Introduction
The National Health Service, NHS, is a government agency in UK under the management of the Department of Health whose primary responsibility is to provide healthcare to UK citizens. NHS has three parts: hospital services; family doctors, dentists, opticians, and pharmacists; and local authority health services, including community nursing and health visiting (NHS, 2006).
In 1999, the UK government initiated the modernization strategy on institutions across UK including government agencies such as the NHS. The aim of this modernization scheme is to exploit technology for the advantage of the people all over UK. Part of this modernization scheme is the implementation of e-commerce strategy within government agencies. E-business within government agencies is electronic transactions or public service between a government agency and the public; electronic transactions between government agencies and between departments of an agency; and electronic transactions between the government and the industry.
As a health agency, NHS has a great involvement in the e-business since it handles many transactions with the public such as medical services, and the industry where it gets supply for the medicine, equipments and other facilities needed by a health agency. The focus of this paper is the complex supply chain of NHS and how e-commerce can be capitalized for the benefits of NHS, the public and the suppliers which are all part of the chain. The paper discusses on the elements of the e-commerce strategy for the NHS supply and the barriers that may hinder the effectiveness of the strategy as well as the approach needed to overcome the barriers.
As stated above, NHS has a complex supply chain. What made it complex are the many independent organizations such as hospitals, primary care trusts and health authorities. Health authorities all over UK include the Bromley Health Authority, the Dorset Health Authority, North West Lancashire, South Humber, and the South Staffordshire Health Authorities. NHS Trusts includes the many hospitals and infirmaries such as Airedale NHS Trust, Glasgow Royal Infirmary University NHS Trusts, Ipswich Hospital NHS Trust and many others. Each trust and health authorities has different needs and demands, making the supply chain complex.
In addition, NHS needs to manage its £11 billion annual procurement budget (Simons, 2002). It needed a system that will help manage the transaction in NHS and make transactions transparent. A centralized purchasing using e-commerce is then needed.
The NHS Supply Authority
The NHS Supplies Authority is an organization formed in 1991 which aims to integrate the variable supply operations across UK by creating agreements with suppliers with fixed prices. The agreements between the NHS supplies Authority and the suppliers allowed all health authorities and NHS trusts to have contract with the suppliers at pre-agreed prices for particular goods and services. The NHS Supplies Authority is involved in the purchasing arrangements between the customers and the suppliers. The organization also has direct customers which buy products directly to them so NHS Supplies Authority also buys goods from the suppliers which they sell through their warehousing and distribution service (Bourn, 1996).
However, the role of the NHS Supplies Authority is limited to providing framework agreements which serve as a basis of supply contracts. NHS Supplies Authority does not cover other aspects of purchasing such as how much a certain health institution will spend, which brand and which suppliers will provide certain goods or services. In other words, NHS Supplies Authority is not sufficient to make efficient procurement across the NHS supply chain, thus the NHS Purchasing and Supply Agency, PASA, was formed.
NHS Purchasing and Supply Agency
NHS PASA is basically a government agency that develops policy on supplies and formulates strategies including the incorporation of e-commerce strategy in the NHS supply chain. It is responsible of modernizing and improving supply management across UK to ensure that the money allocated for NHS is spent wisely and effectively.
The functions of NHS PASA includes improving purchasing and supply performance across the NHS; leading the modernization of the supply chain; improving efficiency and reducing cost in the supply chain; raising the profile of the purchasing and supply function; ensuring that all non-pay expenditure is subjected to professional purchasing and value for money practices; and encouraging new and innovative suppliers (NHS, 2002).
As noted above, there are differences in purchasing performance across the NHS that make the supply chain complex. This complexity makes the supply chain response slower. To address this, NHS PASA recommended the formation of a middle tier of purchasing between the national and local level purchasing (NHS, 2002). This is the formation of Supply Management Confederations, a group of trusts who work together to negotiate contracts on a geographical basis (NHS, 2002). They group together for mutual benefit to achieve a joint approach in areas of purchasing such as strategic outsourcing, product and supplier rationalization, stock management, contracting and supply chain management (Anonymous, 2004).
Through the Confederations, trusts need to commit to NHS PASA contracts and procurement strategies and plans; agree the configuration and terms of reference of their Confederation; develop project implementation plans for collaboration; harmonize corporate governance arrangements; agree and commit to the sharing of risks and benefits; develop strategies within the confederations; monitor and feedback performance using national performance indicator; and share information with regard to best practices (NHS, 2002).
NHS Logistics Authority
NHS Logistics Authority was also formed with the aim to improve the supply chain of NHS. NHS Logistics Authority is structured into four directories which are Finance and Performance; Human Resources; Customer Services; and Information Technology (Anonymous, 2006). The NHS Logistics serves as the distribution centers within NHS and its role is to deliver a range of essential modern supply chain services, to manage and develop the NHS-specific supply channel for consumable goods required by the NHS. NHS Logistics also implement the range of e-commerce supply chain solutions it has developed; implement a supplier performance regime; and assists the Supply Management Confederations with the necessary supply chain arrangements and skills (NHS, 2002).
