Procurement performance measurement system in the health care industry

Abstract

Purpose: The rising operating cost of providing healthcare is of concern to health care providers. As such, measurement of procurement performance will enable competitive advantage and provide a framework for continuous improvement. The objective of this paper is to develop a procurement performance measurement system.

Design/methodology/approach: The paper reviews the existing literature in procurement performance measurement to identify the key areas of purchasing performance. By studying the three components in the supply chain collectively with the resources, procedures and output, a model is been developed. Additionally, a balanced scorecard is proposed by establishing a set of generic measures and six perspectives. A case study conducted at the Singapore Hospital applies the conceptual model to describe the purchasing department and the activities within and outside the department.

Findings: The results indicate that the material management department has already made a good start in measuring the procurement process through the implementation of the balanced scorecard.

Research limitations/implications: There are many data that are collected but not properly collated and utilized. Areas lacking measurement include cycle time of delivery, order processing time, effectiveness, efficiency and reliability. Though a lot of hard work was involved, the advantages of establishing a measurement system outweigh the costs and efforts involved in its implementation.

Practical implications: Results of balanced scorecard measurements provide decision-makers with critical information on efficiency and effectiveness of the purchasing department's work.

Originality/value: The measurement model developed could be used for any hospital procurement system.