Table of Contents
Promoting Efficiency
OntarioBuys Working Group
Notes
All governments attempt to promote efficiency in the public sector. People want to see efficient financial management. One of the ways governments in several jurisdictions are attempting to significantly improve efficiency in the delivery of public-sector ser vices is through the introduction of supply chain management (SCM) best practices.
Citizens expect their public services to operate as an efficient, seamless and effective system. It is important that the government, along with its partners, ensure this is happening. If vital dollars are spent needlessly on back-office processes, fewer dollars are left to be spent on classrooms, hospital wards and lecture halls.
It makes sense, therefore, that if there are better ways for the public sector to plan, source, move and pay for goods and services, these should be examined and implemented.
Supply chain management is one such solution and refers to the array of processes that connect customers and suppliers. It is not merely about reducing the price of goods, but rather about taking greater advantage of improvements in how the public sector purchases and manages the flow of goods and services through an integrated structure. By implementing a rigorous and thorough SCM system in Ontario, hundreds of millions of dollars can be channelled back into key front-line public services.
The savings could be substantial. A 2001 Ontario Hospital Association Task Force study estimated the potential value of SCM improvements in the Ontario hospital sector at more than $300 million.1 Some of those savings have been realized but more can, and needs to, be done.
Adoption of SCM best practices by the private sector has saved billions of dollars while also improving quality and customer service. Publicsector jurisdictions around the world are also adopting SCM.
One such example is the Voluntary Hospitals of America Inc. (VHA), a U.S. not-for-profit hospital co-operative with 2,200 members. VHA estimates its members saved $813.5 million US on purchases of $17.7 billion US in 2003.2 In the U.K., the National Health Service (NHS) has also adopted SCM and made significant strides in customer satisfaction. Please see the box below for an overview of a key supply chain management initiative in the U.K.
U.K. National Health Service (NHS): Excellence in Supply Chain Management
The NHS in England spends £15 billion annually on purchased goods and services. It was determined that there was enormous potential for NHS organizations to save money through effective purchasing. As a result, the NHS Purchasing and Supply Agency (PASA) was established in 2000 as a significant part of the government's modernization of NHS procurement activities to act as a strategic adviser to the NHS on all supply issues. The primary goal of PASA is to improve the per formance of the NHS purchasing and supply system and become the centre of expertise, knowledge and excellence in purchasing and supply matters of the NHS for the benefit of patients and the public.
Some of the achievements of PASA include:
- Achieved savings for the NHS totalling £580 million over the threeyear
period of April 2000-03.
- Implemented pilot supply "confederations" as recommended in the
May 2002 policy document "Modernising Supply in the NHS" to
develop a middle tier between national (PASA) and local (individual NHS trust) level purchasing.
- Produced an eCommerce strategy for the NHS through the
development of an eProcurement toolkit, which provides a framework
to help NHS trusts and confederations understand the benefits of
eProcurement and plan its implementation in a structured way.
- Developed a national set of purchasing and supply performance management measures to better assess the performance of NHS trusts with respect to supply chain activities through benchmarking analysis and strategic assessment of trust and confederation spending.
Source: National Health Service, U.K. 3
In Ontario, with a few notable exceptions, the SCM practices in the public sector are often inefficient, not coordinated, and inadequately supported. The solution to overcoming these obstacles is to build on the existing Ontario success stories, such as the Healthcare Materials Management Services in London, Ontario and the success with the Toronto-area school boards prior to amalgamation, and implement SCM best practices across the broader public sector.
To this end, the Government of Ontario is establishing the OntarioBuys Working Group, whose members will include sector expert-practitioners and representatives of institutions committed to best-practices implementation.
As part of phase one of this project, the Working Group will focus on implementing SCM in school boards, colleges, universities and hospitals. The Working Group will also examine linkages, where appropriate, to other sectors. The government will be asking the Working Group to discuss and make recommendations on the following:
- an appropriate structure serving broader public-sector organizations;
- a central entity that would provide co-ordination, benchmark sector
performance against best practices and ser ve as a portal for shareable SCM information; and
- a best-practices implementation handbook, which will be a detailed "how-to" manual for Ontario-specific SCM implementation.
The Working Group will complete its work by December 2004. The government, in partnership with the broader public sector, will work quickly to implement supply chain management to realize improved efficiency and effectiveness. However, real change takes time and the work that starts now is needed to ensure that sound management remains the foundation of public-sector administration in Ontario.
1 Task Force Report on Supply Chain Management, "Improving Supply Chain
Management for Better Health Care," A Joint Initiative of the Ontario
Hospital Association and Efficient Healthcare Consumer Response,
November 2001.
2 Voluntary Hospitals of America, Inc., "VHA Delivers $1.13 Billion in Value
for Members in 2003", April 29, 2004.
3 The NHS PASA is charged with modernizing and improving supply
management across the NHS in the UK to help ensure that money is
spent to best effect, as a result of the recognition that there were
inconsistencies in purchasing performance. The NHS found that up to
half of its total non-payroll spend (primarily purchasing) was not subject
to rigorous, professional purchasing and value for money process. These
issues are described in:
- NHS Purchasing and Supply Agency, The Agency's Role in Delivering eProcurement in the NHS, February 2004, pages 2-4.
- NHS Purchasing and Supply Agency, Modernising Supply in the NHS, April 2002, pages 3-18.
- NHS Purchasing and Supply Agency, Corporate Plan 2003/6, May 2003, pages 2-9.
- NHS Purchasing and Supply Agency, Framework Document, January 2001, Introduction, page 1.