In developing a supply chain using e-commerce strategy, it is necessary to identify the members of the supply chain who will operate within the network. In NHS, the members of the supply chain are already mentioned above. These are the customers which may be the patients and the doctors; the NHS PASA, the NHS Trusts and Health Authorities; the Confederations; and the suppliers.
Before the modernization plot, NHS supply chain network was very complex due to hundreds of NHS trusts involve in the chain. With the modernization scheme and implementation of e-commerce strategy, the NHS supply chain network has been simplified as shown in the figure below:
The network was simplified by classifying the members into two categories: the primary members and the support group members (Sangam, 2006). The primary members are those who carry out value adding activities in an independent environment while the support members are those that simply provide resources, knowledge, utilities, or assets for the primary members of the supply chain (Sangam, 2006). In the diagram above, the primary members are the customers, the NHS trusts and Health Authorities, and the suppliers. The support members include the NHS PASA which leads the modernization in NHS, the NHS Logistics and the Supply Management Confederations.
The customers are the end users of products and services being given by the trusts, hospitals and health authorities under the supervision and standards set by the NHS. Therefore, the trusts are responsible in forecasting and demand planning. They are the ones who can determine the products and services needed by the end-users. The Supply Management Confederations as noted above are groups of trusts in a certain location. They are group together to share best practices and skills necessary for product inventories and supply management. The Confederation shares with its members the knowledge and e-commerce supply chain solutions the NHS Logistics Authority has developed. NHS PASA assists trusts in negotiating contracts with the supplier. NHS PASA also established common standards such as the catalogue system where products are categorized and classified and given product codes.
The E-Commerce
In any organizations today, they want to incorporate e-commerce strategy in their supply chain management. This has been the primary role of NHS PASA, how to incorporate e-commerce strategy in the NHS supply chain management that will help in reduce expenses in the supply chain and at the same time makes the supply chain more responsive and the flow of products or services faster for the benefits of each member of the chain.
Defining supply chain management, SCM, it is the integration of key business processes, from suppliers through end-users that provide products, services, and information that add value for customers and stakeholders (Perez, 2001). It is also a network of facilities and distribution options that integrate the functions of demand planning and forecasting, procurement of materials, manufacturing, distribution, and return. The goal of SCM is to reduce inventory cost and to improve the coordination and collaboration with suppliers and distributors.
According to the UK government, e-commerce is the exchange of information across electronic networks at any stage in the supply chain, whether within an organization, between businesses, between businesses and consumer, or between the public and private sectors. Electronic commerce and Supply Chain Management focuses on systems and processes to support the flow of information within and between organizations which occurs in the context of procurement, manufacturing, sales, distribution of goods, information and services (Atkinson, 2001). Both e-commerce and SCM is focus on the integration of information and products or services thus by incorporating e-commerce within the supply chain, the goal of SCM will be achieved.
With e-commerce, NHS expects to have exploited and consolidated transparency of information across all networks within NHS; obtain greater leverage through appropriate aggregation of demand across the NHS, the government and the wider public sector; and improve efficiency of transactional processes of NHS and its suppliers, ensuring high quality of service.
Elements of E-commerce
To be able to achieve theses benefits, e-commerce strategy needed to have key elements necessary before and during its implementation. One key element is a good IT infrastructure within NHS and other members of the supply chain including the trusts, health authorities, the Confederations and the suppliers. IT infrastructure composes of computers and laptops, servers, according to the needs of the organization. The software used for SCM should communication networks and software and must be combined together matching the operating system used and should be capable of storing data needed in the supply chain such as product information and supplier information. On the part of the trusts, they should have system capable of storing and retrieving the medical data to plan and forecast demands.
Another key element of e-commerce is resources. These resources include human resources and financial resources. Financial resources are needed for the purchase of equipments needed to develop a good IT infrastructure. If the UK government has no enough allocated budget for e-commerce, then the strategy could be a failure. Human resource is very much needed with e-commerce strategy.
NHS should have a CIO that has the capability and technical knowledge handling e-commerce. E-commerce involves having a standardized information system within NHS and a CIO and other technical people are needed to implement e-commerce. Employees of NHS especially those involve in the supply chain such as the finance and procurement department should be educated on how to maximize the use of such systems. The people involved in the supply chain are the ones who will implement e-commerce so the success of the strategy is dependent on its implementation. Effective leadership is also a key component of e-commerce. Employees should be motivated and organizational learning should be implemented in order for everyone in NHS become aware of e-commerce.
