purchasing and supplies strategy 2008 - Hampshire Hospitals NHS ...

PURCHASING AND SUPPLIES STRATEGY
2008 – 2010
Owner Name Tammie Purdue
Job Title
Final approval
committee
Name
Head of Purchasing &
Supplies
Date of meeting
Authoriser Name Mary Edwards
Job title
Chief Executive
Signature
Date of authorisation
Review date (maximum 3 years from July 2009
date of authorisation)
Audience (tick all that apply) Trust staff
NHS
SUMMARY
The purpose of the Purchasing and Supplies Strategy is to create and embed a
vision and aim for the direction of purchasing at Basingstoke and North
Hampshire NHS Foundation Trust.
The Basingstoke and North Hampshire NHS Foundation Trust has developed
this Purchasing and Supplies Strategy in line with the relevant legislation and
guidelines. Its implementation will ensure a consistent, automated and
successful approach to all purchasing carried out by the Trust.
This strategy applies to all individuals in the employ of Basingstoke and North
Hampshire NHS Foundation Trust.
v3.1 1

Table of Contents
Page
1. EXECUTIVE SUMMARY 3
2. INTRODUCTION 4
3. BACKGROUND 4
4. CURRENT SITUATION 4
5. PROCUREMENT STRATEGY 5
6. STRATEGIC AIMS 5
6.1. Business Case Development 5
6.2. Supplier Selection 6
6.3. Qualification and Tendering 6
6.4. Contract Awards 6
6.5. Contract Management 7
6.6. Supplier Performance/Management 7
6.7. Supplier/Product Rationalisation 7
6.8. Product Standardisation 8
6.9. Collaborative Purchasing and Contracting 8
6.10. Materials Management 8
6.11. Stock Management 8
6.12. Receipt & Distribution – Internal Logistics 9
6.13. Purchase to Pay Systems 9
6.14. Value for Money 10
6.15. Compliance 10
7. EQUALITY AND DIVERSITY 10
8. SUSTAINABLE DEVELOPMENT 11
8.1. Environmental Issues 11
9. RESPONSIBILITY 11
9.1 Trust Board Level 11
9.2 Divisional Level 11
9.3 Purchasing and Supplies Department 11
10. COMMUNICATION 12
11. IMPLEMENTATION 12
APPENDIX ONE – ACTION PLAN 14
v3.1 2

1. Executive Summary
The purpose of this strategy is to positively influence purchasing and supply across
Basingstoke and North Hampshire NHS Foundation Trust (BNHFT) and to support
departments and wards in delivering high quality healthcare to patients using best value
and best practice.
This strategy has been developed to address the total supply chain for the Trust and
provides a strategic vision including the following key components:
• Best value and best practice
• To deliver savings recurring as a contributent to annual business
planning
• To automate purchasing and supply processes ensuring efficiency
• To satisfy compliance to legal and regulatory requirements
• To optimise stock levels by efficient management and control
• To promote and drive supplier and product rationalisation
The full benefits from this strategy will come from the commitment and priority given by the
Board and through positive support and contribution from wards and departments. The
outcomes are summarised as follows:
• An integrated team concept which provides flexible resourses more efficiently.
• Improved commercial performance, best procurement practice and minimal
process costs to deliver best value.
• Automated systems enabling the supplies department to develop its business
and trading relationships with improved management information facilitating
optimum procurement strategies
• Adaptable to changing needs in a dynamic business and healthcare environment
through effective management and control. Common solutions to shared
problems will emerge as a result.
• Planned and organised approach to all trust purchasing and supplies
requirements
“The Supplies Team aims to become a centre of excellence for all purchasing through the
promotion and implementation of proactive best value procurement in support of innovative
high quality services to all our customers, and to lead on this through the professional skills
and competence of all staff involved.”
v3.1 3

