1

Collaboration

across the Supply Chain through

ERPS

24 September 2007

2

Overview ofBusiness Support Services

3

Hospital Authority Structure and Organization

38 HospitalGoverning

Committees

HospitalAuthority

Board

40 Hospitals47 Specialist

Outpatient Clinics74 General

Outpatient Clinics

3 RegionalAdvisory

Committees

ExecutiveManagement

AuditCommittee

FinanceCommittee

HumanResourcesCommittee

MedicalServices

DevelopmentCommittee

PublicComplaintsCommittee

MainTenderBoard

SupportingServices

DevelopmentCommittee

PlanningCommittee

StaffCommittee

StaffAppeals

Committee

4

Mr Shane SolomonChief Executive

Cluster Services Division

Dr W L CheungDirector (Cluster Services)

Cluster Performance

Integrated Care Programs

Business Support

Services (BSS)

Allied Health Grade

Chief Pharm Office

Service Transformation

IHC

China OfficeMedical Grade Nursing Grade

Hospital Clusters

Other Divisions in HA Head Office

Executive Management Structure and Organization

5

Business Support Services Department (BSSD)

• BSSD is a corporate multi-skilled team under the Cluster Services Division of the Hospital Authority.

• BSS encompass a wide range of non-clinical support activities and operational systems development for the provision of :– hospital support services (e.g. food service, linen

& laundry, transportation, domestic service, security.)

– procurement and materials management services– biomedical engineering services and medical

equipment maintenance– medical equipment planning and management

6

Support Services

Management at Clusters

Procurement & Materials

Management

Biomedical Engineering Service &

Medical Equipment Maintenance

Medical Equipment Planning &

Management

Support Services Development

BSS Systems Development

Organization of BSSD

7

Mr. Raymond WongChief Manager

(Business Support Services)

ProcurementTeam A

Non-medical & Information Technology

Supplies

ProcurementTeam B

Nursing Care & Operation

Theatre Supplies

ProcurementTeam C

SupportServices & Laboratory Supplies

ProcurementTeam D

Medical Devices

& Supplies

ProcurementTeam E

PharmaceuticalSupplies

Development of Commodity Group Purchase

8

Mr. Raymond WongChief Manager

(Business Support Services)

ProcurementTeam A

Non-medical & Information Technology Supplies

ProcurementTeam B

Nursing Care & Operation Theatre Supplies

ProcurementTeam C

Support Services & Laboratory Supplies

ProcurementTeam D

Medical Devices& Supplies

ProcurementTeam E

PharmaceuticalSupplies

Procurement & Supplies Management Section

Ms. May Yip

Chief Supplies Officer (PTA)

Mr. Stephen Siu

Senior Nursing Officer (PTB)

Ms. Cindy Chu

Senior Supplies Officer (PTC)

Mr. Dennis Chan

Manager (PTD)

Mr. Stephen Lee

Chief Supplies Officer (PTE)

Roadmap of HA Procurement and Materials Management

VisionTo establish VFMand seamless supplychain operation withmaximal riskmanagement

Our Strategies – Five Elements of Success

HospitalsRelationshipsManagement

Partnershipwith

Stakeholders

BusinessTransformation

ChangeManagement

Staff Trainingand Education

Sharing of information with vendors

Establishing partnership with vendors

Enhancingcommunication

Market Researchand ProductStandardization

Warehousinglower inventory; lower operational cost; near-zero wastage; just-in-time delivery; high product safety

Procurementsaving in price; saving in operational cost; user interface & satisfaction; reduction in lead time

Our Target / Key Results Areas

Objectives1. To explore and implement improvements to

procurement services by raising the skills and competency of staff, pursuing service excellence and industry best practices, and achieving best value for money.

2. To provide the best value-added products and services to end-users and patients through the supply chains in healthcare.

