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NHS Supply Chain

As a Senior Auditor, I have gained exposure to Contracting, Tendering and ORP (Order, Receipt and Payment) processes as part of internal audits undertaken. This has given me an insight into how the procurement processes work at a variety of NHS organisations. I am always interested to see how organisations manage procurement to ensure value for money obtained for NHS funding provided.

This blog aims to raise awareness of recent changes introduced in the NHS and those still planned in 2019, around the way organisations conduct their day to day purchasing.

The drive for efficiency

The Department of Health (DH) issued guidance on ‘The Future Operating Model for NHS procurement- Transforming the Landscape of NHS procurement, June 2017’.

This details a Procurement Transformation Programme developed by the Department of Health in response to Lord Carter’s February 2016 Operational Productivity and Performance in English NHS Acute Hospitals: Unwarranted Variations’ report. The DH identified that in 2017 around 40% of the NHS’s £5.7bn spend in everyday hospital consumables goods, high value healthcare consumables and capital equipment was through NHS Supply Chain.

The Procurement Transformation Programme involved the creation of a new NHS Supply Chain service aiming to deliver high-quality products for the best value price available. The plan is that this will in time increase percentage of the annual £5.7bn spend through the NHS Supply chain from 40% to 80%.

New System Design

The new design of the procurement service is split into 11 categories known as ‘towers’, with each tower run by an organisation appointed by the NHS. The towers are divided into three sections, Medical, Capital and Non-medical:- 

Medical

Tower 1

Ward-based consumables

Tower 2

Sterile intervention equipment and associated consumables

Tower 3

Infection control and wound care

Tower 4

Orthopaedics, trauma and spine, ophthalmology

Tower 5

Rehabilitation, disabled services, women’s health and associated consumables

Tower 6

Cardio-vascular; radiology; audiology and pain management.

Capital

Tower 7

Large diagnostic, capital devices including mobile and consumables.

Tower 8

Diagnostic equipment and associated consumables

Non-Medical

Tower 9

Office Solutions

Tower 10

Food

Tower 11

NHS Hotel

Services

The new towers have product-focused teams committed on procuring the right products that better meet the requirements of clinicians and patients.

The choice of available products is being optimised, to remove issues of price variation previously experienced.

The Supply Chain’s increased buying power will enable competitive prices to be agreed through more aggressive negotiation and these savings to be passed onto all organisations.

Areas to consider for Clients

The changes introduced by this guidance issued were discussed with the Procurement department at one of our Audit clients to gain their perspective on how these impact their organisation. The following were identified as areas to ponder:-

  • Delivery efficiency. External suppliers deliver items direct to wards and to other designated delivery points around hospital sites, however NHS Supply Chain are limited to delivering orders only to the onsite Stores department. This potentially means organisations need to identify extra storage space on site for these extra products delivered to Stores. There is also the extra indirect cost of staff time utilised in then transporting these items to the relevant location
  • Urgent Orders. NHS Supply Chain agrees a fixed delivery day on which customers receive orders. This is known as their preferred delivery day and could range from just one day a week to several days each week. All stocked products are available for delivery within their standard 48 hour lead time. In urgent or emergency situations then deliveries can be made sooner, subject to circumstance.
  • Damaged stock. From an audit perspective, with higher volume of deliveries arriving at Stores, which require transporting to the final designated points, it is vital that organisations have appropriate controls in place to identify and promptly report any damaged stock items to NHS Supply Chain. There is a stipulated three day timeframe for reporting these damaged items, a failure to meet this will ultimately lead to increased procurement costs for re-ordering the same items. The same principle will also apply on the prompt identification of items ordered, but found not to have been supplied within the delivery.
  • From April 2019, NHS England will ‘top slice’ (remove) a proportion of the tariff allocated to NHS Trusts, and divert it to NHS Supply Chain for funding the procurement service provided (subject to consultation).  The new model works on the anticipation that organisations are more likely to use NHS Supply Chain if they are already paying for its service offering through the ‘tariff payment’. However, if goods are available at a cost efficient price elsewhere, this poses a question of how many alternative and more economical products need to be purchased to achieve a figure equivalent to the tariff cost? One way to go about answering this question would be for organisations to undertake benchmarking analysis on previous spend data.

By considering the above areas, an organisation will need to decide on the approach it adopts for NHS Supply Chain purchases, to ensure overall value for money is provided.