NHS PASA Supply Chain Analysis Project Report Summary of Report Confidential - PowerPoint PPT Presentation


PPT – NHS PASA Supply Chain Analysis Project Report Summary of Report Confidential PowerPoint presentation | free to view - id: 7acb6-ZDc1Z


The Adobe Flash plugin is needed to view this content

Get the plugin now

View by Category
About This Presentation

NHS PASA Supply Chain Analysis Project Report Summary of Report Confidential


... is in the range 60-64m on consumable products, including single use instruments. ... (GSTT) the annual medical/surgical consumable spend is approximately 55m. ... – PowerPoint PPT presentation

Number of Views:166
Avg rating:3.0/5.0
Slides: 58
Provided by: cris87


Write a Comment
User Comments (0)
Transcript and Presenter's Notes

Title: NHS PASA Supply Chain Analysis Project Report Summary of Report Confidential

NHS PASA Supply Chain Analysis Project Report
Summary of ReportConfidential
In recent times, the NHS has enjoyed year on year
increase in funding to enable the delivery of
world class patient care. The results can be
seen in our hospitals and our communities. We
now need to deliver even greater patient care by
driving out waste and poor processes. So far,
supply chain optimisation has played a minor role
in the delivery of efficiencies and an improved
patient experience. This report was
commissioned by supply chain practioners within
the NHS, supported by PASA, to provide an insight
into the potential benefit to the NHS if we were
to apply modern supply chain concepts and
techniques. The authors relied upon case studies
from individual Trusts own work to reach a view
of the full potential across the whole of the
English NHS. The findings of the Report point to
significant cash flow and efficiency gains with
the need to establish benchmarks of good
performance and KPIs to enable activity to be
tracked. The commissioners of this Report hope
its findings make clear the potential benefit
from applying a supply chain approach to support
the delivery of healthcare and encourage the
adoption of the Reports recommendations by the
healthcare community. Colin Rothwell Andrew
Rudd Chair Co-Chair NHS Supply Chain
Group NHS Supply Chain Group
Contents and Page Index
  • Introduction Page 4
  • Executive Summary Pages 5-6
  • Recommendations Page 7
  • Theatres and Wards Pages 8-14
  • Internal Supply Chain
  • Inbound Supply Chain
  • Stocks
  • Opportunities
  • Pharmacy Pages 14-18
  • Internal Supply Chain
  • Inbound Supply Chain
  • Stocks
  • Opportunities
  • Sterile Services Page 19
  • Pathology Page 20
  • Community Equipment Pages 21-22
  • Best Practice Pages 23-24
  • Maturity Score Ranking Pages 25-26
  • Bench Marking Page 27

Contents and Page Index Appendices
  • Appendix 1 2004-05 NHS Spend by Category (excl
  • Appendix 2a Hampshire, IOW Order Process 2001/02
  • Appendix 2b Hampshire, IOW EDC Mat man v Paper
    Other Suppliers 2001/2
  • Appendix 2c Hampshire, IOW Comparison Summaries
  • Appendix 3 South East Coast Strategic Health
  • Appendix 4(a) Ward Stock Southampton University
  • Appendix 4(b) Theatre Stock
  • Appendix 5(a) Hospital Supply Chain Cost Elapse
  • Appendix 5b Hospital Supply Chain Process Cost
  • Appendix 6 Analysis of Pharmacy Supply Chain
  • Appendix 7 - Hospital Supply Chain Pharmacy
  • Appendix 8 - Summary of 3 Trusts Pharmacy Supply
    Chain Best Practice Reports Pilot Study 2005
  • Appendix 9 - Wards and Theatres Throughputs
    Volumes and Values
  • Appendix 10 - Wards Theatres Supplier Channel
    Option Costing
  • Appendix 11 - Wards Theatres Supplier Channel
    Option Costing
  • Appendix 12 -Pharmacy Throughputs, Volumes and
  • Appendix 13 Pharmacy Supplier Channel Option
  • Appendix 14 Trust Supply Chain Savings
  • Appendix 14 Trust Supply Chain Savings

  • This report aims to clarify the key issues and
    formulate a series of practical improvement
    steps, based upon Best Practice, that can be
    successfully adopted by links within the NHS
    supply chain.
  • As early as 2002 PASA raised the issue and
    opportunities with Trust Chief Executives (Chief
    Executive Bulletin 113) Modernising Supply in
    the NHS.
  • At the 2003 Ministerial Conference the following
    areas of opportunity were recognised
  • Removing inefficient supply chain processes
  • Removing duplicated inventory
  • Improved utilisation of infrastructures
  • Automating supply chain processes
  • Sharing experience and information
  • Performance management and benchmarking
  • The findings in the report are based upon desk
    top research undertaken by SGAC using a wide
    range of data sources. Despite this, limitations
    were found with the data and so assumptions and
    extrapolation of data has been required to be
    able to describe a national picture.
  • The definition of supply chain used for this
    Report is Processes, methodologies and metrics
    that enable an organisation to manage and monitor
    the results and effectiveness of its operational
    support activities.

