Supply chain reaction, by Joe Stringer

2 Feb 11
Another day, another critical National Audit Office report into government efficiency and spending. This time the NHS is in the line of fire

Another day, another critical National Audit Office report into government efficiency and spending.

This time the NHS is in the line of fire. Against the backdrop of the current push to make £20bn of savings over the next four years, the NAO’s auditors found that hospitals are overspending by at least £500m a year, with different parts of the NHS spending vastly different sums for the same supplies.

The only surprising element of the report is the regularity with which nothing is done to improve NHS procurement. After all, just 33 days ago a pan-government team, supported by NHS Shared Business Services, said precisely the same thing.

But as long as the NHS Supply Chain contract continues in its current form, in which DHL is incentivised to shift more products for NHS trusts, hospitals and other healthcare organisations, then there is little mileage to be had in haggling over the scraps of a lower unit price of a suture kit or bulk buying.

As the NAO have quite rightly pointed out, the debate now needs to move on to how the NHS should be a more intelligent customer, managing the fluctuating demand for non-pay goods and services.

There are the seven ways to do this:

(1) Standardising (in areas such as prosthetics);

(2) Reducing the portfolio on offer (eg using central travel booking);

(3) Encouraging re-use (particularly in clinical equipment);

(4) Consider alternatives (such as cutting-edge internet technologies instead of analogue);

(5) Reducing demand frequency (consolidating the administration of multiple orders across an NHS Trust);

(6) Tackling the volume required (dressings being prescribed individually to patients in multipack boxes), and, finally, the Holy Grail;

(7) Eliminating demand altogether (for example, patients with low haemoglobin are more likely to require a blood transfusion during surgery; demand for blood products can be eliminated by treating these patients using iron tablets before surgery to reduce the likelihood of transfusion)

The difficulty is this involves a very different set of skills from those usually found within a typical NHS procurement team, which are often more akin to that of a general manager. Instead, there needs to be greater working across internal silos and with other trusts to drive greater transparency.

Unfortunately very few general managers started out in their career with the ambition to be a 'demand manager', but this needn’t be beyond them.

Fragmentation of spend and provider autonomy is all too often held up as a fundamental barrier to tackling this issue, but there has never been a better time to grasp the nettle.  It is possible to compete in the area where it matters most – frontline patient care – while collaborating for collective benefit in the back office.

I'm always wary of suggesting the techniques of private sector supply chains can be dropped into the NHS, but taking a tougher grip of demand isn't one of them.

Joe Stringer is a partner in Ernst & Young’s health practice

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