NHS Supply Chain – committed spend drives better value

We talked about the general progress and issues around the NHS Supply Chain operation, run by DHL, in part 1 here. Today we'll dig into a couple of more specific initiatives.

One successful idea has been the “capital trading fund”.  This idea, developed by the Department of Health and DHL, saw DH providing initial funding so that DHL could go to the market with commitment and actually buy outright health capital equipment – items that they knew their customers were going to need, but for which they didn’t necessarily have firm orders.

The results demonstrated what we probably would have expected. Approaching suppliers with commitment and hard cash rather than merely the chance to go on a framework with some vague promise of future business, has led to savings that have averaged around 14%, according to Mick Gerrard, Supply Chain’s CEO.

“To date NHS Supply Chain has negotiated 36 commitment deals on a wide range of medical equipment such as Linear Accelerators, Bladder Scanners, CT, MRI Scanners and X-Ray Machines. Over £11m of incremental savings over and above the National Framework prices have been generated, further helping trusts to maximise their capital equipment budget”.

And the beauty is that this was a one-off investment by DH – as items are bought by Trusts, the fund is constantly renewed.  “Trusts are now sharing their capital plans with us so we can look ahead and invest ahead of the trusts requirements” says Gerrard.  Is there scope for other collaborative bodies to learn from this, I wonder?  GPS in central government perhaps?

Another initiative which shows promise is the drive for better stock and supply chain management around items used in operating theatres. I certainly didn’t know that we still have suppliers physically going round theatres doing consignment stock management. That seems amazing in these digital days. This area is “still largely clinician driven – so there are big opportunities for moving stock more efficiently though the supply chain”.

Of course, DHL are also bringing their specific expert experience in the logistics field to bear too. The Rugby warehouse is now holding slow-moving stock for much of the country – that has been calculated to be more efficient than holding it in each regional depot. There’s also been investment in automation. Whilst it is a long way short of a fully automated, no-humans- in-sight warehouse, some of the picking has been automated via impressive new equipment.

I’d been reading before my visit a lot about the way certain retailers (no names mentioned) treat staff at their warehouses, so it’s worth saying that there is a clear focus on good management and staff relations at Rugby. Staff turnover is very low and the desire to communicate and involve everyone was clear from both the notice boards evident around the place and our discussions on management practices.

As one of our commenters pointed out ( see part 1), there is much more that Supply Chain could do, and the organisation is not without its critics. Customer service is key of course to the organisation’s reputation, but I suspect whatever they do, some stakeholders have never forgiven the whole initial concept of outsourcing and the way it was pushed through by Ken Anderson, the NHS Commercial Director at the time and a controversial figure in many ways. But you do get the impression that there is now a genuine focus on customer service and managing the range of stakeholders in a positive manner - from small SME suppliers to clinicians, from procurement customers to staff.

As we explained in part 1, Department of Health have a tricky decision to make next year about whether to re-tender or extend DHL’s contract. It’s not surprising therefore that DHL are focusing hard on performance, and they certainly appear to run an impressive operation, at least based on a single visit. And I’m sure they will be on absolute “best supplier behaviour” for the next 18 months!

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Voices (2)

  1. bitter and twisted:

    DHL are good at delivering stuff?

  2. Publicservzzzz:

    There is no choice but to market test in this current environment – to extend would be madness. Going forward they should give the procurement to GPS and let DHL do what they do best (deliver stuff). The NHS SC contract has destroyed competition and created a monopoly for both logistics and general supply. NHSSC are perceived by many SMEs as bully boys. They lack transparency and charge different prices to different trusts – well done DH/BSA. I’d also challenge the capital deals approach. Trust procurement heads I talk to say they’re getting better deals without NHSSC when they go direct and leave out the middle man.

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