Smarter operations: procurement review leads to improved outcomes

This not-for-profit aged care provider found that an overhaul of its procurement processes delivered the efficiencies that will help it meet its mission.

Financial savings coupled with improved budgeting, and a better overall picture of the organisation’s expenditure are among the benefits a not-for-profit aged care provider has seen following a review and revamp of its procurement processes.

Doutta Galla Aged Services said that in order to achieve its mission, it had to ensure all facets of the business were running efficiently, and a review of its procurement found that processes had evolved over time and were inconsistent across its eight residential facilities.

The review revealed fragmented buying habits, various facilities “reinventing the wheel and duplicating each other’s work” and too much time being spent obtaining quotes from various suppliers, according to CEO Vanda Iaconese.

The provider had inconsistent pricing for facilities using the same supplier, poor ordering habits with overstocking or understocking, and too many people involved in purchasing with no central management systems and controls, the review found.

“The review highlighted opportunities for improvements in containing costs and ensuring quality of supply, in regulatory compliance, purchasing transparency and governance, coordinated purchasing and improved prices from suppliers,” Ms Iaconese said.

It found that 72 per cent of the provider’s expenditure on goods and services was with 28 suppliers, while the remainder was with some 400 suppliers.

Based on the review, Doutta Galla developed and implemented a broad-ranging and strategic strategy to overhaul its procurement processes.

Coordinated approached needed

Speaking to Australian Ageing Agenda ahead of her presentation at the upcoming Aged Care Procurement Conference in September, where she will discuss the provider’s experience in overhauling its processes, Ms Iaconese said the initial review highlighted that a coordinated approach was required.

“This involved a review of all key contracts, and the development of priorities for action. A key part of the transformation was to get staff buy in. Staff differentially had been complaining about a range of issues relating to contracts and suppliers. Staff saw this process as real opportunity to review contracts and suppliers and to improve those issues that they had been raising,” she said.

The process of overhauling the procurement processes also involved getting buy-in from facilities regarding centralising the procurement function. The provider went about sourcing and implementing a central electronic contracts management system to manage documentation, as well as an online quote/tender system, which all staff needed to use.

It renegotiated existing contracts with trusted suppliers, held discussions with suppliers about the various agreements they had with each facility, began to run competitive processes, and developed panels for specific services, said Ms Iaconese.

In terms of implementing the changes, Doutta Galla developed a business case for a dedicated resource to undertake a special project for a few months, and it established a procurement strategy to be implemented in a phased basis over a two-year period.

‘Streamlined systems’

Discussing the benefits that have been delivered by the overhaul, Ms Iaconese said Doutta Galla now had improved terms, better products, and streamlined ordering and delivery systems.

“We have a centralised electronic repository of contracts with automated workflows, prompts and reminders, and a contract management processes to deal with reviews, delivery or quality issues, price adjustments and any other matters that need to be addressed during the life of the contract,” she said.

The provider also now has electronic retention of knowledge and experience with suppliers to assist with future procurement needs, greater utilisation of bulk buying group contracts, and improved relationships with suppliers, she added.

Asked for her advice to other providers considering an overhaul of their procurement processes to deliver efficiencies, Ms Iaconese said to start with the “low hanging fruit and get a few quick wins on the board.”

“Be strategic in how you tackle the task. Be selective by analysing your spending habits and target big ticket items,” she advised. It was important to involve staff, as they know more about quality of products and what adds value to them, she added.

“Stay the course. Not everything you do will save you money, but it will improve the service and secure supply of mission critical goods and services to allow you to deliver better quality care to your residents.

“Remember that many of your suppliers want to be with you in the long term, they care about what they do and want to support you to be successful. They have their own data and industry knowledge and expertise to offer – they want a successful relationship with you too,” she said.

The Aged Care Procurement Conference takes place from 22-23 September in Sydney. Australian Ageing Agenda is the conference media partner.

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