Executive Summary (1)
  • Three explicit supply chains were reviewed in
    detail (theatre, ward and pharmacy) using data
    from field visits and NHS internal and external
    reports. Due to data availability, three other
    supply chains (community equipment, sterile
    services and pathology), could only be reviewed
    at a high level.
  • An assessment was made on the maturity of each
    supply chain and a score in the range 1-5 was
    given to each (1 being low). No supply chain
    scored above 4, the highest performing being
    pharmacy (4) with three supply chains scoring 2
    or less.
  • Opportunities to reduce inbound and internal
    costs were identified across theatre, ward and
    pharmacy supply chains. This was calculated to be
    360m of which, 289m was from stock reduction
    (giving a one off cash benefit) and the rest from
    efficiency gains.
  • Across theatre, ward and pharmacy it was found
    there exist a high concentration of suppliers,
    suggesting implementation of supply side changes
    could be implemented relatively quickly.
  • Very little Best Practice data is gathered by the
    NHS in the area of supply chain. A process of
    establishing and defining Best Practice is set
    out starting with the P2P and stock management

Executive Summary (2)
  • Bench Marking NHS performance with other
    industries was attempted but with limited
    success. It was felt the complexity and unique
    nature of the NHS made comparison difficult.
  • There are no standard Key Performance Indicators
    adopted which record supply chain performance. A
    wide range of KPIs could be used but it was
    found that focusing on just a few would provide
    immediate benefit with others to follow once the
    processes were established.
  • Factory gate pricing could deliver a 6 reduction
    in selected material costs if suitable logistics
    partners could be found. (Based on the study
    Factory Gate Pricing Within Tesco Andrew Potter
    Cardiff University.) NHS Supply Chain could be
    the ideal partner but the situation would need to
    be assessed using local input coordinated
    through, for example, a Procurement Hub or
  • Alternative channels to market were identified as
    a potential opportunity to reduce costs.
    Developing a consolidator model using a hub and
    spoke concept delivered by an existing supplier
    to the NHS, could use spare capacity in the
    system and reduce the number of vehicle movements
    to hospitals. The pharmacy market was identified
    as being a supply chain that offered high

  • Establish a national body to set the SC agenda.
  • Establish a Programme to exploit the potential of
    eCommerce/Stock reduction/physical process
    improvements, (This should link with the
    eEnablement strategy).
  • Create viable and credible data sources covering
    site, Trust and specific channels for
  • Intra Trust comparison
  • Intra SC link comparison
  • Initially develop a limited number of KPIs in
    accordance with suggested categories, and then
    move on to more detailed monitoring.
  • Consider standard data definitions (to support
    data comparison on an inter Trust SC level.)
  • Use existing Process Mapping Tools to determine
    Activity Costs
  • Support CPH/CPC development and exploit the
    possible opportunities
  • Consider the appointment of a SC champion to
    lead, drive and co-ordinate the appropriate Best
  • Investigate Alternative SC link options through
    the use of unused capacity within supply

Internal Supply Chain Wards and Theatres
  • The NHS total spend on materials excluding drugs
    (based on 2005 TFR3 data) was 3.9bn (Appendix 1).
  • There are 2 replenishment channels NHS Supply
    Chain , Direct Supply
  • NHS SC
  • order process cost (a 2-4 step process )
    represents 30 of channel costs
  • receipt and delivery of goods (a 7 step process)
    represents 55-65 of channel costs
  • payment of goods ( a 10-22 step process)
    representing 1-4 of channel costs.
  • Direct Supply
  • order process costs (a 13-19 step process )
    represent 30-40 of channel costs
  • receipt and delivery (an 7-11 step process)
    represents 35-45 of channel costs
  • payment of goods ( a 8-24 step process)
    representing 22-27 of channel costs.
  • Order velocity (i.e. requisition to order issue)
    is dependent upon the replenishment channel
    applied (assuming all other factors e.g. physical
    processes remain the same)
  • NHS SC electronic 1-3 days
  • Trust P2P electronic 2-4 days
  • Trust P2P paper based 2-7 days
  • Supplier lead times (from order issue to
    delivery) 2-10 days

