NHS Purchasing and Supply Agency

The National Health Service Purchasing Agency works with around 400 NHS trusts and health authorities and manages 3000 national purchasing contracts. The NHS spends approximately £11 billion per annum on purchasing goods and services for the health service.

The aim is for the Agency to develop and implement an e-commerce strategy that will:

• embrace and integrate all business processes from 'demand' through to payment;

• embrace all key players in the NHS supply environment;

• expect the NHS to 'act' on a once only basis in programme design and application;

• change the function of purchasing from transactional to strategic.

It is envisaged that on satisfaction of the above aims sourcing, display of products and prices and ordering of goods and transacting with suppliers will all be done electronically. Additional expectations are that when the e-commerce strategy is fully implemented there will be systems that can offer facilities for budgeting and planning, reporting and control, demand forecasting and more focused strategic analysis.

The scope of the e-commerce operation is to include all the NHS's primary, secondary and tertiary suppliers into a trading network. The size of the network will be extensive but will primarily focus on B2B trading relationships, not trading relationships with the general public (B2C). The anticipated advantages of implementing this project are that it will:

• improve efficiency by streamlining transactional processes with suppliers. This will be achieved by automating manual processes, enhancing control mechanisms, optimising procurement practices, standardising and sharing procedures and information in a coherent and consistent manner;

• provide opportunities to obtain greater leverage over prices by aggregating demand for goods and services across the network;

• improve levels of transparency.

It is also anticipated that both the NHS and their suppliers will benefit from successful implementation of the e-commerce strategy.

Source: Adapted from NHS Purchasing and Supply E-Commerce Strategy for the NHS

• Online purchasing auctions: Real-time online purchasing auctions are used by buyers and suppliers globally. General Electric (GE) involves both established and non-established suppliers in e-auctions. The model is of a web-based electronic bidding mechanism that operates in a similar way to those held in traditional auction rooms and tendering processes. However, in the case of GE the aim is to drive costs down via a competitive, open bidding process. The downward movement of prices is sometimes referred to as a 'reverse auction' as opposed to a bidding situation where prices are driven upwards. GE purchasing managers do not always select the lowest bid as they will assess the potential risks associated with the supplier: say, the ability to fulfil the order, quality and requirements for after-sales service issues, rejection rates, quality of goods. An emergent benefit of this model is that e-auctions allow companies to monitor competitive pricing, which helps the organisation reduce total costs.

• E-fulfilment: Although not currently referred to by many as a business model, the delivery of goods in a timely and appropriate fashion is central to the re-engineering of the supply chain. According to a survey, 'fulfilment' will be an area of significant growth for businesses operating online. However, over 80% of organisations cannot fulfil international orders of tangible goods because of the complexities of shipping, although there are some geographical locations (e.g. parts of Europe and Asia) that are better served by local warehouse support networks than others. Further discussion of 'last mile' problems can be found in Chapter 10.

Time will inevitably establish the validity of the proposition that online purchasing practices are sustainable business models. Notwithstanding this point, there are some key benefits associated with online purchasing which should be noted (see Table 11.1). This table is based on Croom's (2001) investigation of the impact of web-based technology on the supply chain and the above discussions of supply-side market exchanges. The next section examines the sell-side of organisational activities.

Table 11.1 Potential advantages of online purchasing systems

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