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Maximizing Value in Procurement - Key Strategies for Success

Explore procurement strategies for different organization types and buyers to drive value, understand and measure value creation, and make informed decisions. Discover case studies and practical insights for achieving optimal procurement outcomes.

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Maximizing Value in Procurement - Key Strategies for Success

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  1. Creating Value through Procurement12th April 2010 Gavin Hodgson Senior Category Manager

  2. Agenda • Introduction • Different types of Organisation… …Different types of Buyer? • Understanding and Measuring Value • Conclusions

  3. Introduction • Who am I? How did I get here? • Studies • University: Modern Languages • Master’s in Purchasing • MCIPS • Career Path • Consulting • B&Q • Premier Foods • NHS MASAÏ The Purchasing Experts

  4. Introduction • Why Procurement? • What is Procurement’s Role? • Assure Supply • Agent of Change • Provide Strategic Advantage • Deliver Value for Money

  5. Different Types of Organisation……Different types of Buyer?

  6. B F Types of Purchasing Organisations • Single Site Purchasing • The Buyer manages stocks and supplies • (This is your model at home)

  7. B F1 F2 F3 F4 F5 Types of Purchasing Organisations • Multiple Site Purchasing (Centralised) • Increased Complexity • Significant Logistic Operation to Manage • Division of Purchasing and Supply

  8. B1 F1 F2 F3 B2 F4 F5 F6 Types of Purchasing Organisations • Multiple Site Purchasing (Co-ordinated) • Typical of Large Organisation Purchasing • Significant Complexity • Multiple Portfolios Now consider the complexity of this in the NHS!

  9. Understanding and Measuring Value

  10. Understanding Value • Just What is “Value for Money”? • Definitions from around the Room Today: • Best Service / Product and Best Price • At the Right Time and in the Right Location • Specification • More Product for the Price paid, without compromising on Quality • Meet the Service Users’ Needs and Expectations • Delivery of an Effective and Efficient Service

  11. Understanding Value • What is “Value for Money”? £0.40 £2.19 / 8pk 27.4p each

  12. 21.5p each 22.4p each Understanding Value • What is “Value for Money”? £1.29 / 6pk £2.24 / 10pk

  13. Understanding Value • What is “Value for Money”? £190,460 £18,335

  14. “The NHS in England is faced with the prospect of finding savings of around £15-20bn over the period 2011-2014” - The Nuffield Trust, June 2009 “The NHS is facing a very severe (…) £8-10 billion real terms cut (…) lin the three years from 2011” - The NHS Confederation, June 2009 Understanding Value • What is “Value for Money”? £2,098 No New Money! Gordon Brown, 12th April 2010 (paraphrased) £488

  15. Understanding Value: Specification • What happens if your specification is: • 1: A round, green (pantone 15-0318), plastic (PET) mug to hold between 200 and 220 ml of liquid, stable at temperatures between -40 and 200 °C • 2: A green plastic mug to hold no less than 200ml liquid able to withstand temperatures between -20 and 150 °C • 3: A green mug suitable for holding hot liquids • 4: Something to drink my tea from

  16. Driving Value • How is Value Created? • Needs analysis + Market Analysis • Outcome Based (Functional) Specification • How do we Measure Value? • Only What is Measurable Counts. (?) • Different Stakeholders May have Different Values

  17. Driving Value – Case Studies • In-Patient Palliative Care Beds • Minimum Pass Mark plus Critical Questions • Lowest Price • Quality / Price “run off” (50:50) • Award Criteria Heavily Influenced by Financial Climate • Intermediate Musculoskeletal Service • Evaluation based on both Quality and Price (60:40) • Multiple Options from five Bidders • Wide Variation in Approach and Scoring • A Close Decision!

  18. Measuring Results • Meet (or exceed!) Specification • Lowest Price / MEAT • What is “Value” in your context? • What were the Outcomes • (What did we save?) • Provide Evidence • Effective Contract Management • Reference your Baseline

  19. Conclusions

  20. Conclusions • Role of Buyer depends less on the nature of the organisation than on the Portfolio and project concerned • Buyers must Create (and demonstrate!) Value • Value changes from project to project • Measuring the Value created is of Prime Importance • Patient outcomes, savings, WCC, Sustainability

  21. Conclusions • Value can not be Created without Change • Behaviours • Relationships • the Market • Understand • Plan • Act • Measure • (Repeat!)

  22. Thank you – Any Questions?

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