Inbound Supply Chain Wards and Theatres (1)
  • NHS Supply Chain
  • Based on TFR3 2005/6 data, NHS SC supply 20 of
    in scope spend of this Report (this can be higher
    or lower within product groups).
  • Very little financial/operation information has
    been made available but key facts
  • Turnover 800m
  • Stock turn 16
  • 70 of deliveries ex warehouse 28 cross docked
  • Operating costs 9 of T/O- all fully recovered

Inbound Supply Chain Wards and Theatres (2)
  • Direct Delivery
  • Around 80 of Trust spend -3,625m of Clinical
    and General Supplies and Services, delivered from
    Suppliers own or contracted distribution networks
    which in some cases may involve consolidation
  • Based on 2005 Summary figures for the South East
    Coast Strategic Health Authority (Appendix 3)
    concentration of live suppliers was

Stocks Wards and Theatres
  • Based on Trust and CPH studies, ward stock levels
    average 5.5 weeks usage or 42m
  • Similarly, theatre stock levels average at 13
    weeks usage or 335m
  • Best practice examples show that stock in wards
    and theatres can be reduced to 3.5 weeks - a
    potential reduction of 144m

Opportunities Inbound costs, Wards and Theatres
  • Spend 1,151m
  • Inbound Costs
  • _at_ 100Supply Current
  • Case 1
  • Supplier Direct
    105.0m 80
  • Case 2
  • Via Distributor/NHS SC 77.3m 20
  • Case 3
  • Via Consolidator 60.7m
  • Potential Saving (105.0m
    60.7m) x 80 35.4m

Opportunities Transfer from Paper to EDC
  • Electronic Inv Manual
  • Clinical and General
  • National Cost Reduction Potential
    6.8m 13.4m
  • Pharmacy
  • National Cost Reduction Potential

Pharmacy - Internal Supply Chain
  • Trust spend on Drugs including Gases for 2005 was
    2.0bn, of which, Secondary Trusts accounts for
  • There is a concentration of suppliers such that 7
    suppliers account for 50 of spend and 20
    suppliers account for 75 of spend.
  • Wholesales account for 36 of value but 75 of
  • Drugs are ordered via a 3 step process steps
    which accounts for 92 of channel costs
  • Orders are received in half day slots with an on
    time, in full score of 92
  • Drugs are receipted via a 2 step process
    accounting for 8 of channel costs
  • Payment of invoice is highly automated with at
    negligible marginal cost.
  • Direct supply accounts for 25 of transactions
    but 64 of value.
  • Drugs are ordered via a 5 step process steps
    which accounts for 14 of channel costs
  • Orders are received on average in 6 days of
    order, but there is considerable variation
  • Drugs are receipted via a 3 step process steps
    accounting for 28 of this channels costs
  • Payment of invoice is a 10 step process covering
    accounting for 58 of this channels costs

Pharmacy - Inbound Supply Chain
  • Wholesalers
  • There are 4 main Wholesalers who provide daily/2
    daily delivery services to the Trusts
  • Goods are supplied in returnable sealed crates
    for each requisition point (some palletised
    deliveries are made for bulk items)
  • Potential to downloaded directly from requisition
    (bar code) direct to Wholesaler e ordering
  • Good management information is available
  • e services ordering and invoicing from their
    specialist Systems (e.g. AAH Medecator)
  • Direct
  • There are approximately 800 suppliers in this
    category with some 56 suppliers accounting for
    90 of the direct spend
  • Presenting the trusts with longer lead times
    (average for Mid Staffs sample 7 days by
    supplier) with resulting increased stock levels
  • Unless booked, deliveries are uncontrolled and
    can cause imbalance in the workload of the
  • Variation in ordering procedures (unless

Opportunities Inbound costs, Pharmacy
  • Spend 998m Inbound Costs
  • _at_100 Supply Current
  • Case 1
  • Supplier Direct
    24.5m 63.58
  • Case 2
  • Via Wholesaler 18.0m 36.42
  • Case 3
  • Via Consolidator 15.9m
  • Case 4
  • Via Wholesaler 10.1m
  • With Supplier X Dock
  • Potential Saving (24.5m 10.1m ) x
    63.58 9.2m

Pharmacy - Stocks
  • Stock is located centrally at main hospitals
    dispensaries and at dispersed location to wards
    and satellite dispensaries.
  • Stock coverage ranges from 2.5 weeks to 8 weeks
    with an estimated average 6 weeks.