2. Introduction
The Trust recognises that the proper management of purchasing and supplies is essential
to the efficiency and effectiveness of clinical and support services. This document outlines
a strategy for procurement and supply management, which is in line with the Trust’s
strategic direction and business plan objectives.
This document outlines a 3-year strategy and follows on from the previous strategy dated
March 2003.
3. Background
This strategy incorporates a whole spectrum of activities, which can be described as part of
the total supply chain of the Trust. This strategy will identify these activities but will also set
out the objectives of, and responsibility for, each of them within the Trust. This strategy
also acknowledges that this activity will be rooted in the Trust’s strategic direction and
business planning objectives and be seen as a vital contribution to its success.
This strategy also acknowledges that the Trust is part of a very complex set of networks of
manufacturers, suppliers and a range of other stakeholders, including the wider NHS, and
therefore sets out the Trust’s expectations including identification of strategic and
collaborative options.
4. Current Situation
Over the past few years the Trust has recognised that purchasing and supply functions are
key in ensuring value for money for the purchasing of goods and services. Historically the
procurement function of the Trust had been organised primarily at a clerical level via the
Supplies department.
Since the introduction of the Procurement Strategy in 2003 a number of changes have
taken place, which has led to this service modernising and becoming more strategic:
• In 2005 the supplies department installed an integrated purchasing system allowing
electronic ordering and connecting directly to the Trust Finance system.
• In 2006 a contracts database and contracting team were implemented
• Since 2006 annual contracting and savings plans have been developed
• In 2007 the department was integrated into the Finance structure
• In 2007 the department restructured to ensure the new structure supported the move to
Foundation Trust and engaged the shift from clerical level to strategic level working
v3.1 4

This strategy leads on from these developments and builds on the previous procurement
strategy and is intended to cover the supply of all goods and services required by the Trust
to enable high quality health care services.
5. Procurement Strategy
This strategy is intended to cover the procurement and supply of all goods and services
required by the trust. Procurement and Supply Management covers a spectrum of activity
including:
• Business Case development
• Supplier selection
• Qualification and tendering
• Contract awards
• Contract Management
• Supplier performance/management
• Supplier/product Rationalisation
• Product standardisation
• Collaborative Purchasing and Contracting
• Materials Management/Stock Management
• Receipt and distribution – internal logistics
• Purchase to pay systems
• Value for money
• Compliance
All of these are encapsulated within this strategy.
6. Strategic Aims
6.1 Business Case Development
As a Foundation, the trust is responsible for the management of its finances and has the
opportunity to re-invest any surplus achieved back into the organisation. However,
investments into large purchases need to be planned and funding allocated within sufficient
timescales.
Historically procurement processes have been omitted from business cases and therefore
the right purchasing choice has often been difficult and value for money not always
achieved. With the new European Union (EU) legislation surrounding tendering it is
becoming more difficult to waive these processes and therefore procurement needs to be
integral to all business cases involving purchasing.
Aim: to ensure business cases are provided for all major procurements to enable
full life cost analysis to be captured and ensure value for money
v3.1 5

6.2 Supplier Selection
Historically the selection of suppliers has often been based on previous procurements and
no supplier evaluation or market analysis has been carried out to ensure optimal capability
and best value. New EU legislation provides the following general principles:
• All procurements should be subject to competition
• All procurements should be conducted on a value for money basis
• All procurements should be fair, open and transparent
All procurements need to take account of previous procurements so as not to view the
purchase in isolation, especially when dealing with goods or services, which are similar or
have effects on the clinical environment for which the items or services are required.
Aim: to ensure all purchases above tender value are advertised in order to adhere
to the general principles of the new EU Legislation
6.3 Qualification and Tendering
Qualification is concerned with identifying those suppliers who are qualified to provide the
services required by the NHS. That could be supplying a service or a product. PASA (The
Purchasing and Supply Agency) set up a Supplier Information Database (SID) which is free
for all NHS Organisations and which holds vital information on suppliers used throughout
the NHS. This is therefore essentially a vetted, approved supplier list. This list of approved
suppliers is used as an aid to calling for competition, approving candidates and expediting
the selection of tenderers. However, the information held in this database is often out of
date or vital information is missing and therefore individual organisations are still required to
obtain information against each individual tendering exercise.
Since the development of the SID system many other electronic procurement system
providers have also developed similar databases.
Tendering is a very paper intensive process and under the new EU directives must be
transparent. A standard set of documentation is already used for all tenders and there are
now systems available to provide suppliers with the documentation electronically. These
systems usually include supplier accreditation services as well as electronic opening
procedures to ensure it meets Trusts Standing Financial Instructions (SFIs).
Aim: to seek and recruit an electronic tendering system to include alternative
supplier accreditation service for use with all future tendering exercises.
6.4 Contract Awards
Under new EU directives all contracts, following the issue of the successful and unsuccessful
letters, should have an 11-day standstill period allowing the unsuccessful
bidders to seek clarification or debriefing. Bidders can now bring litigation if these
processes are not followed or if the process has not been transparent. It is also mandatory
following the standstill period and within 48 days to issue a contract award notice via the
official journal. It is therefore very important to ensure all paperwork or electronic
documentation relating to the tender is held centrally.
v3.1 6

