Lecture 1
Gross domestic product (GDP) = standard measure of the value added
created through the production of good and services in a country during a certain
period. As such, it also measures the income earned from that production or the
total amount spent on final goods and services (less imports).
Why tce is important: (overheidsopdrachten)
1. Over 250,000 authorities in EU spend around 14% of GDP on the purchase
of services, works and supplies.
2. Public sector can use procurement to boost jobs, growth and investment
and to create economy that is more innovative, resource and energy
efficient, and socially inclusive.
3. Impact the supply market through the promotion of innovation.
What a hospital spends:
1. Income from patient care
2. Expenses:
a. Purchase of healthcare
b. Staff and directors
c. Premises and transport
d. Supplies and services (clinical exc drugs)
e. Supplies and service (general)
f. Drug costs
Purchasing volume (%) = spend volume as % of total turnover.
Refers to the proportion of a specific purchase (such as insurers HC/HC
providers) to a company's total purchasing volume.
What is sourcing / purchasing / procurement?
- (Selective) contracting providers by insurers
- Tendering medical equipment
- Wisely spending tax payer’s money
- Negotiations between insurers and providers
- Saving costs
- Outsourcing / insourcing
- Hiring advisors, temporary labor
- Purchasing elderly care by municipalities
It is not just a purchasing, it involves everything you get an invoice for
department or purchasing/procurement officer.
Each step involves specific activities, which are to be performed:
,At the beginning of the procurement process, most costs can be saved
(specifications & cost savings)
Lecture 5
Performance management (24% of the papers), healthcare purchasing
strategies (23%) and contracting (11%) are mostly discussed in the
literature:
Outsourcing = often aimed at reducing non-core activities, the strategic
implications need to be considered.
Decisions about outsourcing non-core activities are often strategic
- Less strategic but also relevant
o Facility management, finance, IT
o Indirect payment
- Boundaries of firms are blurring more and more
o What are core activities of NIKE, Apple, DELL, etc.?
Possible reasons for
outsourcing:
1. Increased flexibility
2. Lack of skills
3. Political pressures
,Transaction costs = Costs of running the system. Try to minimize them best as
possible.
1. Direct costs of the product and managing relationships (e.g. drafting and
negotiating contracts)
2. Opportunity costs of making inferior governance decisions
Four key aspects define the transaction cost theory:
1. Assumptions of human behaviour:
a. Bounded rationality = People have limited cognitive abilities and
information to make fully rational decisions.
b. Opportunism = People may act in self-interest with guile, leading to
uncertainty and risks in transactions.
2. Dimensions of transactions
a. Asset specificity = The degree
to which an investment is
specific to a particular
transaction and difficult to
repurpose for other uses.
b. Uncertainty = The level of
unpredictability and risks
surrounding future
circumstances within a transaction.
Criticisms TCE
1. Limited options
2. TCE does not address the limitations of firms
3. TCE is a theory of cost minimization, not of value maximization
4. Transaction cost theory tends to focus on contractual issues and neglects
relational mechanisms.
Resources can be divided into resources and capabilities and bring
competitive advantage:
- Resources are heterogeneous and are endowed with differential levels of
efficiency
- Superior resources enable firms to produce at lower cost or better satisfy
customer demand
Resources that fulfil these criteria to a large extent provide competitive
advantage and should not be outsourced : VRION
1. Valuable = The resource should create value by improving efficiency or
effectiveness
2. Rare = It must be unique or scarce compared to competitors, providing an
edge
3. In-imitable = Competitors should find it difficult or costly to copy the
resource
4. Immobile/organization = The resource should be specific to the firm and
difficult to transfer, and the company must have the organizational
capabilities to exploit it
5. Non-substitutable = There should be no equivalent alternatives that
competitors can use to achieve similar benefits
Conclusion: Resources that meet the VRION criteria provide a sustainable
competitive advantage and should be kept in-house rather than
outsourced to maintain control and uniqueness.
, RBV (resource-based-view):
- Criticisms:
o Exclusion of opportunism
o Limited prescriptive implications
o Less focus on costs than TCE
Differences TCE & RBV:
- Both discuss markets and hierarchies as options, but differences exist:
1. TCE: markets are preferred unless…
a. Transaction costs are too high (i.e. firms are the last resort)
2. RBV: internal is preferred unless…
a. Capabilities cannot be developed or acquired
Important activity of a purchasing process is the specification of need
Remember, difference between purchasing OF healthcare and purchasing
FOR healthcare
Specification:
1. Multiple dimensions of specification:
a. Product requirements, process requirements, customer
requirements, mode of communication, functional requirements,
form of specification, technology use and standard specifications
2. Specification is input for:
a. Request for Quotation (RfQ)
b. Request for Proposal (RfP)
i. Success of RfP: Research, features,
comparables, stakeholders, budget, schedule.