Opportunities Stocks

Sterile Services
  • There is little evidence of focused work directed
    towards SC activities in this service. The
    national spend is in the range 60-64m on
    consumable products, including single use
  • The shape and function of the service has yet to
    be delivered and so it is difficult to determine
    through desk top research, the potential for SC
    improvement. (The National Decontamination
    Program is currently rolling out across the
  • What is to be hoped is that when designing and
    evaluating new resources, attention will be given
    to Lean Processes and the need to consider how
    best SC activities can support the service.
  • SC should reflect the needs of the service and
    enable present needs and future plans not only to
    be achieved, but where appropriate, lead the
    drive towards new possibilities. The use of IT
    and e based processes have enabled
    organisations to improve their effectiveness and
  • All the Best Practice benefits that are available
    to mainstream supply chains and described
    elsewhere in this document, can be exploited and
    enjoyed by Sterile Services. Reference should be
    made to the recently published Outline Paper
    for the Procurement of Products Associated with
    Sterilisation Service Departments V1

Pathology Services
  • In terms of its Supply Chain evolution, Pathology
    is in a not dissimilar situation to Sterile
  • The Carter Report and initiatives such as Path
    Links primarily focus on the organisation
    structure and technical process functions.
    Progressive procurement disciplines are now being
    applied to equipment and infrastructure
    purchasing, but the use of eCommerce is in its
    early stages and there is little apparent
    evidence of its deployment in SC activities.
  • Across a number of pilot sites service
    improvement initiatives are being undertaken with
    good results. Logistics flows for sample
    transportation could be a high potential area for
    optimisation. Removing non-value added steps and
    stock control/inventory management is receiving
    attention. (This is being developed using the
    pathology networks).
  • All the Best Practice benefits that are available
    to mainstream supply chains and described
    elsewhere in this document, can be exploited and
    enjoyed in their appropriate context by Pathology

Community Equipment (1)
  • In scope is the administration, delivery,
    collection, refurbishment and servicing of
    medical equipment, ranging from walking aids to
    beds for the NHS Social Services and PCTs.
    Typically a service centre will supply a range of
    200-300 specified items.
  • Limited data, coupled with a relatively wide
    range of internal and external customers and
    the unusual feature of a comprehensive reverse
    logistics process, makes it difficult to describe
    a generic process or to specify Best Practice.
    Anecdotal information appears to indicate that
    the degree of management sophistication varies
    considerably in this area.
  • Case Study - Gloucestershire Hospitals NHS
    Foundation Trust - GIS Healthcare
    (Gloucestershire Industrial Services).
  • 4.5m stock holding supports a 20-step process,
    which includes the recovery and refurbishment of
    equipment. Approximately 1400 items are delivered
    each week and around 700 collections are
  • Orders are received via the district
    nurses/occupational therapists when an order is
    entered into the system the customer receives
    acknowledgement of the equipment they require
    stating whether the goods are in stock or not.
    This acknowledgement is via email and is
    therefore dependent on the customers email
    address being registered with GIS.
  • Coupled with the delivery of equipment, GIS
    provides a collection service from homes and
    hospitals. In order to achieve a greater number
    of returns GIS has provided a cage at their
    depots for the public to drop off unwanted
    equipment instead of waiting for a collection.
  • Returned items are sanitised, booked onto the
    system, inspected by hand, repaired/refurbished
    if required or scrapped if unsuitable. Most of
    the equipment that is scrapped is sent out to
    third world countries.
  • Equipment is bar coded to aid stock control and.
    when dispatched, colour coded by delivery area.

