The Hidden Cost of NHS On-line Ordering – How Guy’s Hospital is Responding

Hot Topic(We are delighted to feature this very timely guest post - given our comments yesterday - on NHS on-line ordering and other delights from David Lawson, Procurement Director at Guy's and St Thomas' Foundation Trust, London).

David Lawson10 years ago, like many hospitals at the time, we were replacing paper-based systems with on-line ordering as part of wider updates of Finance Systems.  The brave new world of eProcurement had reached the NHS.  A key learning point was that on-line ordering does not equal inventory control and so we embarked on a parallel programme of deploying inventory systems and in doing so exposed huge hidden costs.

However, inventory systems do not cover all spend and the assumption at the time was that on-line ordering would streamline the rest of the process and help drive new savings.  What we have come to realise is that on-line ordering in itself, especially that provided by traditional Finance Systems, simply replaces one set of problems with a new set that if not addressed represent significant hidden costs and lost opportunity.  We have identified six factors which collectively mean that we are at risk of ordering more than we need and paying more than we should:

1. Pictures! Q: When you order at home would you buy something if all you could see was a product code?  A: No.  Yet we expect clinical teams to order products with no pictures.  As a result we have the everyday risk of clinical staff ordering the wrong item and the resulting re-work and risk of waste this creates.  We need systems with Pictures.

2. Track & Trace. Q: When an order is raised when does a clinical team know it has arrived? A: When it arrives.  That's great but what happens if the supplier did not receive the order, or they received the order but it is on back order, or the product has been delivered but was sent to another building?  The lack of visibility creates a lack of trust in the system.   As a result you see general over ordering, just in case.  We need systems with Track & Trace.

3. Lowest cost 1st.  Q: When you order at home would you select the most expensive supplier? A: No.  Yet our own systems do not display delivery charges so a direct supplier may appear as the lowest cost option when a wholesaler is in reality the best value option.  We need systems that provide visibility on total cost and provide an alert if the lowest cost option is not selected to 'nudge' users to the most cost efficient option.

4. Catalogues.  No one likes managing catalogues yet they are central to effective spend control.  For suppliers they have to employ an army of back office staff to maintain multiple price files operating on multiple systems requiring multiple formats.  For procurement teams they have to validate the same catalogues and either deal with errors at the front end or invoice price queries at the back end or both.  As a result a large percentage of catalogues will be time expired at any one time and the accounts payable team are tied up with invoice queries.  Catalogue coverage will be low because to administer a high number is difficult.  Equally the level of product information is largely limited to unit price, product code, unit of measure.  The absence of GTINS for example limiting efficient product receipting.  We need systems that streamline catalogue management for both suppliers and hospitals and provide more depth of information from GTINS to product specification.

5. One System.  The interesting aspect of on-line ordering and inventory systems is that they both provide a route to order but they operate independently of each other even when used within the same clinical area.  The on-line system will allow you to order a product without informing you that the inventory system has the same product already on the shelf.  Equally the on-line ordering system will allow you to order a product without alerting you to the need to route through Pharmacy.  We need systems that integrate with other inventory systems to provide a One System solution.

6. Gatekeepers.  Good systems are important but simple control is equally important.  Last year we transferred responsibility for on-line ordering from a group of Theatre Sisters to a single 'gatekeeper'.  The impact was dramatic with an immediate reduction in weekly order levels as duplicate/ excess ordering was removed.  Across the hospital we have over 1,600 users.  We need to reduce the number of users.

We do not know the hidden costs these issues create but we know the consequences in terms of ordering more than we need and paying more than we should.  The Department of Health have recognised to an extent the need for agile systems with ability to scale up, but we need to act at pace. We cannot wait for strategies to be written and pilots to be developed; we need to drive efficiency now and we need a solution now. To address this challenge we turned to the retail industry and are now introducing the same 'Amazon style' cloud-based solution with interoperability to other systems used by the largest retail firms and supermarkets in the country.