Two main ways of preparing the specifications:
1. Technical
a. Detailed description of properties
b. If there are complex interfaces with existing equipment
Gross domestic product (GDP) = standard measure of the value added
created through the production of good and services in a country during a certain
period. As such, it also measures the income earned from that production or the
total amount spent on final goods and services (less imports).
Why tce is important: (overheidsopdrachten)
1. Over 250,000 authorities in EU spend around 14% of GDP on the purchase
of services, works and supplies.
2. Public sector can use procurement to boost jobs, growth and investment
and to create economy that is more innovative, resource and energy
efficient, and socially inclusive.
3. Impact the supply market through the promotion of innovation.
What a hospital spends:
1. Income from patient care
2. Expenses:
a. Purchase of healthcare
b. Staff and directors
c. Premises and transport
d. Supplies and services (clinical exc drugs)
e. Supplies and service (general)
f. Drug costs
Purchasing volume (%) = spend volume as % of total turnover.
Refers to the proportion of a specific purchase (such as insurers HC/HC
providers) to a company's total purchasing volume.
What is sourcing / purchasing / procurement?
- (Selective) contracting providers by insurers
- Tendering medical equipment
- Wisely spending tax payer’s money
- Negotiations between insurers and providers
- Saving costs
- Outsourcing / insourcing
- Hiring advisors, temporary labor
- Purchasing elderly care by municipalities
It is not just a purchasing, it involves everything you get an invoice for
department or purchasing/procurement officer.
Each step involves specific activities, which are to be performed:
,At the beginning of the procurement process, most costs can be saved
(specifications & cost savings)
Lecture 5
Performance management (24% of the papers), healthcare purchasing
strategies (23%) and contracting (11%) are mostly discussed in the
literature:
Outsourcing = often aimed at reducing non-core activities, the strategic
implications need to be considered.
Decisions about outsourcing non-core activities are often strategic
- Less strategic but also relevant
o Facility management, finance, IT
o Indirect payment
- Boundaries of firms are blurring more and more
o What are core activities of NIKE, Apple, DELL, etc.?
Possible reasons for
outsourcing:
1. Increased flexibility
2. Lack of skills
3. Political pressures
,Transaction costs = Costs of running the system. Try to minimize them best as
possible.
1. Direct costs of the product and managing relationships (e.g. drafting and
negotiating contracts)
2. Opportunity costs of making inferior governance decisions
Four key aspects define the transaction cost theory:
1. Assumptions of human behaviour:
a. Bounded rationality = People have limited cognitive abilities and
information to make fully rational decisions.
b. Opportunism = People may act in self-interest with guile, leading to
uncertainty and risks in transactions.
2. Dimensions of transactions
a. Asset specificity = The degree
to which an investment is
specific to a particular
transaction and difficult to
repurpose for other uses.
b. Uncertainty = The level of
unpredictability and risks
surrounding future
circumstances within a transaction.
Criticisms TCE
1. Limited options
2. TCE does not address the limitations of firms
3. TCE is a theory of cost minimization, not of value maximization
4. Transaction cost theory tends to focus on contractual issues and neglects
relational mechanisms.
Resources can be divided into resources and capabilities and bring
competitive advantage:
- Resources are heterogeneous and are endowed with differential levels of
efficiency
- Superior resources enable firms to produce at lower cost or better satisfy
customer demand
Resources that fulfil these criteria to a large extent provide competitive
advantage and should not be outsourced : VRION
1. Valuable = The resource should create value by improving efficiency or
effectiveness
2. Rare = It must be unique or scarce compared to competitors, providing an
edge
3. In-imitable = Competitors should find it difficult or costly to copy the
resource
4. Immobile/organization = The resource should be specific to the firm and
difficult to transfer, and the company must have the organizational
capabilities to exploit it
5. Non-substitutable = There should be no equivalent alternatives that
competitors can use to achieve similar benefits
Conclusion: Resources that meet the VRION criteria provide a sustainable
competitive advantage and should be kept in-house rather than
outsourced to maintain control and uniqueness.
, RBV (resource-based-view):
- Criticisms:
o Exclusion of opportunism
o Limited prescriptive implications
o Less focus on costs than TCE
Differences TCE & RBV:
- Both discuss markets and hierarchies as options, but differences exist:
1. TCE: markets are preferred unless…
a. Transaction costs are too high (i.e. firms are the last resort)
2. RBV: internal is preferred unless…
a. Capabilities cannot be developed or acquired
Important activity of a purchasing process is the specification of need
Remember, difference between purchasing OF healthcare and purchasing
FOR healthcare
Specification:
1. Multiple dimensions of specification:
a. Product requirements, process requirements, customer
requirements, mode of communication, functional requirements,
form of specification, technology use and standard specifications
2. Specification is input for:
a. Request for Quotation (RfQ)
b. Request for Proposal (RfP)
i. Success of RfP: Research, features,
comparables, stakeholders, budget, schedule.
Two main ways of preparing the specifications:
1. Technical
a. Detailed description of properties
b. If there are complex interfaces with existing equipment