Aim: to hold a complete evidence base of all tendering paperwork either electronic
or paper
6.5 Contract Management
Historically contracts have been put in place with little or no on-going management behind
them. Contract management is a crucial reason for user dissatisfaction and for not
realising value for money. It is important to have continuity in the relationship and for
contract managers from both the Trust and the supplier to have been engaged early in the
procurement process.
With a dedicated contracts database and contracting team now in place contract
management has improved for the Trust but needs to be built in to the standard
procedures.
Aim: to monitor all contracts on a regular basis for the duration of the contract and
ensure contract management is written into standard procedures
6.6 Supplier Performance/Management
Historically suppliers have been able to continuous fail to provide the service we require,
usually by not delivering to the correct address, not delivering on time, not using the
appropriate order numbers etc. This increases the trusts administration time both for
supplies staff and clinical staff and therefore has a cost associated with it. In order to
reduce this cost a supplier performance procedure needs to be adopted within supplies to
monitor those suppliers who regularly fail to follow the procedures. This will increase the
control over suppliers and enable a more seamless process for receiving goods.
Aim: to implement a supplier performance system that records evidence of
suppliers performance and which can be reported on a regular basis
6.7 Supplier/Product Rationalisation
The Trust currently has in excess of 2500 suppliers. Best practice advises that supplier
reduction programmes are extremely powerful for delivering cost savings and improved
customer service. Consolidating business with key suppliers and utilising their ability to
source from non-key suppliers cuts administrative overheads and enables procurement
functions to focus on achieving significant added value for the business.
In all stages of the order cycle a wide range of operational and administrative savings will
result from an effective supplier reduction program. Purchase requisition generation,
expediting, delivery, stores management, internal delivery, payment and payment queries
are all areas where administrative cost reductions will be seen.
Aim: where appropriate to develop and implement a supplier reduction programme
v3.1 7

6.8 Product Standardisation
Product standardisation is the process by which clinical products are reviewed to evaluate
how they work and to consider their cost. It removes the fragmented and uncoordinated
approach to product choice that can occur in NHS settings. It moves product selection to
user led rather than supplier led, improves quality to patients, achieves costs savings and
encourages users to work together on choosing products rather than each department
working autonomously.
Aim: where appropriate to increase product standardisation throughout the trust
6.9 Collaborative Purchasing and Contracting
The NHS has long recognised the benefits of collaborative procurement, stretching back
over a number of decades. This followed successive reports on the subject, particularly
around national, regional and area contracting. Modernising NHS Supply saw the
development and establishment of NHS collaborative procurement organisations
coterminous with Strategic Health Authority (SHA) boundaries, known as supply
management confederations and more recently as hubs.
The Trust has chosen not to join the local hub known as ‘Pro-cure’ which represents the
Thames Valley and Hampshire & Isle of Wight area. A number of organisations such as
Basingstoke have opted out of using this route and these are:
• Reading (Royal Berkshire and Battle Foundation Trust)
• Solent Supplies Department (servicing Portsmouth and IOW)
Therefore Basingstoke, Reading and Solent have been working together on a few selected
contracts.
Aim: to continue to work collaboratively with other Trusts in similar situations to
ours
6.10 Materials Management
Materials Management is the process managed by supplies to ensure wards or
departments have the essential items ‘topped up’ on a weekly basis. The process is very
much governed by the supplier ‘NHS Supply Chain’ and therefore the team work to certain
procedures to ensure stock is managed effectively. The Materials Managers work closely
with clinical staff and more recently with housekeepers who play a vital part in this role.
This aids the team in knowing when stocks may fluctuate and results in less products being
over or under stocked.
Aim: to optimise stock levels by efficient management and control and by building
relationships with clinical staff at ward level
6.11 Stock Management
Stock Management is not all handled by the supplies department. Many departments are
responsible for managing their stationery stock and some areas are too small to use the
v3.1 8

