Andy McMinn on Clinician-Led Procurement at BravoSolution Connect Event

We have mentioned previously the work being done by Andy McMinn, CPO at the Plymouth Hospitals  NHS Trust, and his break-out session was a highlight at the recent BravoConnect event (the BravoSolution customer conference). McMinn comes from a private sector and supply chain background, so his focus is always wider than pure “procurement” for a start.

For example, one early figure he quoted set the scene for his presentation; one study showed that 28% of hospital inventory ends up in the bin. That is because of over-ordering, obsolescence and slow demand for certain lines. Yet only 10% of hospital Trusts have an inventory system. It’s a similar message to what we heard from David Lawson of Guys Hospital recently, another of our leading CPOs in the sector. Price comparisons between Trusts are fine, Lawson said, but the real value lies in sorting out the end-to-end supply chain – and in identifying how effective products are too (but more on that later).

In healthcare, McMinn said, only 25% of the cost base is with suppliers – that is low compared to other sectors (although as more “staff costs” get converted to “agency costs,” that must be changing somewhat). But procurement is still low on the maturity curve and heavily transactional. Demand for healthcare is rising, budgets are flat and more complex supply chains are leading to greater risk. There is, he said, a “doomed love triangle” between suppliers, procurement and clinicians that must get resolved!

Suppliers are often too close to clinicians – McMinn is in favour of the Sunshine Act, which in the US is proposing that suppliers and clinicians must disclose their commercial relationships. Suppliers can come and go at any time into hospitals; Leeds started controlling this and found 65 suppliers in one day were on-site!

“These independent behaviours – rather than a healthy interdependency – are amplifying risks and increasing costs,” McMinn said. He told of a nurse telling him proudly that she had received a 10% discount from a supplier for buying a certain product. But to get the discount she had bought 18 months' worth of the item.

Supply chain waste is linked to the variety of items that is bought. This disaggregation undermines buyer power and forms barriers to entry for alternative suppliers. The group purchasing organisations in the sector become “framework factories” in order to offer users (too much) choice. In one hospital, a study found that over 50% of the items in inventory had not moved for over 24 months.

So how can this be addressed? We need data and market insights. We need better information on clinical product performance, and we must incentivise the right behaviours (for instance, allowing budget holders to re-invest savings). That can enable category strategies and implementation plans for key spend areas.

McMinn is part of a group of 10 hospitals that receive spend data now monthly via the BravoSolution spend analytics platform. This enabled them, for instance, to see that 286 different types of glove were being bought from 29 suppliers. By looking at the plastics market, using market intelligence, committing to market share and using their leverage (doing a good procurement job, in other words), the group has reduced the price of a unit from around 3p to 1.4p per pair, and the number of SKUs from 285 to 5.

McMinn believes that savings of 20% to 50% are possible, alongside improved clinical outcomes, on a range of products in the medical sector. “We need focused and engaged clinicians though, presenting a united front to the market.” Non-contentious items should come first, and then eventually the more difficult stuff will follow.

So, an inspiring presentation, and it does feel now that we have quite a lot of really impressive CPOs in health. But is it enough to give a critical mass for change? Is the central Department of Health doing enough to help promote the best work? Can we get clinicians to think at least to some extent in a commercial manner? These are big questions still to be answered.

Voices (23)

  1. Mark Lainchbury:

    re: single, national electronic catalogue.

    It’s all about the Tech.

    Much of the demand for a reduction in variation ( a procurement tool from the 18th century) is driven in the NHS, by clincal ignorance and rightfully should take a back seat, to a drive towards total supply chain visibilty.

    Within the next few years, we will/should be getting to a point where the “Internet of Things” will transform Healthcare supply systems PO Systems (accessed on a mobile device at the bedside) will “know” the Requisitioner from their name badge Rfid. Will know the PLACE location from the Hospitals Wifi and will know the Patient I.D. from their wrist-band Rfid. The SNE-Cat must be in place, to fill in the last missing “PRODUCT” piece, of this trinity..with a glut of consistant data.

    Tradational PO’s just are not up to it.

    1. Dan:

      “Within the next few years, we will/should be getting to a point where the “Internet of Things” will transform Healthcare supply systems PO Systems (accessed on a mobile device at the bedside) will “know” the Requisitioner from their name badge Rfid. Will know the PLACE location from the Hospitals Wifi and will know the Patient I.D. from their wrist-band Rfid. The SNE-Cat must be in place, to fill in the last missing “PRODUCT” piece, of this trinity..with a glut of consistant data.”

