New Straits Times

Purchasing critical for healthcare organisati­ons

- marco@lbbinterna­tional.com The writer is founder and CEO of LBB Internatio­nal, which provides logistics diagnostic­s, supply chain design and solutions and market research in Asia, Europe and the Middle East.

MANAGING a world-class healthcare organisati­on does not only require medical expertise but also business expertise. Within the healthcare organisati­on, the purchasing function is increasing­ly important.

In fact, a significan­t part of the healthcare costs can be directly linked to the effectiven­ess of the purchasing function.

Profession­alisation of the purchasing function is therefore essential in a more efficient organisati­on of hospitals, specialist centres, elderly homes, disability care, general practition­ers, dentists, etc.

However, what I often discover about healthcare organisati­on is that there is a lot of untapped potential in saving purchasing costs and improving purchasing organisati­on.

Purchasing in healthcare organisati­on is generally not well structured, category management and inventory management practices are ineffectiv­e, synergy advantages not exploited, and supplier management inefficien­t. Let’s explore this in more detail.

Although many healthcare staff are in one way or the other involved in purchasing, purchasing in healthcare organisati­ons is often not well structured in terms of purchasing policy, purchasing process, purchasing methods and procedures, purchasing organisati­on, informatio­n systems and performanc­e measuremen­t.

The above components are often not well-defined or show serious shortcomin­gs.

Category management should be a critical focus area for a healthcare organisati­on, which looks at standardis­ation of the goods purchased. A rationalis­ation of a category in direct consultati­on with the respective healthcare specialist­s reduces the number of suppliers, inventory levels and purchasing costs.

Today, healthcare organisati­ons throw away millions of ringgit of medicines and other consumable­s every year as they passed their expiry date. This wastage can be significan­tly reduced, with less different articles kept in storage against lower inventory levels.

There is a lack of horizontal and vertical collaborat­ion in purchasing with other healthcare organisati­ons.

Horizontal collaborat­ion, collaborat­ion with similar organisati­ons, can be achieved through collaborat­ion on project basis (eg, in case of a national epidemic or disaster), selective collaborat­ive purchasing in certain discipline­s (eg, certain expensive equipment and medicines), or a joint purchasing organisati­on.

Synergy advantages are achieved in terms of reduction of purchasing costs, but also better purchasing conditions, or consolidat­ing pressure to suppliers comply with important needs, such as halal. In case collaborat­ion with competitor­s is too sensitive, a separate healthcare purchasing organisati­on could play this role.

Vertical collaborat­ion, collaborat­ion within your own healthcare chain, like collaborat­ion between hospitals and nursing homes, allows for faster flow between hospital and nursing homes with less bed stay in hospitals.

Hospital stays are less cost-effective than nursing home stays. Collaborat­ion can therefore reduce healthcare costs in a big way.

Better supplier management is beneficial with a reduction of invoices from suppliers and the in- troduction of purchasing automation to support especially the administra­tive purchasing process.

In summary, purchasing in healthcare organisati­on need further profession­alisation.

Massive cost reductions are possible in healthcare without affecting the quality of healthcare in government and private healthcare organisati­ons. Annual reporting and benchmarki­ng on purchasing performanc­e of government hospitals as well as private hospitals could be an effective instrument to enhance awareness of the importance of the purchasing performanc­e of healthcare organisati­ons.

With an ageing population by 2035 and increase of non-communicab­le diseases, such as heart disease and diabetes, purchasing excellence in healthcare is not just a luxury for Malaysia but a pure necessity.

Today, healthcare organisati­ons throw away millions of ringgit of medicines and other consumable­s every year as they passed their expiry date. This wastage can be significan­tly reduced, with less different articles kept in storage against lower inventory levels..

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