Community Equipment (2)
  • Future Challenges
  • Examination of the recovery/sanitisation/refurbis
    hment/replacement process in order to understand
    how much effort should be expended on each type
    of item before the cost exceeds the benefit.
    Recyclable Items could then be clearly marked and
    tracked, enabling recovery to be targeted.
  • Identify the total cost of their processes- not
    just the cost of goods
  • Decide how to gain most benefit from eCommerce
  • What equipment can be economically recycled.
  • How IT can be used to optimise equipment recovery

Best Practice - Introduction
  • The goal is that Best Practice can produce
    combined SC cost benefits of between 15 and 30 -
    evidenced by studies undertaken by CPHs and NHS
    Logistic Authority (see Appendix 17a/b).
  • Best Practice is defined as systems or
    processes that enable tasks to be performed at
    the right time, in the most cost-effective way
    and without duplication or failure
  • The journey towards achieving Best Practice is
    sequential and progressive, there are no magic
    fixes. Missing out key stages or trying to
    shortcut the essential actions will lead to
    failure, but it is recognised sometimes that at
    step rather than incremental change will be
  • Very little data is collected with SC activities
    in mind and so cannot be used to compare
    different channels, locations or activities.
    Anecdotal evidence indicates that as much as 40
    of Non Pay spend cannot be classified correctly
    (NHS YHCPC Business case).
  • Before any useful work can be undertaken clean,
    stable, coherent and relevant data-bases need to
    be established. Without this critical foundation
    any other work done will be wasted.

Best Practice Recommended Steps
  • Define and introduce standardised electronic
    order and payment processes (P2P) across all
    requisition points. (eCommerce). - Process cost
    reduction of 54-90 (NHS SC/HFMA), NHS Purchase
    Order process is typically 22 of SC cost
  • Introduce effective and utilisation based stock
    control. Potential stock holding reductions of
    between 15-30. Cost of Inventory is typically
    15 of SC cost. The key factor is inventory
    control. Consideration should be given to the
    creation of a three dimensional Classification
  • ABC of throughput usage
  • ABC of product, by value
  • ABC of product by shelf life
  • ABC of product by clinical criticality
  • ABC pf product by supplier reliability/On Time In
    Full (OTIF)
  • The objective is to identify the lowest stock
    level compatible with availability, ordering
    complexity/cost (reduced both for Trust and
    supplier) and the supplier service channel
  • Reduce the number of suppliers. Over the 177
    secondary Trusts the annual Pharmacy spend was
    998m from 796 direct suppliers, In a 47 Trust
    sample Med/Surg for a spend of 95m had
    approximately 5,500 suppliers. Supplier
    Management is typically 14 of SC cost.
  • Centralise physical SC distribution functions.
    (Remove hands off the process). Process cost
    reduction 10 NHS Receiving Distribution
    activity plus Stores Management is typically
    23.5 of SC cost. (Based upon modelling of
    Southampton University Hospital)

Supply Chain Maturity Score (1)
Supply Chain Maturity Score (2)
  • A recent survey conducted by ProLogis found that
    companies that undertake formal benchmarking
    initiatives often realise a substantial return on
    their investment within the first year and
    benchmarking data can often be procured free of
    charge from the likes of industry, trade and
    professional associations.
  • Ideally, all the constituent members of the NHS
    would have a common and uniform database,
    utilising common suppliers/ product
    names/descriptions/codes. This does not exist and
    in the foreseeable future, is unlikely to be
    created. If the SC Group Benchmark their
    activities against each other they have to adopt
    a set of common definitions, process
    descriptions, and a rigorous discipline in order
    to keep their data integrity and ensure that any
    comparisons made are valid. It might be possible
    to replicate the Logmark experience or - perhaps
    join another Benchmarking club such as The
    Health Care Procurement and Benchmarking
    Association (http//www.abhc.org/hcpscba.html) in
    the USA. (A member of the Association for
    Benchmarking Health Care - ABHC).
  • Cranfield University show that the European
    manufacturer to customer cost link comprises -
    Transport 42, Warehousing 24, Inventory 13.
    (The comparable figures for the USA are 45, 22
    and 24).
  • The wide range of SC maturity (SCMS) coupled with
    the lack of adequate data, currently makes it
    very difficult if not impossible to usefully
    Benchmark NHS Supply Chain activities with
    external organisations

Key Performance Indicators
  • As with Bench Marks, KPIs are dependant upon a
    clean, current and credible database. It is
    critical that the KPIs themselves are clearly
    defined and do not change over time. Once the
    initial KPIs are installed, understood and
    providing the useful and consistent information
    that was originally specified, then, and only
    then, the organisation may seek to expand the
    range of measures.
  • Too many KPIs, especially in the early stages of
    their introduction, will be counter productive
    and could threaten the whole SC improvement
    initiative. Also, the means of producing the
    supporting information should be pragmatic and
  • The table set out below illustrates the range and
    type of KPIs which might be used in a SC
    environment. Although they have been divided into
    categories, Financial, Outcomes, Throughput and
    Volumes and Capacity there are no rules governing
    the KPIs which are chosen.
  • A barrier to progressing the development of KPIs
    has been the availability of data Trust may
    well need to invest in systems to overcome this