      Having worked in the public sector, I have a feeling that it will be more than a few years until that level of technology is widely used, given the less than outstanding use being made of current technology

      1. Bill Atthetill:

        Ok, hot-off-the-press,

        I’ve been informed that the ‘new’ national catalogue could/will be NHS Supply Chain’s catalogue – is this good or bad news?

        1. Sam Unkim:

          Depends
          Do you want the present “Tesco’s” model, 380,000 items to sustain every single possible variety but often at list price.
          Or a “Lidl’s” model, some 9 to 12,000 SKUs one type suits all (any colour you want as long as it’s NHS Pantone 300 blue ) but with very competitive pricing.
          So probably not good news……….

  2. Bill Atthetill:

    So, looking at Lord Carter’s interim report, why is there such a massive emphasis on the one-trick-pony of a “single, national electronic catalogue” when the most significant benefit/value resides in relentlessly managing local supply chains? Or did I miss something? Focusing on the price of 100 products when you throw 20 of them away each year can’t be right…. And a reduction in variation can’t be achieved overnight, nationally, by rolling out a national catalogue (unless the vast majority of the curent volume already flows through a small percentage of the SKUs being adopted by hospitals).

  3. David Lawson:

    In truth no one really knows. The majority of hospitals do not have inventory control over the majority of spend. Clinical supplies, the majority of which is in sterile packaging (and so with time expiry) is expensed as soon as it crosses a hospital loading bay. Even for medicines which are subject to greater control are expensed out of pharmacy inventory systems when they leave the pharmacy dept and go up to Wards. However, given the absence of visibility/ control and the repeated examples of over ordering, stock expiry, obsolescence a waste level of 15-25% is not unrealistic. A recent study in one hospital indicated excess inventory +4wks at almost 70%. The level of inventory waste is unknown because the inventory is expensed on delivery but the risk of high levels of waste is clear.

  4. Sam Unkim:

    Re: not sure how many have a decent “ordering” system either

    Virtually all NHS ordering systems are an awful 1990’s after-though appendage to the finance-dept.’s existing monolithic legacy E.R.P systems. Agresso & Integra being particularly worth a mention, for not having a “Data-Field” to record either Product Code or Unit of Issue.. Vital information which then has to be buried in the narrative description…

    None of them can be described as good, lacking
    • Live organisation wide spell-checking
    • Predictive Text. Drawn from catalogued items or previous orders
    • Fast Search
    • “Some-one has just ordered similar “
    • Phrase pasting

    They need to be designed for the NHS, aimed at getting the requisitioner back to their “day-job” a.s.a.p., after creating an accurate requisition.

    Hardly an Amazon experience

    1. Final Furlong:

      I know what you’re going to say Sam. “He’s back!”
      Needless to say I was in a place where I couldnt possibly comment, and, well, now I’m not.
      Your comments and those of others all make perfect sense. International research (recent) has identified that there has been enormous investment in supply chain management (strategy, process, systems, skills….) by hospital chains in both public and private sectors, aligned to a centre-led approach to procurement and sourcing. (When I say centre-led, I do not mean ‘centralised’. ‘Centre-led’ operating models can work within both centralised and devolved organisations.)

      Very few trusts have adopted lean as a key component of their supply strategy (let alone implemented it) and banging in place any technology into a fundamentally inefficient environment only enables those inherent inefficiencies to become embedded. Transformation (radical transformation) is key. You need to obliterate before you automate.

      Spend analytics is also key. Trusts need to follow the money and, as some CPOs have done, undertake ABCx analyses to identity the sweetspots in the flow of goods and materials to the point of use.

      The Atlas of Variation put an enormous (unwanted) spotlight on price varistion, when waste and product varistion would have been better and more sophisticated measures of efficiency (there is a huge different between 15% of total volume cost vs 10% of product price). But, as David as said below, not many trusts are able to accurately track what they waste.

      1. Bill Atthetill:

        That all sounds very good (taking aside the obvious consultancy-speak…).

        But, in getting back to basics, there were two prime recommendations in Carter’s report for procurement: a single national catalogue and reviewing the need for a ‘Sunshine Act’ (though it looks more like a ‘Sunset Act’ for many…).

        If what you (and others) say is true, could you throw some light onto why this wasn’t a key recommendation in the report, and, yet, as it has been pointed out to me, this sentence (below) can be found within it…

        “…We do believe there are greater savings to be had by managing the demand for products through better inventory management rather than price reductions.”