10

Delineation of Roles and Responsibilities

Clusters/Hospitals

Systems

Development

Systems

Development Risk ManagementRisk Management

- Product Standardization

- Bulk Contracting

- Tendering Support

- Suppliers Partnership

- Product Standardization

- Bulk Contracting

- Tendering Support

- Suppliers Partnership

Policies and

Guidelines

Formulation

And Setting

Standard

Policies and

Guidelines

Formulation

And Setting

Standard

Vendor

Performance

Monitoring

Vendor

Performance

Monitoring

Inventory

Control/

Logistics

Support

Inventory

Control/

Logistics

Support

Tendering/

Purchasing

Support

Tendering/

Purchasing

Support

Order Cycle

Planning

Order Cycle

Planning

HA Head Office

Procurement Planning

Product Standardization

PerformanceMonitoring andReview

Risk andInformationManagement

HA Head Office

Clusters / Hospitals

11

Patient Care

Patient Care

Healthcare Delivery

People Skills

Equipment Supplies

Systems Structure

Procedures Processes

Supply Management

Value-based supply selection & standardization

Managing Inventory

Vendor collaboration

Purchasing controls & efficiency

(e-procurement)

Strategic view of supply chain management

Organizational View of Supply Chain Management

12

Performance Review on Procurement & Supply Chain Management in HA against a Maturity Model (2001 - 2007)

Dimension / Critical Success Factors

Stage 1

Stage 2Stage

3Stage

4

1Customer Service Management

2Strategic Supply & Sourcing Planning

3

Materials & Service Requirements Planning Process for all Hospital Supply Activity

4Forecasting & Demand Planning for Hospital Activity

5Relationships with Suppliers & Service Providers

6Information & IT Capabilities, including Electronic Commerce

7KPI Management & Measurement

(With ERP)

(With ERP)

(Total Solution) (PPP)

13

Performance Review on Procurement & Supply Chain Management in HA against a Maturity Model (2001 - 2007)

Dimension / Critical Success Factors

Stage 1

Stage 2

Stage 3

Stage 4

8Workplace Culture & Leadership

9Organizational Structure & Supply Positioning

10Improvement Focus within Business

11 Staff Competence

12Process Management (e.g. procurement process, inventory management)

13Supply Infrasturcture (e.g. warehouse, office location)

(With ERP)

(With ERP)

14

Critical Milestones :Take-over of procurement from Government Logistics

Department– Non-drug (July 2003)– Drug (April 2006)

• Centralized procurement • Strategic outsourcing

– Total solution contract on general consumables– PPP Project on food service– Bulk contracts on medical equipment maintenance,

domestic services, security, landscaping, pest control etc.

Areas of Continuous Enhancement :• Inventory management (since 1998)• Vendor Managed Inventory/Consignment Stock (since 2002)• Internal/external partnership (since 2002)• ISO9001(QMS) accreditation (since Nov 2003)• Professional services – legal, auditing, advertising,

telecommunications (since 2006)• Green procurement (2007)

Procurement & Materials Management

15

Sourcing

Procurement

MaterialsManagement

Logistics

Payment

PROCURE

PAY

Supply ChainComponent

CostManagement Collaboration Standardization

• Significant savings achieved through “Bulk Purchase” - $163M $113M (non-drugs) p.a. $50M (drugs) p.a.

• PPP for Food Service• Total Solution Contract for general items• Outsourced equipment maintenance services

• Bulk contract coverage ( for non-drugs ) increased from 26% to 44% from Year 2002 to Year 2006• > 90% for drugs

• 1,304 Bulk Contracts - 925 for drugs - 379 for non-drugs

• Clinical Interface• Drug Selection Committee

• Specification of Equipment & Consumables

• Stock turnover rate increased from 3 to 6• SKU reduction by 5%

• VMI and Consignment stock for critical items

• Common supplies items 100% standardized

• Cluster Warehousing • Auto-refill at Point of Care• Central monitoring of Personal Protection Equipment (PPE)

• Electronic transmission for all internal supply chain processes

• E-Invoice• E-Payment

• Centralized Payment

Strategic Milestones in Procure to Pay Process

16

Non-drug Stock Management and Supply Chain Initiatives

Commodity Group Supply Chain Model

Procurement & Materials

Management Strategy

Cleansing materials, office supplies, stationery and linen

Distributor – Ward/Department

Outsourcing logistic and inventory management

General medical and non-medical consumables

Vendor – HA Bulk Store

In-house inventory management supported by VMI

Specific surgical consumables (e.g. OT, Pathology and X-ray

Vendor – Department Store

In-house inventory management

PTCA and O&T consumables

Consignment

Zero inventory supported by Product Tracking and Tracing

Low value and low risk consumables

Vendor – Ward/Department

Direct non-stock purchase

17

Implementation Progress of

Enterprise Resource Planning System (ERPS)

