Supply Chain Improvement – Shared Service West

Supply Chain Improvement

-Shared Services West

Instructor: LouAnn Birkett

Prepared by: Jun Li, SCMP

October18, 2015

Table of Contents

1.Executive Summary

2.Introduction and Supply Chain Map for Shared Service West (SSW)

3.Issues(s) Identification

4.Environmental and Root Cause Analysis

5.Alternatives and/or Options

6.Recommendations

7.Implementation

8.Monitor and Control

9.Conclusion

10.References, Exhibits and Appendixes

1.Executive Summary

I had an opportunity to chat about the supply chain improvement for shared healthcare servicesin Ontario with my colleague who used to work in Ontario healthcare center. I also visited websites and conducted researches for Ministry of Finance, BPS (Broader Public Sector) and some Ontario health shared services organizations including Plexxs, Mohawk, COHPA and SSW. I found that there are lots of supply chain improvements for these organizations, especially SSW.A list of issues was addressedfor SSW to improve supply chain procurement based on the environment and root cause analysis. The issue included lack of supplier social responsibility and supplier compliance with privacy policy, no vendor performance review and reporting, and no supplier diversity program, etc. As a public sector, SSW has to request vendors to take more social responsibilities and comply with privacy policy. SSW needs to implement supplier diversity program in order to ensure the accountability as a public sector. Furthermore, SSW has to set up regular supplier performance review and VOR program and improve the due diligence and risk mitigation process to ensure high quality of products and satisfied services. By implementing the supply chain improvements recommended in this report, SSW will improve the customer satisfaction to 95%, 100% of suppliers will commit to comply with privacy policy, over 95% of suppliers will commit to take social responsibilities, and SSW will target to have over 5% of suppliers are certified by Canada Diversity Program organizations.

2.Introduction and Supply Chain Map for Shared Service West (SSW)

Shared Service Practices involve the integration of service activities across various areas of an organization, or across different organizations into a single entity. Shared Service West (SSW) was established as a non-profit organization in 2001 to provide strategic procurement service for hospitals and health care organizations in the regional west of the Greater Toronto area including Mississauga, Milton, Brampton and Georgetown. The examples of member hospitals include Halton Healthcare Services, Trillium Health Partners, William Osler Health Systems, etc. SSW is supervised and governed by (Broader Public Sector).

There are 2 directions of the supply chain mapping for SSW. Upstream direction is toward suppliers and downstream direction is toward customers. Both of them are related each other and impact each other. For SSW, the upstream direction is multiple tiers of suppliers, and downstream direction is the customer. From table 1 (SSW Supply Chain Map) below, we can find that there are different tiers of customers for SSW. For SSW, the tier 1 customer is member hospital (e.g. Halton Healthcare Services), and different departments within in Halton Health Services are tier 2 customers. Doctors and Nurses are tier 3 customers, and they provide service to patients. Thus, these patients become tier 4 customers. Likewise for upstream suppliers, the vendor that provides products and services directly to SSW becomes tier 1 supplier, and their suppliers (e.g. distributors) are tier 2 suppliers, the manufactures are tier 3 suppliers, and raw material suppliers become tier 4 suppliers, etc. Both of upstream suppliers and downstream customers are related and impact each other. Therefore, as a public sector, SSW needs to enhance the tender process and emphasize supplier responsibilities in order to drive savings and provide best quality of products and service to the eventual customers – taxes payers.

Table 1: SSW Supply Chain Map

3.Issues(s) Identification

The key elements of public sector procurement are fairness, transparency and accountability. Based on the research conducted for SSW including SSG Strategic plan, vendor responsibilities, RFQ and order Terms and Conditions, there are at least five issues need to be addressed.

1)Lack of supplier social responsibility

2)Lack of regular supplier performance reviewprocess and Vendor of Record (VOR) program

3)Lack of mandatory requirements for supplier to comply with privacy policy

4)Lack of due diligence and risk mitigationprocess

5)No supplier diversity program

4.Environmental and Root Cause Analysis

1)Lack of supplier social responsibility

SSW set out numerous vendor responsibilities on its website for vendors to conduct by themselves in a responsible, truthful and ethical manner in all dealings with SSW-supported Hospitals. It includes the vendor's responsibilities to ensure the market competitive pricing, well trained personnel, timely payment and complete and accurate product information. However, SSW only required vendors to comply with healthcare industry guideline and regulations pertinent to patient safety matters. For example, SSW issued a notice to all vendors to comply with Workplace Hazardous Materials Information System requirement on its website (see appendix A). According to WHMIS, all vendors are required to label and prepare material Safety Data Sheets (MSDSs) for products they make, import, package or process. There are no other mandatory laws and regulations are required for vendors to comply with. For example, Health and safety policies, Human rights and labour practices (including child or forced labour for products imported off-shore), code of conduct, ethics, anti - bribery, anti - corruption and environmental sustainability. As a public sector, SSW must to comply with ethics laws and regulations, and SSW needs to ensure that all vendors, who provide products and service,need to comply with these ethics laws and regulations as well.