        Again, did I miss something?

      2. Mark Lainchbury:

        Sorry cannot let this go by
        “The Atlas of Variation put an enormous (unwanted) spotlight on price variation, ”

        No it wasn’t unwanted or even unneeded.
        It is/was just riddled with errors, lacking in context and unrepresentative.
        Many of us are still hanging in there until it becomes useful for more than causing Daily Mail readers to self-combust.
        The most recent version’s suture comparison was nuanced, useful and gives me hope for it’s overall future

  5. Sam Unkim:

    Comparing Oranges and Onions

    Most of the value in the 28% was down to Expensive “short shelf life” & “made to prescription” drugs.
    Items traditionally beyond the (inventory) control of most Trust H.o.Ps

    But great for headlines though

    1. Andy McMinn:

      Incorrect Sam. The 28% is across the board and in fact pharma waste is below this average with this area seeing stock turn ratios up in the twenties. It’s not headlines it’s fact.

      1. Sam Unkim:

        “28% Across the Board” really !!
        My Trust is ordering over £10million a year from NHS-SC alone.
        Top 20 by spend……….
        Hearing aids, Gloves-examination, ,Gloves-Surgeons, Cannula, Administration-sets, Patient Warming Blankets, Stocking Anti-embolism, Syringe-hypodermic, Skin-antiseptic, Sharps Container, Patient-Wipes, Thermometer covers, Cubicle-Curtains, Dressing IV, Tourniquet SingleUse, Underpads, Apron-polythene, Copy-Paper, Paper-Handtowels, Couch-Roll etc.

        The vast majority of this stuff, just isn’t being thrown away, unused….

        If it were really 28% then Trust purchasing dept. would be completely re-aligned to reduce this lost £2.8 million rather that “mucking about” chasing price savings on items where 1/4 are doomed to be thrown away !!

        Liked the rest of the piece though……..

        1. Andy McMinn:

          Sam which trust are you at? We should hook up ? Let me know which trust and I’ll track you down.

  6. Dave Coley:

    As the NHS gets greater visibility of the scale of the inventory problem it also needs specialist and focused support to develop business cases or offer loans to Trusts to embark on this journey. A few of my colleagues aside I dont see many of us having the skill set or multi industry experiences to “lean” a hospitals supply chain and deploy a system to control and automate the process.

    My ask of the DH is develop business case templates based on those of us who are on this journey, provide loans and select a pool of implementation experts to support the service -piecemeal improvements just arent adequate.

  7. David Lawson:

    Inventory control is the perhaps the single most important efficiency opportunity “Procurement/ Supply Chain” functions in hospitals should target right now. A hospital could make an immediate Month One impact on reducing over ordering/ waste on all product lines simply by applying a level of control and investing in its Supply Chain team. Alternatively a hospital could wait for various national initiatives focused on unit price such as the recently announced national electronic catalogue – delivery date/ scope unknown?

  8. Andy McMinn:

    just one clarification , I said only 10% of hospitals have an inventory management system. Thanks for the article Peter. Spot on summary.

    1. Peter Smith:

      Changed now – a slip of the pen! thanks for spotting, I did mean “inventory”. Mind you, not sure how many have a decent “ordering” system either…!

  9. Dan:

    Why does a nurse have the authority and ability to order 18 months worth of a particular item?

    1. Andy:

      Dan. in some hospitals approx 70% of inventory is managed by clinicians. There are no bills of materials linked to production. Simply we have approved contracted items in our eprocurement system that approved budget holders can requisition from. We therefore control price and item choice but can only influence volume by taking over item management from clinical staff. By the end of this year 50% of trust inventory will be managed by my team. The goal is obviously 100%. Happy to link up to discuss further.

      1. Secret Squirrel:

        Good work, Andy, but another back to the future for me. We were doing this 10 plus years ago when I was at Leeds Teaching Hospitals.

      2. Dan:

        But how can you truly control the price if you have no influence over the volume? Its the volume of work that will (in part) determine the price.

        1. Andy:

          We contract for the annual volume and possible growth with retrospective rebates just one tool. what I should have said is that for those items not inventory managed by my team I have limited control over how they call off or pull. Some might requisition small volumes regularly and keep a tight ship , fifo etc Others might over requisition , bullwhip effect etc hence I don’t control volume be requisitioned but I do contract for volume consumed.

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