Key Performance Indicators Recommendations
  • The three target areas for improvement and
    benefit generation are
  • 1. Increase use of eCommerce in P2P process
  • Suggested KPI - of Purchase transactions
    effected by e Commerce
  • 2. Reduce Stock Holding
  • Suggested KPI - Value of Stockholding or
    Stockholding as of Spend
  • 3. (i) Reduce number of suppliers
  • Suggested KPI -possibly measure by category
  • or
  • (ii) Centralise SC physical distribution
  • Suggested KPI(s)
  • Distribution lines (User predestined) picked
    per paid hour.
  • Stock lines (From Supplier) put away per
    paid hour.
  • 4. On Time In Full

Key Performance Indicators Advanced
Recommendations (1)
  • As sophistication and the desire for more
    detailed information grows, then more detailed
    KPIs can be developed, for example
  • For the in house supply chain link a record of
    key data is required
  • By - Overall grouping Wards /Theatres/Pharmacy
    and/or Channel NHS SC/Wholesaler/Ex Supplier/
  • Orders/Req
  • Req Points
  • Lines
  • Packs/Units
  • Order Errors
  • By SC Section Separate
    records by Channel
  • Activity No Time Cost
  • Stock count Req
  • Receiving
  • Transfer to User
  • Returns
  • Admin

Key Performance Indicators Advanced
Recommendations (2)
  • In order to understand SC costs and make informed
    decisions as which channel might offer the
    optimum solution it is necessary to measure for
    all material types, the inbound/supply
    performance. Appropriate KPIs could be
  • NHS SC/Wholesaler Direct
  • Cost per Requisition Raised
  • Cost or time per Order Received
  • Cost or time per Line Received
  • Cost or time per Delivery Received
  • Cost or time per Delivery to
  • Ward/Theatre/other (inc return cages
    crates etc)
  • Cost or time per return

  • Admin cost/time per order

Factory Gate Pricing
  • Definition-The use of an ex-works price for a
    product and the organisation and optimisation of
    transport by the purchaser to the point of
    delivery. (Potter et al, 2003, Cardiff
  • The optimisation of the transport link can
    produce specific cost savings of as much as 18,
    which are offset to varying degrees by additional
    handling costs and potentially slower transit
    times. The likely link actual saving is in the
    range of 5-6. To get the very best results from
    FGP there needs to be in place a network of
    consolidation points and clearly defined
    processes supported by robust and transparent
  • Within the NHS, apart from particular situations
    such as the Excel Hospital Logistics Solution in
    NW London, the only comprehensive SC network
    which would support FGP development is that
    uniquely provided by NHS Supply Chain. Their
    practices and development plans are outside the
    scope of this Report, but clearly they will aim
    to realise the potential synergies of cost
    reduction and enhanced product flow from the
    application of FGP principals.
  • A way forward would be for Trust to jointly
    identify duplication or inefficient use of
    transport related resources and quantify
    potential savings and go out to the market place
    in order to find the optimum cost benefit
    solution. This ought to include a structured
    Gainshare provision in order to help realise
    the future opportunities which will arise as
    other supply chain components move towards Best

Alternative Channels - Options
  • In order to take full advantage of the potential
    benefits available from eCommerce the first
    alternative route requires the creation of an
    eCatalogue for each specific channel. There are
    however a number of barriers to building a
    catalogue and these have been highlighted by work
    done at Guys and St Thomas (GSTT). The key
    barrier to building a catalogue is that the spend
    base in hospitals is typically very fragmented.
    At Guy's and St Thomas' (GSTT) the annual
    medical/surgical consumable spend is
    approximately 55m. The supply base is spread
    across over 2,000 suppliers from the large 1-2m
    cardiac suppliers to specialist laboratory
    suppliers below 1,000. The need to create and
    maintain a catalogue for each supplier is clearly
    not a practical or viable option.
  • An alternative is to reducing the number of
    suppliers and then consolidating the supply base
    through wholesalers and/or offsite
    warehousing/final delivery. (This model is not
    dissimilar the role played by NHS SC). Allocating
    a single distribution route for each clinical
    department removes the need for large numbers of
    catalogues and facilitates the rollout of
    eCommerce based processes.
  • The ideal model will adopt a JIT (3-4) day stock
    level service (tailored for clinical risk),
    supported by Service Level Agreements with
    suppliers. The cost of the service is absorbed by
    the suppliers on the premise that it is more
    effective for them to deliver monthly to an
    offsite warehouse than daily or weekly to the
    hospital. It also provides a real opportunity to
    develop Gainshare opportunities, which
    encourage all parties to anticipate demand
    changes and adapt to changing circumstances.
  • Development of consignment stock or Vendor
    Managed Inventory to release cash and integrate
    supply chains with suppliers.

