Look closely at what is required of trusts to deliver the Carter savings and the gaps in their required in-house skills become startling clear, writes Richard McIntosh
Lord Carter’s review of NHS efficiency says that £5bn could be saved if hospitals utilised standard procedures. It identifies procurement as a critical area, particularly non-pay expenditure, which accounts for 30-35 per cent of total spend.
It’s a considerable challenge, especially given the lack of basic procurement skills within many trusts
Carter targets at least a 10 per cent reduction in these costs across the NHS by April 2018. But trusts have been working towards this target for some time, so how can the delivery of savings be accelerated?
It’s a considerable challenge, especially given the lack of basic procurement skills within many trusts – from effective contract, category and supplier management, to the use of volume buying power and the aggregation of spend. For these trusts, achieving Carter’s proposed savings will mean the complete transformation of procurement practices, supply chain management and the entire purchase-to-pay process.
When this transformation is examined at a granular level, the true extent of the task emerges. For example, the review states that by September 2017, all trusts should be operating with 80 per cent of their transaction volume through an electronic catalogue. With many trusts not currently operating any kind of e-catalogue, the work required to simply meet this one recommendation is huge.
Carter also encourages the building of supply chain capabilities, particularly in inventory management systems, and references the adoption of GS1 and Pan European Public Procurement Online (PEPPOL) standards. For a large number of trusts, the step-up to this level in the timescale given is unachievable without specialist assistance.
Modernisation of the purchase-to-pay process forms another substantial part of Carter’s recommendations. But for the majority of trusts, switching from a manual system to a best-in-class digitised process, underpinned by appropriate governance, is an all-consuming, cross-functional project in itself.
These examples begin to underline the scale and complexity of the transformation that is required. While the targeted 10 per cent savings are achievable, ultimately this requires the wrestling back of margin from suppliers. And that means addressing every pound of non-pay expenditure through a comprehensive programme that standardises and then aggregates the purchase of products to leverage best value.
Some trusts are already embracing the adoption of the NHS Standards of Procurement, and with support from the NHS Procurement Transformation Programme are improving their approach. But many others have made limited progress in meeting Carter’s goals. His overriding priority is that trusts must make immediate, substantial savings – the overriding issue is whether the in-house capabilities exist to execute the necessary rapid transformation in procurement.
Richard McIntosh is founder and managing director of Procura Consulting