2)Lack of regular supplier performance review and report

As a public sector, SSW must to ensure high quality of products and satisfied service they procured from vendors. Vendors need to provide warranty, and they also have to provide reliable quality of products and responsible services to their customers. Regular supplier performance review and report will provide visibility for SSW to track and monitor supplier's service based on the SSW's requirements of RFP and RFQ. Supplier performance review and report can be audited and will provide transparency to the taxes payers for the products and service eventually provided to them. However, SSW only mentioned that vendors need to product complete and accurate product information to facilitate the contract development and implementation process.

3)Lack of mandatory requirements for supplier to comply with privacy policy

Information for SSW and all of SSW's customers including tier 1 customers (member hospitals and health care centers), tier 2 customers ( different departments within hospital and health care centers), tier 3 customers ( doctors and nurses) and tier 4 customers (all patients) are confidential. It's SSW's responsibility to protect the confidential information. SSW also needs to ensure that their vendors protect these confidential information as well. Confidential information protection must be one of the key vendor responsibilities.

4)Lack of due diligence and risk mitigationprocess and Vendor of Record (VOR) Program

To ensure the fairness and transparency during the tender process, SSW will manage tenders through e-procurement tools "biddingo.com". As it is open to the public, vendors who meet requirement and have capability to provide products and services can participate tender process. According to section 7.2.9 of Public Sector Procurement Directive, "mandatory criteria (e.g., technical standards) should be kept to a minimum to ensure that no bid is unnecessarily disqualified1".SSW can develop evaluation criteria for business, technical and functional requirements. However, it is difficult for SSW to ensure that all the responses from vendors are honest, accurate and creditable. In addition, it is also hard for SSW to choose suppliers to provide best quality of product if they only provide minimum requirements for tenders. Proper due diligence process to mitigate risk becomes very important for public sectors.

5)No supplier diversity program

The Supplier Diversity Program (SDP) was first established in 2010 in USA to promote supplier diversity in public contracting."Supplier Diversity Canada in an initiative of BC-based Women’s Enterprise Centre (WEC). Its goal is to encourage the adoption of supplier diversity in Canada by encouraging corporations and government agencies to include more women-owned, aboriginal-owned,minority-owned and LGBT-owned businesses2". As a public sector, SSW needs to take more social responsibility to proactively participate programs which encourage minority groups grow up. However, Ifound that neither of SSW nor BPS (Broader Public Sector)mentioned the diversity program on their websites.

5.Alternatives and/or Options

Option / PRO / CON / Alternative
Enhance supplier's social responsibility / Ensure public sector accountability / Additional resource (e.g. HR) to assess and follow up / It's SSW's priority to ensure supplier's social responsibility, thus no alternative
Set up regular supplier performance review and introduce Vendor of Record (VOR) program / -Ensure supplier to provide high quality of products and satisfied services
-can be auditable and will provide transparency to customers / Potential price increase due to additional resource and reporting from suppliers / SSW can access to vendor's portal to generate report
Set up mandatory requirements for supplier to comply with privacy policy / Ensure supplier to comply with laws and regulations to protect confidential information / Supplier will request SSW to comply with privacy policy as well, thus needs additional training from SSW HR / Both SSW and suppliers to sign Non-Disclosure Agreement when they establish relationship
Improve due diligence and risk management process / Enhance SSW's accountability and mitigate risks, especially for long term agreement / Additional resource and time to implement the process / It's SSW's priority to ensure mitigate the risks for government; thus no alternative
Implement Supplier Diversity Program / Improve SSW's social responsibility / -Only a few of supplier can meet the requirement
-may not ideal for big project / Require supplier to implement green environment program as part of tender requirements

6.Recommendations

In my opinion, the following summary of my recommendations will be beneficial for SSW.

1)Emphasize supplier social responsibility during tender process. SSW needs to add supplier social responsibility to the existing vendor responsibility on their website and launch this program to the existing vendors as well.

