NHS market could fragment further, warns Supply Chain CEO

In an interview with HSJ, Nick Gerrard, CEO of the DHL-run procurement and logistics service, conceded that NHS reforms could further decentralise NHS purchasing, making it more difficult to realise savings through aggregated buying power.

“A lot of other industry sectors take a more, if you like, centralised approach to how you organise your procurement,” Mr Gerrard said. “The reality is that the NHS is a very fragmented system,” claimed Mr Gerrard. This fragmentation was being increased by the independent actions of a growing number of foundation trusts.

Asked if he thought the way NHS procurement was developing would help it to overcome that fragmentation, he said: “I don’t think it will make it any easier in the short term, because I think there are a number of things going on in the marketplace that could actually increase the level of fragmentation.”

For example, there were “new organisations moving into the procurement landscape [which meant that] you’ve got procurement taking place at a trust level, and procurement taking place at a regional level”, he added.

But asked if he thought the NHS should mandate the use of Supply Chain in order to drive efficiency savings, he said: “I don’t think a monopoly provider would necessarily be healthy in the longer term.

“You need to have an element of competition. I think it’s the level of duplication that you have in the marketplace that’s the key.”

Going from “a lot of duplication” of procurement routes to “less duplication” would definitely be the “right way to travel”, but customer choice was important to prevent Supply Chain from becoming complacent, he said.

Mr Gerrard said NHS Supply Chain had around a 40 per cent share of the estimated £5bn a year NHS supplies market, which it hoped to increase to 45-50 per cent in the next two years.

“For an organisation like NHS Supply Chain I think that’s where our future growth is going to come from, because there’s not much volume growth naturally in the NHS now, and we’re seeing some areas decline,” he said.

While some supply lines linked to areas of increased treatment activity were still growing, falls had occurred. “We’ve seen some quite significant declines, as the trusts have scaled back on their discretionary spend,” he explained.