Faced with procurement challenges, aged care facilities are considering alternatives

Procurement managers in the aged care sector have faced significant challenges since the advent of the COVID-19 pandemic, which has impacted trade shows, sales calls and safety protocols in facilities – not to mention disruptions to the supply chain.

 Australia’s aged care sector accounts for an estimated $2.2 billion of purchases annually to keep residents fed, entertained and healthy, according to Sean Matthews, who is managing director at Banksia Consulting Group and a specialist in transformation and change in the aged and healthcare industries. He was working with a multitude of companies while heading the care division of wholesale stationery and supplies retailer Winc before a restructure of the business prompted him to establish his own consultancy in August last year, a time when the industry was still feeling the impact of the pandemic on everyday life.

 Matthews has heard first hand from suppliers and some of the 1800+ organisations in aged care who regularly purchase supplies about how the pandemic has forced a rethink of procurement procedures.

 “What COVID did was identify that – like most companies in Australia – we don't risk-manage well. We wait until the shit hits the fan, and then we do something about it.”

 No-one had pre-planned for the impact of a pandemic, despite the fact that they have occurred in other parts of the world in years past.

 The result was that the supply chain was broken because of international shipping delays, factories being closed due to the coronavirus outbreak and people in Australia having to stay home social distancing for varying lengths of time.

“Because aged care homes could not get supplies and products, a lot of them were just buying up in bulk from existing suppliers. And now many of them have got themselves into a financial hole because of it. A lot of the aged-care businesses have made a loss this year – some running into the millions – because they over bought on supplies and they’ve had to keep staff at home who weren’t feeling well, and continue paying them in some circumstances. All those costs add up.”

 Another impact was that the salespeople who used to go out and meet procurement staff at aged care facilities were cut off as a direct impact of COVID-19, so they had to connect either via Zoom or over the phone and a level of personal contact was lost.

 On top of that, facilities were often isolated to protect the residents, who are among the most vulnerable demographic when it comes to contracting COVID.

Matthews says the result has prompted procurement staff to consider new sourcing options – and even suppliers. The pandemic has highlighted that customers “always relied on suppliers being reliable”. Consistency of supply and timeliness of delivery has become more important than price especially during and post COVID.

 "Value is not only about pricing, it's about how the products get delivered, how they are invoiced – all of those key efficiencies. The cost of doing business is very relevant to them. It's not only the cost of an item, because if it is 50-per-cent discount, that doesn’t matter if it does not get delivered on time.”

 Working with a group of companies in the sector, Matthews has developed a pilot program in which facilities can work alongside an Australian-owned B2B wholesale trading platform called TradeSquare which allows sourcing from multiple suppliers through a single portal, and with transparent pricing.

 With one company on board and several more in discussions, the program will bring procurement staff and vendors together to understand the sector’s needs better and help develop a tailored supply model – “because money and efficiency are two areas that they're really eager to manage better.”

 “A lot of organisations are looking for different ways to source but they don't know there are other procurement options out there until someone puts it in front of them. So a lot of people will just go on doing the same thing and the only time they will change suppliers is when they've been let down numerous times because KPIs haven't been met or their products haven't arrived.”

 A core theme for Matthews currently is ‘co-designing’. He sees it as essential that the sector works closer together to solve common challenges. “If you build stuff, and expect your customers to like it, they inevitably won't. But if you co-design something – like with the pilot that we're trying to design right now with TradeSquare – it’s based on the customer having input as to how they want to be transacting.

 “The sector is very regulated and time poor right now and there has been a reluctance to change. But in saying that, people recognise they have got to be more cost efficient. So, this pilot is more about finding out if there's some value that can be generated and the only way we find that out is by asking questions and saying, ‘We've got an alternative, but we need to understand what you need and how you want it delivered’