Procurement in the NHS

Procurement in the NHS

We will continue the theme of our previous blog about the future of procurement and consider how this vision might apply to the NHS. Today we will look at procurement of goods, in subsequent articles we will consider services, exceptions and the advantages.

Lord Carter’s report into acute hospitals forecasts potential efficiency savings of around £5 billion through new technological initiatives that will dramatically affect many areas, in particular procurement. We believe that that is a conservative number however the thing that prevents the realisation of this wholesale change is reluctance to accept it, at all levels. The NHS administration is not as radical as the professions have been, consider for example the introduction of Nurse Practitioners who do minor operations, prescribe and generally take on much more responsibility than their predecessors, thanks to imaginative thinking by the Royal College of Nursing. The administration in every Trust is creating a mountain of paperwork to “improve” governance but that is the wrong approach as it will only cause delay and cost. They are right to seek improvements in governance but they do need to think in a different way.

What do we mean by wholesale change? If we take the procurement of a box of examination gloves as an example, there will be no local stores of them, save on the ward, no local procurement ordering them, no catalogue on the NHS intranet. In future, we believe that internal catalogues will disappear and be replaced by Amazon-style portals (potentially operated by Amazon themselves) where products are selected and ordered for delivery, direct to the place of need e.g. to a ward. Stored budget and authorisation data will ensure seamless processing from procure to pay with no intervention from the Procurement Team. This will in effect remove most of the work done by Procurement staff, stores staff and invoice-processing staff within a Trust. It will introduce truly transparent national pricing enabling all trusts to pay the same price for a box of examination gloves irrespective of quantity.

Imagine if you will the algorithms that allow Amazon and others to present buying alternatives, cross-sells and up-sells to their customers. Deploying an equivalent system in the NHS would enable alternative products (that meet specification) to be offered at different price, lead-time and delivery levels. This would allow clinicians to make a more informed choice (a simple ‘?’ button could lead the clinician to relevant research stored on IBM’s Watson) and potentially garner further savings at the same time as eliminating much of the Procurement workload.

Some would argue Public Procurement Rules (PPR) will prevent this but those who do are the people who do not want change. The PPR are there to ensure fair treatment for the sellers and good governance of the public purse. If the platform is open to all who submit qualifying products, clinicians will be able to make their choice based on the most economically advantageous deal for their patient. The platform does need to retain more information than a personal Amazon account in that it needs to be able to show the actual choices the individual was offered so that abuses can be evidenced if necessary. Individuals will further argue that this system does not allow for a yearly spend rebate: while correct, the user decides if price or delivery is king at the point of decision, uninfluenced by rebates that encourage over-purchasing. Reducing stock levels will save the NHS millions of pounds.

Procurement, Stores and many in Finance will be seen as part of the cost savings to be added to the savings made on gloves etc., through dynamically communication between suppliers’ and buyers’ systems in real time, those systems reacting to low sales volumes by reducing price until it reaches floor or volumes rise to an acceptable level. Suppliers’ computers will dynamically manipulate their systems to win business and every single box of gloves is now a competition on price and delivery in which every qualifying supplier takes part in real time. This also means that suppliers will need fewer sales staff and will therefore lower their cost base.

We will discuss the implications for procurement of services in our next article.

Graeme Sloan
Managing Director at Wrekin Consulting.
Experienced and successful Contacts/Commercial Director, leading large scale Business Process Outsourcing, IT Outsourcing and Business Transformation / Seperation opportunities together with large capital installation projects in both private and the public sector.

Working at director and all levels within organisations, developing and building relationships based on an entrepreneurial spirit, delivery and trust with full responsibility for commercial strategy and the practical negotiations and procurement decisions.

Extensive experience across many industries, sectors, and geographies (managing actual operations in Ireland;Belgium and Spain) and applying best practice to each specific opportunity.

Experience is running UK and International businesses, including full P&L responsibility.

Specialties: Information Technology Outsourcing (ITO), Business Process Outsourcing (BPO), Business Transformation, Seperation, Commercial Leadership, Business Strategy, Contract Negotiation, P&L Management.