Does NHS Supply Chain spelltroubler for small medtech companies in the UK?
On Target asks Akin Sawyerr, healthcare logistics expert and former Head of Development for the Capital at NHS Supply Chain, to explain how the new system for NHS procurement and distribution of medical equipment will affect the industry.
1. What does NHS Supply Chain, and its ten-year contract to purchase and distribute medical equipment for the NHS, mean for healthcare in the UK?
NHS Supply Chain is operated by DHL Logistics under a 10-year contract, and governed by the NHS Business Services Authority. It manages the procurement and delivery of more than 500,000 products for NHS trusts, hospitals and other healthcare organisations. Our aim is to target £1 billion of savings to NHS trusts over the next 10 years, enabling them to reinvest in patient care.
For the NHS, this means a focus to encourage spend commonality within trusts – which in turn will drive economies of scale in purchasing, inventory management and logistics. The challenge for NHS Supply Chain is to bring forward solutions that can increase efficiency and save money, as well as reducing the carbon footprint.
2. What are the implications of the NHS Supply Chain contract for the medtech industry? Is it good news for major healthcare corporations, but bad news for specialist SMEs?
NHS Supply Chain’s strategy is to drive savings and value for the NHS nationally. This can be done in some areas through national contracting, particularly around standard products where there is little opportunity for local input. But the opportunity to bring value into the NHS often rests with local suppliers and SMEs, where the local economy can offer a better service or offering to a local authority or local trusts.
Driving costs out of the supply chain can involve breaking monopolistic practice. SMEs and local suppliers may be more keen to deliver a product that is fit for purpose, and which can go on to a mass-production level. These companies are heavily incentivised to produce quality products. In the long term, driving costs out of the supply chain often means having a quality product that manufacturers have taken time to think about and design – rather than a standard product that is made year after year without much change because the supplier can afford to do that.
SMEs have the advantage in terms of service that they can easily be reached for advice and support. They don’t have a bureaucracy and structure that make it difficult to reach the individuals who delivered or sold the product. A large organisation far away means a lack of service continuity, because you’re talking to a different person each time. SMEs have the advantage of continuity and relationship, and sometimes of proximity to the end user – as well as attention to detail and care taken to provide what the user really wants. These have potential value in terms of savings.
3. What is NHSSC looking for from the healthcare industry in terms of an effective business model?
NHSSC has an algorithm for choosing products that takes into consideration a number of parameters: patient experience, user experience, environmental impact, cost and effect on the local economy. It looks at whether the reusability and sustainability of the product fits in with a long-term savings plan, rather than having a short-term approach of making the savings today, but then paying for it over and over again tomorrow. The assessment will ultimately determine what is the best value product, rather than the cheapest product. It uses input from procurement specialists, distributors, manufacturers and clinicians.
The business plan to follow goes back to the value chain. Companies must be able to demonstrate that they are providing the NHS with best value and not indulging in the kind of practice where, because they know they have the market or know what’s preferred by the end user, they set a price that puts the NHS at a disadvantage.
4. What would be your advice to sales and marketing teams trying to get to grips with NHS Supply Chain as their leading customer?
Sales and marketing need to get away from the shiny/glossy image: it’s more important to engage with end users in a way that helps them practically to use the product in an effective and efficient way. This means a focus on training, to make sure the product is familiar to the end user and there is clear understanding of its impact. Sales and marketing need to focus on actual user experience rather than the feelgood factor of using a ‘brand’. They also need to feed the knowledge back to R&D, so they can improve the product to bring better value for the NHS, better patient experience and better health outcomes.
5. How will NHS Supply Chain support NHS-industry partnership to bring healthcare innovation to the patients?
If suppliers have to invest less in logistics and other non-core activity, that will free up resources for them to focus on R&D. Increased standardisation will mean greater concentration on specialty, which will drive down costs of manufacture and free up more funds for R&D. These are just two ways in which NHSSC provides opportunity for greater innovation.
Akin Sawyerr is Head of Life Sciences at DHL Worldwide Express, responsible for multinational customers across 14 countries in the Middle East. Until recently he was Head of Development for the Capital at NHS Supply Chain. The views expressed in this interview do not necessarily reflect those of the current management of NHS Supply Chain.