the significant opportunity that exists for procurement to contribute to the financial challenge the NHS faces. However, in what is a highly devolved organisation, with limited central control, questions must be asked about what the NHS can learn from what others do.
KPMG’s survey of procurement functions the Power of Procurement illustrates what “good” looks like and highlights the attributes of a high performing organisation. It provides a range of practical indicators that could help NHS procurement teams make strides to fulfilling their obvious potential.
Here Rob Carter sets out key questions you should be asking yourself about the maturity of your procurement function.
Steps to better procurement
Based on our research, it is clear that there is ample opportunity for most procurement functions including those in the NHS to drive additional value into their organisations. But this means changing the status quo and actively working to enhance the value, capabilities and reputation. So what can be done?
We’ve highlighted questions you should be asking yourself about the maturity of your procurement function. If you can’t answer these then you know there is real room for improvement:
- Is the procurement function organised to deliver optimal value to the organisation by focusing on outcomes rather than cost? Does it challenge needs vs. wants?
- Are key organisational stakeholders fully engaged in the development of procurement’s strategy, and does this reflect the wider organisational strategy?
- Is all spend managed through category management and strategic sourcing processes, with a competitive sourcing process mandated?
- Does procurement actively lead SRM and supplier performance including the identification of strategic suppliers, the setting of metrics and the measurement and follow-up of non-performance?
- Does the procurement function influence in excess of 80 per cent of spend?
- Does the procurement function lead or get actively involved in demand management initiatives in your organisation?
- Is risk management an integrated part of procurement’s day-to-day operations, and contract management process? Are contract audits performed on a regular and rigorous basis?
- Are procurement processes automated? Is there a fully integrated e-procurement solution?
- Is there a consistent benefits tracking framework? Are benefits captured, realised and reported to relevant stakeholders?
- Is procurement policy used as a mechanism for driving behavioural change throughout the organisation, with non-compliance being exceptional?
We’ve highlighted six simple things that every trust should be doing now as a matter of course. Ask yourself where you are against these points:
Ensuring that the organisation understands and buys in to the fact that driving efficiencies is not just the responsibility of procurement function. Internal stakeholders have significant role to play in driving efficiencies
Establish clear performance measures and report them to the board. Measuring performance is a simple way to ensure the input of procurement is recognised. Reporting this to board is a way of ensuring that it is on the agenda of the senior management
Ensuring the procurement strategy is aligned to the direction of the organisation. Too often procurement strategies are loose and non-value adding. What do the board want procurement to do?
Procurement must become the partner of the organisation. In the NHS most direct clinical spend is driven by clinicians. However very few formal “category teams” exist where the commercial and performance attributes of products are discussed. Too often suppliers are able to play on internal politics so procurement must get on side with its own organisation to buy in order to make efficiencies.
Challenge needs vs. wants. Too often products are over specified by an organisation and significant value is lost by unwillingness to change. Organisations must be willing to make tough calls on what is really needed.
Eliminate time consuming transactional activities. We continue to see valuable time wasted on non value adding transactional activities when simple and proven technologies already exist. Procurement must work with finance to improve the P2P process so it can become more strategic.