Improving purchasing performance of the UMCG : Developing a checklist to identify opportunities for improvement to the health care purchasing process

The purpose of this research is to identify improvement opportunities to the purchasing process of the University Medical Center Groningen (UMCG) in order to increase the purchasing performance. Problem identification The Purchasing Department of the UMCG is responsible for acquiring products and services from external sources, generating an annual spend of € 150 million. However, insight into and control over the purchasing situation are currently lacking, especially for the laboratories. The need to improve the performance of the purchasing process is present, most improvement potential is expected at the strategic and tactical levels of purchasing. Therefore, the research goal is: Identifying points for improvement focusing on the strategic and tactical levels of purchasing, for the Purchasing Department of the UMCG, to increase purchasing performance. Method First, currently used purchasing performance measurement methods and results are brought into view. Second, a literature review to idenfity possible improvement opportunities to the purchasing process in health care is performed. Third, interviews with staff members at the UMCG are conducted to determine the applicability of the points from literature, specifically for the laboratories, and to identify additional points. Fourth, a comparison with other UMCs is drawn to learn how other hospitals score on the identified points for improvement, with a focus on the laboratories. And to determine how these UMCs have tried to improve their purchasing performance. Main findings First, concerning purchasing performance, room for improvement is identified regarding both current performance measurement methods and results. A spend analysis shows that several large and many tail suppliers (90%) are present for the laboratories. While the focus on the large suppliers has to increase, the number of small suppliers could be reduced to generate savings. Especially in the product category Chemicals, with a large volume, savings could be realized by decreasing the scattered spend among small suppliers. The annual vendor rating is not reliable due to errors in the objective criteria. The results of the rating are not acted upon by the purchaser due to the unreliability of the results and the large number of suppliers rated. The customer satisfaction survey is oriented at the operational purchasing process and actions upon the results are limited. For most of the operational performance indicators measured, the norm is not met nor are activities to meet these norms in place. Second and third, based on the literature review, 38 improvement opportunities to the health care purchasing process are identified (see Table 8 at page 22-23). These points are divided into 11 categories, ranging from a more strategic, overarching level to practical issues concerning control and evaluation. With the interviews at the UMCG, the applicability of most of these points to the purchasing process at the UMCG is confirmed. The most relevant points, according to the interviewees, can be divided into three groups: - A strategy and policy, accompanied with clear guidance A documented purchasing strategy and policy should be in place, to provide clarity to the staff members concerning the developments at the Purchasing Department. The interviewees perceive a lack of guidance from the management; the purchasing manager should focus on mentoring staff and strategic leadership. - Creating an overview of and insight into the current purchasing process Currently, the purchasing situation is not comprehensible, leading to a lack of control. The roles and responsibilities of staff members need to be reviewed, including the numerous operational activities performed by purchasers. In addition, contract management has to be performed to create insight into supplies, suppliers and current contracts. Plus, early involvement of the department has to increase and purchasing planning has to improve to gain control of the purchasing situation. Lastly, the interviews confirm vii that performance measurement methods and results have to be improved, and a regular spend analysis implemented, to reduce tail suppliers and generate savings. - Increased differentiation in purchasing Active differentiation in the purchasing process per product category is needed to use the scarce resources best. Using a purchasing portfolio the purchasing strategy, relations with suppliers and type of negotiation should be adapted per product category. In addition, the purchasing process should be formalized for products of low cost and low complexity. The points focusing on defining the outlines of the purchasing process, such as dividing responsibilities among the staff, having a clear strategy in place and performing contract management, are considered highly relevant. The results of the interviews indicate that currently this framework, the prerequisites for the purchasing process, is insufficient. This is confirmed by the additional points brought up by the interviewees, these additional points focus on the organization of purchasing at the department. These points are not only valid for the purchasing area of laboratories, but for all areas of purchasing. Fourth, the interviews at the Amsterdam Medical Center, University Medical Center Utrecht, and Radboud University Medical Center led to the formulation of eight additions to already formulated points and nine new points. A total of 55 points for improvement is now present, see Table 1 at page iv. The results of the interviews indicate strong similarities in the improvement opportunities relevant to the UMCs. The UMCs are all in a greater or less degree struggling with similar difficulties.