Tesco tactics: why the NHS needs to bump procurement up the priorities list

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It is common knowledge that good procurement practices can help the health service drive efficiencies and improve quality, but it is still not considered a priority. More often than not, it is thought of as a money saving exercise rather than for its potential to add value.

‘The panel was unanimous in saying that procurement needs to be seen from a strategic perspective’

Now, amid mounting financial and structural challenges in the NHS, the role of procurement is evolving to mirror those changes.

HSJ organised a best practice workshop in value and improvement in procurement, sponsored by Cook Medical, to discuss these issues, current problems being faced by procurement departments, examples of best practice and lessons to consider.

Not just savings

Alastair McLellan, HSJ editor and chair of the workshop, opened the discussion by asking members to focus on immediate concerns. The panel was unanimous in response, saying that procurement needs to be seen from a strategic perspective, delivering value propositions, and not just viewed as a savings mechanism.

‘The thorny question of mandated collaboration and whether that meant centralisation drew conflicting responses’

David Lawson, chief procurement officer at Guy’s and St Thomas’s Foundation Trust, said that the department was perceived as “junior to human resource or finance, so there is a need to ensure it becomes a part of the board agenda”.

Meanwhile, the important issue of addressing clinical choice was initiated by Pia Larsen, director of procurement and supply chain at University College London Hospitals, who said: “We need to move the debate around clinical choice. Clinicians are our customers and until we get that engagement right, we’ll struggle.”

Mr McLellan raised the thorny question of mandated collaboration and whether that meant centralisation, which drew conflicting responses. While one member was of the opinion that centralisation would drive away clinicians, another suggested it should be about developing structures to enable clinicians to take decisions.

Like-minded approach

Alan Hoskins, director of procurement and commercial services at NHS South of England Procurement Services, noted that there is already a collaboration of like-minded organisations working with clinicians in the south.

“If you have the best price or supply chain, people will come to you automatically – there is no need for collaboration,” he said. But he warned: “If it’s politically led, it will fail like previous times.”

‘Clinicians should be a part of designing the supply chain’

Ali Ali, head of procurement at Bradford Teaching Hospitals NHS Foundation Trust, called for a balanced approach. “There are incidents where collaboration will work but sometimes you need that direct link with the organisations and the clinicians.”

“In the case of SMEs, how’s is it going to work if you have one multinational/national supplier for all organisations -  you’re going to drive the business away,” he said.

Andy Harris, head of procurement at University Hospitals Birmingham, cited The Shelford Group as a good example of collaboration. He was keen to stress that collaboration should be based on “mutual benefit, not forced”.

“If we can collectively agree on what the future looks like, we can mandate it,” he said.

Chief procurement officer at Plymouth Hospitals Trust, Andy McMinn, had another concern. He warned that “using the word mandate with clinicians can be dangerous because then they won’t listen to you”.

“Clinicians should be a part of designing the supply chain, though we can mandate in generic cases such as stationery, sharp pins and so on. There should be a balanced approach between mandated collaboration and clinical engagement,” he added.

Mr McMinn said that sometimes centralisation can lead only to short term savings and the answer lies in collaboration of regional groups. “If you mandate three to four players, they will become dominant and prices will go up, so there won’t be savings in the long term,” he said. “The best way to go forward is in small groups such as Shelford.”

Risk management

Rob Knott, national director for NHS procurement at the Department of Health, supported a collaborative model around clinical engagement. He said: “The most important thing to consider is supply chain risk management, and that coordination is needed around risk.

“A lot of products are made overseas. We buy gloves from nine manufacturers out of which 45 per cent goes to one manufacturer,” he added, highlighting the vulnerability of the supply chain.

‘There are 244 organisations buying, but not in a consistent way’

Mr Harris was of the viewpoint that the health service should be strategic by focusing on mandating of contracts instead of on mandating products.

The group also disagreed whether commissioners can help in bridging the gap with supplies.

The discussion then moved onto the role of technology and how it can be harnessed to improve practice. Despite the growing buzz around technology, participants seemed unenthusiastic.

Comments ranged from “technology in the NHS is clunky  – it’s 20 years behind” to a view that “it’s like an iceberg, with huge amounts of hidden costs”. Another participant said: “Trusts don’t invest in areas where there are such hidden costs. They focus more on obvious, (visible) patient care initiatives.”

Mr Knott said: “There are 244 franchisees and not one of them has embraced world-class end-to-end procurement. Procurement departments are under-staffed as trusts are more focussed on HR, finance and so on.

“We deserve a world class procurement strategy. Consistency equals quality. There are 244 organisations buying, but not in a consistent way. Tesco’s marketing plan manages 600 organsiations in an organised way. Some things, the obvious stuff, should be mandated. At the moment it’s a highly developed market, which doesn’t help in mandation.”

Role of technology

Mr Knott also suggested that the NHS needs a different operating model, pointing out that technology is being used to great effect in procurement in other industries.

Another tricky issue was that of leadership and whether there should be an NHS procurement organisation to direct trusts and other organisations.

‘We want characteristics of a world class retailer but we don’t want a retailer – we want a slick organisation’

Ms Larsen compared NHS Supply Chain to a shop front, adding, “there’s huge spend on low quality, high volume stuff, which we don’t want”.

Meanwhile, Mr Harris focused on the absence of research, saying that the Department of Health’s outsourcing is “profit-driven, and not evidence-based”.

David Lawson said there has been “a vacuum of leadership and absence of contract management in procurement”, and called for “more levelled leadership, which isn’t there at the moment”.

However, Mr McMinn chose to play devil’s advocate, saying “it’s unfair to put all the blame on their (NHS Supply Chain) shoulder”. He gave the example of regional collaboration in the south coast to drive home the point about direct contractual obligation without intermediaries.

“We want characteristics of a world class retailer but we don’t want a retailer – we want a slick organisation,” argued Mr Knott.

Attracting talent

Delegates identified talent management as a crucial area that need overhauling to bring about a change in the coming two-to-three years. They agreed on a need for bright talent to join procurement.

Various examples of research have shown that if employees are offered potential for advancement and given encouragement, then they prefer to stick in the same organisation.

‘We don’t stand up to the director of finance for extra posts or initiatives. We blow with the wind’

Mr Harris said: “I’ve got a budget for three graduate trainees. We need to convince the trusts to spend money on talent and support them. We need heads of procurement for the future. There is too much reliance on the interim market.”

According to Ms Larsen, a ‘superheads’ model, such as those seen in the education sector, might be the answer.

She wondered why a small district general hospital would invest in a procurement director, suggesting that it makes sense for smaller hospitals in a region to have one procurement director. Ms Larsen added that perhaps the NHS should have “CCPOs (chief clinical procurement officers) just like CCIOs (chief clinical information officers).

Gary Welch, Head of Procurement at Oxford University Hospitals Trust, however, urged procurement heads to take some of the responsibility, too.

“Individual heads of procurement should take local responsibility by engaging with colleagues. We shouldn’t wait for the DH or others to help us out,” he said.

“We are reluctant to stand up for our profession. We don’t stand up to the director of finance for extra posts or initiatives. We blow with the wind.”

Mr Knott of the DH summed up the proceedings by saying there is a “need for a different landscape as the current one is ineffective and leads to duplication”.

“One consistent theme is that it needs to be led by the NHS. NHS chiefs of procurement need to lead, design and help clinicians and embed it. There is a lot of excellence in procurement but it’s not being harnessed,” he concluded.