2)Set up regular supplier performance review during contract term and introduce Vendor of Record (VOR) program. SSW not only ensures the high quality of products and satisfied service purchased from vendors, but also needs to keep vendor record to track their performance and maintain record for audit purpose.

3)Set up mandatory requirements for supplier to comply with privacy policy during tender process. Both SSW and customer's information are confidential information, supplier has the responsibility to protect the confidential information, and can't disclosure the information.

4)Improve due diligence and risk management process. As a public sector, it is SSW's responsibility to ensure that qualified supplier to provide products and services to hospitals and health care centers.

5)Implement supplier diversity program. As a public sector, SSW has the social responsibility to encourage minority groups grow up. Thus, SSW can set up supplier diversity requirements during the RFQ process for those biddings with small value.

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7.Implementation

Recommendation / Activity / Who-Primary / Who-Secondary / When
-Immediate
-Short term
-Medium term
- Long run
#1 / Draft notice to all existing vendors to introduce supplier social responsibility for tender process / Sourcing department / HR department / -Immediate
#1 / Provide trainings to SSW sourcing managers and set up conference calls with all existing vendors / HR and sourcing department / HR and sourcing department / -Short term
#2 / Introduce vendor performance review and VOR program to all existing vendors / Sourcing department / Member hospitals and healthcare centers / -Immediate
#2 / Set up vendor performance review clause and VOR program in the agreement / Sourcing department / Legal / -short term
#2 / Provide VOR trainings to member hospitals and healthcare centers / Sourcing department / HR department / -Short term
#3 / Set up mandatory requirements in RFP and clauses in agreement for suppliersto comply with privacy policy / Legal / Sourcing department / -Immediate and
Short term
#4 / Improve due diligence and risk management process / Sourcing department / Risk management department / -Medium term
#5 / Implement supplier diversity program / Sourcing department / HR department / -Short term
#1,#2,#3,#4 and #5 / Update related requirements in Biddinggo bidding system / Sourcing department / IT department / -Immediate

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8.Monitor and Control

There are two aspects to the monitor and control functions for SSW to execute new supply chain improvement. The first aspect is the successful implementation of the recommendation list above. This process can be completed by timely checks in regard to what has to be completed, by whom and when. In other words, management must simply follow up on the implementation plan.

The second aspect is the operations of supply chain improvement. Metrics must be provided to equally evaluate the success of the supply chain improvement. All departments within SSW and suppliers will be evaluated in the same or similar manner. The following is a list of KPIs that will be used to measure the supply chain improvement.

# / Performance Indicator / Unacceptable / Acceptable / Successful
1 / Supplier social responsibility commitment / Percentage of suppliers to commit social responsibility <85% / Percentage of suppliers to commit social responsibility is between 85% and 95% / Percentage of suppliers to commit social responsibility >95%
2 / Customer satisfaction / Satisfaction <85% / 85%<=Satisfaction <=95% / Satisfaction >95%
3 / Suppliers commitment to comply with privacy requirements / Percentage of suppliers to commit privacy requirement <95% / Percentage of suppliers to commit privacy requirement is between 95% and 100% / Percentage of suppliers to commit privacy requirement is 100%
4 / Suppliers who provide products and services are certified by WEC, WEOC, WBE Canada, CAMSC, and CGLCC / Percentage of suppliers are certified by diversity program organizations <3% / Percentage of suppliers are certified by diversity program organizations is between 3% and 5% / Percentage of suppliers are certified by diversity program organizations >5%

* WEC: Women’s Enterprise Centre

WEOC: Women’s Enterprise Organizations of Canada

WBE: Women's Business Enterprises

CAMSC: the Canadian Aboriginal and Minority Suppliers Council

CGLCC: the Canadian Gay and Lesbian Chamber of Commerce

9.Conclusion

In general,SSW should request suppliers to take more social responsibilities and comply with privacy policy and SSW needs to implement supplier diversity program in order to ensure the accountability as a public sector. Furthermore, SSW has to set up regular supplier performance review and VOR program and improve the due diligence and risk mitigation process to ensure high quality of products and satisfied services.By implementing the recommendations presented above, SSW will improve the customer satisfaction, enhance its social responsibilities as a public sector, and improve fairness, transparency and accountability during competitive process.

10.References, Appendixes and Exhibits

Reference:

  1. Broader Public Sector Procurement Directive. Retrieved from
  1. What isSupplier Diversity Canada? Retrieved from

Appendix A:

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