materials management system. Fundamentally all areas across the trust should be looking
at more appropriate methods for ordering their stock and some of the solutions available
are advised by Supplies, for example., consolidating orders. Unfortunately this is not seen
as priority across departments and therefore areas either hold too much stock, too little
stock or order too frequently and this imposes unnecessary cost to the Trust.
Aim: implement training schemes or communications throughout the trust
demonstrating best practise stock management
6.12 Receipt and Distribution – Internal Logistics
The Receipt and Distribution team are responsible for the internal logistics for all goods
arriving through the main stores at BNHFT. Although the purchase order system allows
goods to be receipted electronically the internal delivery notes which are signed by the user
department are still paper based. A large amount of time is therefore spent handling paper.
It is also evident that the workflow through this area has increased somewhat, especially
with regards to 18 weeks and it is becoming increasingly difficult to manage every parcel
with the control it needs.
There are a number of bar-coded delivery systems which would improve the process for
delivering goods internally, by making goods more secure and by ensuring the signatures
are recorded and held electronically for future reference. This would remove administration
time and cost.
Aim: to invest in systems for controlling goods received into the hospital in order to
provide more security and reduce unnecessary cost
6.13 Purchase to Pay Systems
Currently the trust uses an e-procurement solution provided by Cedar. Although this
provides some of the purchase to pay process electronically there is still a substantial
amount, which is keyed in manually. A purchase to pay system is an e-commerce solution
that automates trade between buyers and suppliers from requisitioning through to invoicing.
It maximises trading connections, transaction volumes and savings.
In easier terms it allows suppliers to manage our specific products electronically and allows
requisitioners to ‘punch-out’ from our current Cedar solution, pick the products they need
and then pull them back into our purchase order. In other words ‘shopping on-line’. The
order is then electronically transmitted direct to that supplier and they can then
electronically transmit the invoice directly to our system.
A Purchase to Pay system will remove process costs and approximately 60% of manual
input for invoicing. The system allows the speed of order process through to delivery to be
improved substantially. It also helps to ensure a transparent service and provides better
management information with regards to the product usage and spend. The other benefit
is it will allow the trust to implement one system for all rather than other areas using their
own system for purchase orders i.e., catering, pharmacy.
Aim: to invest in a purchase to pay system and streamline the ordering systems
used within the Trust
v3.1 9

6.14 Value for Money
Value for money is important but is not just made up of price. It includes total acquisition
and supply cost. Value for money is achieved by using competition, aggregating demand,
establishing long term contracts, maximising discounts and reviewing usage and spend on
a regular basis. It also looks at the back end costs such as process or transaction costing.
Aim: to improve value for money by competition, aggregation, commitment,
improved planning and prompt payment
6.15 Compliance
Compliance with the rules and regulations surrounding purchasing is essential in ensuring
best value and best practise. In large organisations it is often too easy for individuals to bypass
the correct procedures and therefore undermine the work which has been
implemented to ensure value for money. This causes unnecessary costs to the Trust.
The Trust has standard financial procedures, which include Standing Orders (SO’s) and
Standing Financial Instructions (SFI’s). These documents detail the levels of spend and
the process that needs to be followed including the approval level and everyone within the
trust has a duty to comply with these instructions. However many staff throughout the trust
are not advised of these and unfortunately these documents are not specific enough to the
purchasing processes.
Aim: to develop and implement a purchasing policy to support (SO’s) and (SFI’s)
7. Equality and Diversity
Equality and Diversity matters for the NHS and new legislation requires the NHS to meet
certain duties to promote this in and through procurement. It is central to NHS
Organisations playing their role as a good corporate citizen.
The Trust needs to be ethical in how it procures and this includes our relationship with the
Suppliers. Any individual or group contracted to provide services on behalf of the trust
needs to demonstrate that they operate in accordance with the requirements of race
equality, disability equality and gender equality. It needs to be a condition of any tendering
process for suppliers to demonstrate equality and fairness and the award and continuation
of a contract needs to be contingent upon operating a policy conducive to meeting the
contractual commitment to co-operate with the trust in meeting its obligations within the
three equality duties.
This strategy supports this and has included our duties for equality and diversity within the
action plan.
v3.1 10

8. Sustainable Development
The NHS plays a key role in contributing to Sustainable Development through its significant
annual procurement expenditure. The NHS Purchasing and Supply Agency is responsible
for implementing the government’s agenda and has made recommendations in support of
this for individual trusts to pursue.
8.1 Environmental Issues
Under the Treaty of Amsterdam the EU is committed to the integration of its environmental
policies into all of its others, including procurement. NHS organisations are required to
address environmental issues within their procurement activity. There are a number of
ways the Trust can support this: -
• Engagement of small and medium sized enterprises (SMEs), black and
other minority enterprises (BMEs) – which includes disabled-owned
businesses, women-only businesses and social enterprises and voluntary
sector businesses.
• Working with suppliers to reduce waste through packaging
• Working with suppliers to reduce carbon emissions through the
aggregation of deliveries
This strategy intends to support these and plans to include these within its tendering and
contracting procedures.
9. Responsibility
9.1 Trust Board Level
The Director of Finance has board level executive responsibility for the procurement and
supplies function within the Trust and will be accountable for ensuring the implementation
of this strategy. In addition, the Director of Finance will provide periodic reports to the
Board on the progress made against this strategy.
9.2 Divisional Level
The Divisional Managers of each Division will be responsible for ensuring that their staff
engage effectively in all procurement and supplies processes in accordance with this
strategy. They will also engage staff to participate in the delivery of the objectives laid
down in this strategy and will continue to monitor the work of their staff in achieving this.
9.3 Purchasing and Supplies Department
The Head of Purchasing and Supplies will be responsible for this strategy and ensuring the
successful implementation of all the objectives. The Head of Purchasing and Supplies will
v3.1 11

