How does the procurement process work?

The healthcare supply chain includes upstream suppliers and distributors, and downstream consumers providers. Most of the time, distributors and providers use the electronic order-entry systems to exchange data.

Factors of the effective procurement process

• Relationship between buyer and seller should be transparent and ethical.
• Procure the right medicines in the right quantities.
• Products must meet recognised standards of quality.
• Hopefully obtained at the lowest price.
• Regular purchasing schedule, and safety stock level should be established.
• Ensure timely delivery to avoid stocking out.
• Ensure supplier reliability with respect to service and quality.

A typical model

The pharmacy department manages procurement with support from information centre. The central warehouse supplies six pharmacy divisions and an outpatient pharmacy in the hospital. It is managed by one chief pharmacist, seven pharmacists, and two experienced technical staffs.

Suppliers who want to participate in tender must prepare these documents

• Drug license
• Authorisation letter
• Manufacturer PIC/S approval letter
• Price survey from other medical centers
• Instruction sheet
• NHI price
• Price sheet
• Factory registration certificate (domestic industry only)

There are three common purchasing models

• Annual purchasing
• Scheduled purchasing
• Perpetual purchasing

Reorder frequency may differ from the purchasing model. Maintaining a safety stock level is very important. To ensure this, the supplier lead time, pattern of consumption and service level must be calculated.

Several factors may affect reorder quantity

• Average consumption, the demand.
• Lead time, the time between starting a purchase order and receipt at the warehouse.
• Safety stock, stock that should always be on hand.
• Reorder level, the quantity of remaining stock that triggers a reorder of the item.
• Maximum stock level.
• Stock position.
• Procurement period.

In the event of an epidemic or seasonal disease, purchase quantities should be adjusted promptly to match temporal needs.

Perpetual purchasing is also called just-in-time inventory. It can be used for high-price items. The item is only purchased on the request from physicians.

It is necessary to regularly review the best inventory level and maintain as little stock as possible. As with higher inventory turnover, patients will get newer medication.

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