Alternative Channels Pharma. (1)
  • Pharmaceutical sector consolidation has started,
    featuring the virtual stores concept, with the
    wholesaler AAH under their Added Value Services
    programme. Amongst these is one covering 17 Trust
    sites in Avon/Gloucester/Wiltshire.
  • 50 of Pharmacy demand is satisfied by 7
    suppliers, and 20 suppliers cover 75 of direct
    supply demand. It is also interesting to note
    that the pharmaceutical supply chain structure is
    similar to that supporting med/surg demand i.e.
    Supplier delivers directly to the Trust or a
    wholesaler delivers on their behalf. (In the
    med/surg/dressings chain the role of the
    wholesaler is fulfilled by NHS SC).
  • The true link cost of this part of the supply
    chain is difficult to unravel, but there does
    appear to be the potential for a win win
    opportunity if the two parallel SC transport
    activities can be integrated.
  • The cost/margin structure within pharmaceuticals
    appears to be changing as the balance between
    patented and generic drug pricing alters. The
    recognised margin of 12.5 might be considered
    to be too high in relation to higher priced drugs
    and too low in respect of generics. There is a
    risk that attempts to cherry pick routes within
    a SC link could produce unwanted and undesirable
    side effects. It is not within the scope of this
    project to evaluate this situation, but it might
    be possible to add a constructive and previously
    unconsidered factor into the discussion.

Alternative Channels Pharma. (2)
  • Two of the main pharmaceutical wholesalers/retaile
    rs AAH and Unichem have built extensive and
    physical distribution networks to supply their
    retail outlets. In many cases hospital pharmacies
    piggy back the twice-daily retail delivery
  • If the capacity exists within these networks,
    both pharmacy, direct suppliers and non-pharmacy
    suppliers could deliver pre-consigned orders to
    the wholesalers depots/network. These would be
    cross-docked and be delivered on the next
    available vehicle. The Trust would receive fewer
    overall deliveries, potentially a more responsive
    fulfilment service and enjoy a simpler, lower
    cost process. It is anticipated that the
    cross-docking service would cost between 2.5-4
    of product value which should be more than
    compensated for by supplier cost savings.
    (Already pilot-proven by the GSTT experience
    outlined above).
  • To be able to deliver such a step change a
    critical mass will need to be reached before
    volumes are sufficient to drive savings. For
    this reason, such an initiative may need to be
    led regionally by an SHA or nationally by the
    Commercial Directorate or PASA.

Appendix 1 2004-05 NHS Spend by Category (excl
Appendix 2a Hampshire, IOWOrder Process 2001/02
Appendix 2b Hampshire, IOW EDC Mat man v Paper
Other Suppliers 2001/2
Appendix 2c Hampshire, IOW Comparison Summaries
Appendix 3 South East CoastStrategic Health
Appendix 4(a) Ward Stock Southampton University
Appendix 4(b) Theatre Stock
Appendix 5(a) Hospital Supply ChainCost Elapse
Appendix 5b Hospital Supply Chain Process Cost
Appendix 6 Analysis ofPharmacy Supply Chain
Appendix 7 - Hospital Supply Chain Pharmacy
Appendix 8 - Summary of 3 Trusts Pharmacy Supply
Chain Best PracticeReports Pilot Study 2005
Appendix 9 - Wards and Theatres Throughputs
Volumes and Values
Appendix 10 - Wards TheatresSupplier Channel
Option Costing
Appendix 11 - Pharmacy Throughputs, Volumes and
Appendix 12 Pharmacy SupplierChannel Option
Appendix 13 Trust SupplyChain Savings
Appendix 14 NHS SupplyChain Cost Model 2001
Appendix 15 Web Sources
Appendix 16(a) Document Sources
Appendix 16(b) Document Sources
About PowerShow.com