Last week, in a matter of hours we uploaded all 420 of our supplier catalogues covering over a million product codes onto a GS1 accredited cloud-based product information management system (PIMS).  The system fundamentally streamlines catalogue management for both our suppliers and the Trust and provides the foundation to become our on-line ordering solution over the coming months.  The cloud-based system can connect to any hospital and to any supplier so offers a ready-made NHS PIMS.  If retail can operate in this way with their supply chain, then so can we.


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Voices (5)

  1. Mark Lainchbury:

    Cherry picking, one little point, in an otherwise excellent post..

    “we also need to rapidly, radically and dramatically modernise procurement to at least the standard that we experience as everyday consumers.”

    No we really don’t – since the NHS SupplyChain portal is already there.
    google “NHS Supply Chain WHO638” for example.

    A smart phone “APP” for remote requisition approval would be nice though !!

    1. Bill Atthetill:

      Dear Mark, thank you. But I must come back to you on that particularly point. I visited the portal, as you suggested, and I’m afraid to say that it does not reflect what I am referring to in respect of the e-commerce technilogy which underpins advanced consumer-facing marketplaces. It’s doesn’t even come close to being ‘Amazon-style’ in either its appearance, content, user-experience or functionality. Advancements in this space have been considerable in the last three years and I must say that this is really quite basic.

      Now, I must also say that you are getting there with your suggestion of a smartphone app. Uber has become a true, global distruptor because of success in building a real-time relationship between consumers and suppliers via smartphones and tablets.

  2. Bill Atthetill:

    The DH has been saying for a while that the NHS must replicate retail sector, particularly in areas such as standards, barcodes, track/trace, data, processes, supplier/market management, and especially systems. I’ve even heard NHS Supply Chain’s CEO express publicly how an “Aldi should prevail over an Asda” when referring to best practice (a ‘core list’ of popular everyday items should exist rather putting every product on the shelf – or putting 500,000 products into a catalogue when only 5,000 ever see an order).
    I’m from the private sector, and, in recent years, I have observed how retail has had to move rapidly with the times in competing with the likes of Amazon and similar on-line marketplaces/channels. There is no doubt that a PIM/catalogue is vital to the success of e-commerce (retailers tell their suppliers that it is the only way they will do business) but the article touches on another very important point. We must also recognise that there are 1.4m potential ‘consumers’ (employees) in the NHS who use these ‘Amazon-style’ marketplaces to make personal purchases almost every day. Books, magazines, travel, clothes, food, dental, insurance, personal items, cars, houses, taxis, now rooms in other people’s houses(!) And we now can ‘rate’ all of them to tell others of our experiences. Even the disruptors like Amazon have disrupted themselves – they once sold and shipped books now they also sell e-books and sell the devices on which to read them. So, importantly, we also need to rapidly, radically and dramatically modernise procurement to at least the standard that we experience as everyday consumers. The DH has promoted the need for transparency over the last two years, and yet, for years, as consumers in the real world, we know who is buying what from whom at what price and why, down to each and every individual purchase – globally!
    It’s no longer rocket science – not even a science – but an art. The writing’s already on the wall and the NHS simply needs to get the picture.

  3. Mark Lainchbury:

    Hi LM
    Re: Why aren’t all trusts/hospitals pursuing this model.

    Many Hospitals have already have reasonably effective, requisitioning-modules integrated to their existing ERP solutions and can afford to wait for the NHS GS1 datapool to be delivered.

    Kudos to David though for forging ahead though.

    We also, all have 400,000 lines of NHS-Supply-chain managed catalogued items available as well, of course

  4. LM:

    Excellent guest post. Is there only one trust/hospital doing this? If so, why aren’t all trusts/hospitals pursuing this model. The last paragraph is particularly pertinent. It all starts with a resilient product information management system (which is why Tesco and every retailer owns and imposes one). If it’s cloud-based, it’ll take months, not years to implement across all hospitals. The NHS has run out of time. If this platform has been built to scale, then it’s just about pace.

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