18

ERPS Implementation PlanPhase I/II – 1st April, 2008

Clinical

Patient Billing

Asset Management

(Phase I/II – Non-drug items only)

19

Procure-to-Pay Process

Develop & Implement

Procurement Strategy

Maintain & Evaluate Suppliers

Identify Need Develop Specs & Solicit Bids/

Proposal

Manage Contracts

Create & Maintain Purchase

Requisitions & Orders

Order Goods & Services

Manage Disposition of Inbound

Goods

Receive, Inspect &

Accept Goods & Services

Procure to Pay

Manage Accounts Payable

Enable Payments

20

Adoption of ERPS Better Practices Through Business Process Re-

engineeringSub-Process Area Best Practice

Product Codificationand Classification

• Standardized nomenclature and classification to facilitate procurement planning, inventory control and data analysis.

• Adoption of UMDN / GMDN for medical devices in compliance with the MDACS program.

Sourcing Strategies• Rationalization in overall numbers of suppliers and concentrated spending to leverage purchasing power.

• Single integrated procurement system to enable quick and easy sharing of data and definitions across HA

• Maintenance of central database of spend information.

Regulatory Compliance

Procurement FunctionManagement

21

Adoption of ERPS Better Practices Through Business Process Re-

engineeringSub-Process Area Best Practice

Requisition &Purchase OrderProcessing

• Routing and approval verification automated through workflow.

On-line GoodsReceipt

• Embedded bar code information used to record receipts in purchase orders.

Payment • Three-way / Four-way matching with automated delegation to speed up payment.

Vendor Master • Centralized vendor master file maintenance

across HA.• Contracts for high value and strategic purchases centrally negotiated and monitored.

Supplier Selectionand Negotiation

22

Market Interface & Supplier Engagement

Moving Towards E- Commerce

• Electronic exchange and transaction of supply chain data which include purchase orders, delivery notes, invoices and inventory information using standard protocols, i.e. EDI, XML, Fax, email, etc.

• Use of comprehensive universal data standards such as UNSPSC, and E-Healthcare data standards such as EAN and HIBC.

• Extension of business / supply chain models to enhance information sharing e.g. Vendor Managed Inventory (VMI )

Use of Technology

Collaboration with Suppliers

23

Product Codification & Classification

• Item Classification – United Nation Standard Product and Services Code (UNSPSC)

• Item Description Nomenclature –Drugs : International Non-proprietary Name (INN)

–Medical Device : Primary - Universal Medical Device Nomenclature (UMDN)Secondary - Global Medical Device Nomenclature (GMDN)

–Non-Medical Device : AUSLANG

• Product Identification Standard – EAN / HIBC

24

Vendor Master Maintenance

• Central vendor creation and maintenance by Procurement and Materials Management Section in Head Office with effective 1 September, 2007

• Designated multiple currency bank account to receive remittance from HA

• Vendors to provide update information, if any before October, 2007

25

e-Transmission of Purchase Order

E-mailFaxEDI/XML

26

ERPS Rollout Plan• 1st Rollout (1st April, 2008)

– Kowloon East Cluster – Hong Kong East Cluster– Hospital Authority Head Office

• 2nd Rollout (1st July, 2008)

• 3rd Rollout (1st October, 2008)

27

Payment Documentation Requirement

effective 1st April, 2008• Suppliers to send invoices direct to Head

Office/Cluster Finance OfficesPO number must be specifiedName of the staff, name of his/her

department, and hospital (for direct invoices without PO) be provided

• Payment will be settled in the specified currency in the PO (local and foreign currencies)

• For purchase with Trade-in, suppliers to split invoice lines intoGross amount for the new purchase

equipmentTrade-in amount for the old equipment

28

Medical Device Administrative Control (MDACS)

• Regulatory compliance with the MDACS requirement on purchase of medical device

• Requirement to register with Department of Health under consideration in HA

29

Q & A