develop close links with Divisional Managers and Divisional Finance and Performance
Managers to ensure the implementation and on-going progress is monitored appropriately.
10. Communication
Following approval by the Corporate and Supports Service Governance Board this strategy
will be communicated to the Divisional Governance Boards. It will then be passed to the
Corporate Governance Board for final approval before being communicated to the wider
organisation.
11. Implementation
The attached appendix outlines the objectives for the purchasing and supplies department
and details the individual actions, responsibility and timescale for completion.
v3.1 12

v3.1 13

No. Strategic Aim Actions Target
Timescale
6.1 Business Case Development • Work with Divisional Managers
/General Managers to ensure
business cases are provided for
major procurements
6.2 Supplier Selection • Ensure advertising of all
tenders
• Update procedures to include
6.3 Qualification and Tendering • Review current paper
procedures for tendering
• Examine electronic tender and
supplier accreditation systems
• Produce business case
6.4 Contract Awards • Ensure complete evidence
base of all tendering and
contracting paperwork
6.5 Contract Management • Ensure all contracts have
regular reviews built in
• Update procedures to include
contract management
• Record data on contracts and
hold evidence for future
6.6 Supplier Performance/Management • Develop and implement
supplier performance database
• Develop standard reports on
information held
6.7 Supplier Rationalisation • Develop and implement
supplier rationalisation
programme
v3.1 14
Responsibility
• Head of Purchasing
and Supplies
• Divisional Managers
• General Managers
• Procurement Lead
• Head of Purchasing
and Supplies
• Head of Purchasing
and Supplies
• Procurement Lead
• Procurement Lead
• Procurement Lead
• Procurement Lead

• Reduce suppliers by 5% per
year for next 3 years
6.8 Product Rationalisation • Increase rationalisation of
products across the trust
• Increase standardisation
• Produce list of standard
products for information
purposes
6.9 Collaborative Purchasing and
Contracting
• Continue to link with other
trusts for benchmarking
purposes
• Continue to work collaboratively
6.10 Materials Management • Optimise stock levels
• Develop closer relationships
with clinical staff/housekeepers
• Improve the management and
control of stock
6.11 Stock Management • Implement training programme
to increase users knowledge of
stock and stock control systems
used
6.12 Receipt & Distribution – Internal • Examine goods received
Logistics
electronic systems
• Produce business case
6.13 Purchase to Pay Systems • Examine purchase to pay
systems
• Produce business case
• Streamline ordering systems
6.14 Value for Money • Aggregate and plan demand
where possible
• Encourage competition
• Encourage commitment to
suppliers by longer term
v3.1 15
• Supply Chain Lead
• Procurement Lead
• Head of Purchasing
and Supplies
• Head of Purchasing
and Supplies
• Supply Chain Lead
• Supply Chain Lead
• Head of Purchasing
and Supplies
• Head of Purchasing
and Supplies
• Head of Purchasing
and Supplies
• Procurement Lead
• Supply Chain Lead

contracts
• Examine preferential payment
opportunities
• Provide cash releasing and cost
avoidance savings for
procurements of £500K per
year for next 3 years
6.15 Compliance • Improve compliance with
purchasing procedures
• Develop and implement
purchasing policy
• Develop and implement desk
guides
7.0 Equality and Diversity • Build into procurement policy
• Review diversity of supplier
base
• Include in tendering and
contracting procedures
• Include in contract
management process
8.1 Environmental Issues • Engagement of small and
medium sized enterprises
(SMEs), and other minority
enterprises (BMEs)
• Work with suppliers to reduce
waste through packaging
• Work with suppliers to reduce
carbon emissions through the
aggregation of deliveries
• Procurement Lead
• Divisional Managers
• General Managers
• Procurement Lead
and Head of
Purchasing and
Supplies
• Head of Purchasing
and Supplies
• Procurement Lead
• All Trust staff who
receive goods and
services
v3.1 16