With all the necessary information about the supply chain members as well as the key elements of e-commerce known, e-commerce has been implemented. With e-commerce, all the transactions within the chain are done fast and efficient. Customers can order online with the use of e-mail or via the established website of NHS that publishes information and online catalogues. Via the internet, NHS PASA can assists trusts with contract negotiating. Trusts and suppliers can have interaction for order placement and transaction can be completed online by electronic payment. Suppliers will then deliver the products to distribution centers of the NHS Logistics Authority and distributed to the trusts and to the end-users.
E-commerce programme in NHS with the leadership and initiatives of NHS PASA includes undertaking electronically traditional and discrete procurement-based activities such as electronic tendering, catalogues and ordering; overlapping financial and probity processes such as invoice receipt and matching, payment of suppliers and audit trail/authorization procedures; generation of management and strategic supply information such as budget planning, reporting and control, demand forecasting, supply chain performance management, and strategic sourcing and supply decisions (NHS, 2002).
Undoubtedly, the primary benefit of e-commerce is cost reduction by automating the purchase requisition, approval and process; reducing errors and reworks; ‘maverick’, off-contract purchasing; providing online access to multiple suppliers, thereby facilitating price comparisons; and saving administrative time and providing more developed data which enable purchasing professionals to negotiate better terms with suppliers (Homira, 2001).
Barriers to E-commerce
However, there are some barriers that may hinder the effectiveness of e-commerce. These may include an uncompromised member of the chain. Traditionally, all departments such as management, system, administration, inventory, distribution and the purchasing of an organization such as a health-providing organization like NHS operate independently and are often conflicting. Health Trusts also have different departments responsible for the procurement of health products and facilities. With e-commerce incorporation in the supply chain management, all the different functions of these departments should be aligned and integrated. In order for e-commerce solutions to supplant the healthcare industry’s current methods of transacting business, seamless integration with buyers’ information systems and effective coordination of buyers’ and suppliers’ actions is required (Homira, 2001).
E-commerce in NHS will also lead to cultural change due to the substantial change brought about by e-commerce and modernization and it is common that there are some members of the NHS organizations who will resist to changes. It is the responsibility of NHS management to inform and educate its members and defined to them their functions as e-commerce take effect in order for them to appreciate the benefits e-commerce will bring to the entire organization.
Another barrier is lack of financial and technical expertise. As noted above, with e-commerce in the supply chain management, good understanding of the internet, the web, online marketplaces, and information systems and management require good technical facilities that will support reliable systems. Not all trusts in NHS are in the position of making necessary investment in purchasing and supply (NHS, 2002). Resources for financial support for facilities as well as human resources for technical and senior procurement positions lack in some trusts.
Like in any industry implementing e-commerce, security of the system is always an issue. In the supply chain of NHS, important data and transactions are involved therefore it needed security to avoid system failure or interference of hackers in the system.
To overcome these barriers, the UK government who initiated modernization in government agencies should allocate resources to financially support e-commerce in the supply chain of NHS. NHS PASA addressed the issue of lack of human resources through inter-trust supply management, where a group of trusts in the same geographical area and with similar needs collaborate to pool expertise, avoid duplication of effort, and maximize value for money and the potential for savings (NHS, 2002). This collaboration of trusts is also the Supply Management Confederations mentioned above. In addition, NHS PASA provides strategy and assists trusts in communicating with the suppliers. Inter-trust supply management has potential benefits for individual trusts and for NHS as a whole. These benefits include economies of scale and lower total costs through volume aggregation, reduced duplication and sharing of costs; increasing purchasing leverage and reduced cost of ownership; purchasing savings; shared risk; shared purchasing resource and expertise and improved career prospects for purchasing and supply professionals; development of centers for procurement excellence; opportunity to standardize products, systems and processes more widely and collective support and raising standards of weaker trusts (NHS, 2002).
It is also important for NHS and individual trusts to reorganize in some level to able to have an organizational structure integrated with e-commerce. Sound organizational structure usually means a certain mix and interaction of talented individuals, working in relevant functions and areas of responsibility, sharing knowledge and related assets, behaving responsively and constructively (Wolfe, 2003). When a structure’s elements are properly aligned with one another, the structure facilitates effective implementation of the organization’s strategies (Barth, 2003). Some internal departments must be set up like Strategic Sourcing, Procurement and Systems and Operational Procurement departments set up in Addenbrooke’s NHS Trust which led to a cash releasing savings of £1.35 (NHS, 2002).
Conclusion
E-commerce and supply chain management can be at their full potential if integrated together effectively. With this kind of project that involves a lot of changes but will results to huge benefits not only for NHS but especially to the public sector who are befitted by the services provided by NHS, the initiative should be reorganization. Putting people at the right position and defining to them clearly their tasks will help the project become effective and will help eliminate problems during its implementation. Reorganization also helps in effective collaboration and coordination among the members of the supply chain. With the advent of technology, e-commerce in health care agencies is important for the speed and flexibility of health care services given to the public.
Credit:ivythesis.typepad.com
0 comments:
Post a Comment