Coding For Buyers - Types of Purchasing, Saving
Types of Purchasing (Using the NHS as an example)
There are five main ways to buy products in the NHS:
Go out to tender and agree contract prices
Use Framework contracts
To decide on which of the above is best, requires a good knowledge of what is bought, how many and from where? To have this information requires good record keeping, based on standardized descriptions and an effective hierarchical coding system. The standardized record creates the basis for the procurement record of each product or service purchased. This record is updated each time a purchase is made and holds all the details of which suppliers are used and any contract information. A code is added to the record to make it unique and to help gather management information. The code needs to be hierarchical so that information can be gathered at different levels. E.g. what is spent on furniture overall, down to how many individual chairs of a specific design are bought. This information can be used for two purposes.
To decide where to put most purchasing effort, i.e. where most money is spent
To monitor expenditure against budget.
Using standardized descriptions means that it is easy to compare the prices of different suppliers, ensuring that the cheapest is always bought, this can easily save up to 5% of influenceable expenditure.
Knowing where to put the maximum effort of staff resources means that the correct products are put out to tender, which should save a further 5%.
With this good knowledge base it is then straightforward to begin a standardization and rationalization process of products groups. Coupling this with a reduction of suppliers, costs can be cut even further and reduce the overall number of orders placed. This combined should also save another 5%.
Thus good standardized descriptions with an effective coding system underpins these key ways of saving money. Without knowing exactly how much money is being spent with different suppliers for different items it is not possible to do even the most simple of tasks like choosing to purchase the cheapest item.
For more information on specific coding structures use the links to download information, or speak to one of our representatives by calling 023 8055 4111.