Healthy new procurement practices ease a health insurer's sourcing pains

This health insurer also operates aged care facilities, dental centers, and hospitals. It's deeply committed to providing the best possible service to its 18 million customers worldwide, but it wasn't happy with its crucial NPS score, which measures customer satisfaction. Its traditional goods and services procurement and sourcing practices were part of the reason for this. Bureaucratic, inconsistent sourcing activities involved too many steps, meaning long lead times for internal customers – and that translated to service issues for its patients and insureds as well as higher operating costs.

What's more, the firm recognized that many of its suppliers hadn't been thoroughly vetted, raising doubts about regulatory compliance. Leaders also didn't have a handle on contract end dates or license expiration dates, weakening their negotiating position at renewals. And on top of this, staff were ordering some goods and services off contract – or with no contract at all. That was risky business.

Bottom line: Without a cohesive procurement process in place, the company didn't have the visibility it needed for optimal sourcing resource planning, strategizing, and decision-making that would give its patients and customers the best possible service.

Genpact had a five-year relationship with the company administering claims and providing finance and accounting services, so we were well acquainted with its processes and company culture. In this new capacity, the firm brought us in to handle indirect category management – that is, to procure the professional goods and services that help it operate.

The goal was to ensure Genpact's skilled procurement experts, who had a comprehensive picture of all providers in each purchasing category, would share new procedures and policies with the firm's internal commercial sourcing team. This meant understanding the enterprise's exact requirements, getting a detailed sense of what the market offered, and determining the most appropriate suppliers. Our 12-person team held intensive, high-level kickoff sessions over two days. We started by:

• Scoping out existing conditions with key stakeholders, having them describe pain points, and watching them in action
• Interfacing with category managers handling different aspects of procurement
• Mirroring their roles to get a broad-based understanding of their practices
• Studying all the tools and systems involved with in-depth process mapping

We reviewed all of this information and came back for two weeks of more focused sessions to drill down into what we'd learned. We systematically broke these discussions down into the specifics of every procurement topic, such as sourcing procedures and recruitment policies, bringing all relevant subject matter experts to the table for the deepest dive possible. We determined that there were no global standards in place covering manual practices, which varied from location to location. We also found that procurement and commercial sourcing activities were not sufficiently integrated. We produced an in-depth report that collated these and other findings and ran it by the company. Then we made one final thorough assessment.

At that point, we'd peeled back every layer of every process that touched procurement and sourcing. With these in-depth insights and our extensive knowledge of the marketplace, we understood our client's exact needs. Now, we were ready to act.

We created a target operating model geared toward finding the perfect balance between onshore and offshore procurement teams. We bolstered commercial sourcing support coming from headquarters and advised right-sizing the firm's outsourcing group. We pointed out nuances in ordering processes that the company had missed that could improve its buying power. We identified areas that were ripe for new or better tools and processes, such as its procure-to-pay system, suggesting automation that would get the most out the company's existing technology.

We also created a contract repository and brought in more category managers to familiarize staff with new procurement procedures. This change management effort soon bore fruit as more people began using this system and reduced or eliminated the risks of off-contract ordering.

Here's just one example of how these improvements played out. The company wanted to enlist a recruitment agency, so human resources provided us with the names of the agencies it had used to date. With our multilayered understanding of HR's requirements, we expanded the list to add top recruiters based on our own research. Next, we put out a call for tenders. When we got responses back, we looked at the agencies' case studies, tested their cultural fit, verified their credentials, and scrutinized their financials. Meanwhile, we conducted due diligence on potential new suppliers, examining their credibility, their compliance record, and so on. When we'd whittled down contenders to a short list, we negotiated the best possible terms for our client. And we handled the legal aspects of the final contract.

We repeated this process for other category management activities.

After a 20-month engagement with us so far, our client has seen clear improvements. 77% of spend is now under contract – contracts based on best practices and sound information – compared to just 51% before we started. In addition:

• NPS, CPI, and KPI numbers are on the rise
• The 1,000-contract repository we created includes details such as end dates and license expiry dates, making negotiating with suppliers simpler, consistent, and streamlined
• Standardized processes are saving people time and boosting productivity
• Off-contract spending is down
• The company has recognized savings of roughly $8 million

Now, with greater visibility into procurement spend, the company can assign resources and make decisions more effectively.