Have you ever wondered about the sheer magnitude of the NHS's supply chain?
NHS Supply Chain, an allied body of the NHS responsible for centrally sourcing and supplying healthcare products and services for NHS Trusts and healthcare organisations throughout England and Wales, estimates an annual NHS spending of about £8 billion on products for the year 2023-24. The NHS Supply Chain alone manages upwards of 7.7 million orders per year across 129,420 order points and 16,705 locations. It delivers over 35 million lines of picked goods to the NHS annually, integrating orders from over 930 suppliers.
Apart from this, individual Trusts also engage in local procurement for specific needs, with a report from the National Audit Office (NAO) suggesting the value of these transactions to be more than £3 billion.
With several organisations and stakeholders involved, the NHS’s supply chain is indeed vast and comparable to a complex web of veins and arteries, pumping essential supplies to keep the NHS running. Ensuring this smooth flow of supply chain requires effective supplier management, guaranteeing uninterrupted access to critical medical supplies and equipment for healthcare organisations.
In this blog, we will dive deeper to understand supplier management in the NHS and how it can be instrumental in elevating the operational efficiency of the NHS.
What is supplier management?
Supplier management is the strategic process undertaken by organisations to efficiently work with suppliers and yield consistent delivery of goods and services at the best possible value. It involves planning, selecting, onboarding, evaluating, and collaborating with vendors to foster mutually beneficial relationships with suppliers, optimising their performance, and ultimately, your own success.
Supplier management within the NHS
Supplier management within the NHS is extensive process that involves several steps to ensure effective sourcing, procurement, and collaborative relationship with suppliers. Let’s look at some key components typically included in supplier management process in the NHS.
Strategic planning and sourcing
In this initial phase, organisations anticipate future needs for medical supplies, equipment, and services. Key standards, including quality, cost, and sustainability, are established. Market research is conducted to identify potential suppliers who are capable to meet these benchmarks. In addition, this phase includes category management, where similar items are strategically grouped to develop sourcing plans, maximising negotiating power and optimise the procurement process.
Supplier selection and contract management
Bids from qualified suppliers are accepted and evaluated based on criteria such as cost, quality, and track record to select the best supplier. Afterward, the next phase of contract negotiation and management starts. This entails establishing clear terms and conditions for collaboration, including pricing, delivery schedules, performance metrics, and other relevant details. Both parties engage in negotiations to agree upon terms. Contract management and negotiations are essential to ensure compliance and obtain the best value for money.
Supplier onboarding and training
Upon selection, suppliers are integrated into the NHS systems and processes. They are trained on regulations and compliance requirements to ensure they understand what is expected from them and deliver accordingly.
Risk management
It involves identification and mitigation of risks associated with suppliers, including potential disruptions, financial instability, or product quality issues. This aspect is crucial to ensure uninterrupted access to critical resources and facilitate seamless healthcare delivery.
Performance management
This involves regular assessment of supplier performance against agreed-upon metrics, key performance indicators and adherence to contractual obligations, ensuring that suppliers comply with all relevant regulations and standards in the healthcare sector. Additionally, compliance with ethical business practices and environmental standards is checked to align the supplier with the NHS's values and sustainability goals.
Given how critical the quality of products and services in healthcare is, quality assurance plays an integral part in performance management, ensuring that suppliers meet or exceed specified quality standards for goods and services.
Supplier relationship management (SRM)
An aspect of supplier management that goes beyond mere transactions, supplier relationship management focuses on building and maintaining strong, strategic ties with key suppliers, promoting innovation and mutual growth. It involves having open and clear lines of communication with suppliers to foster collaboration, address issues, and continually enhance efficiency in the supply chain. The primary objective of SRM is to optimise the value derived from these strategic supplier relationships, encompassing innovations, cost savings, and a competitive advantage through a strong and collaborative partnership.
Why supplier management matters for NHS?
From medical equipment and medicines to catering and disinfectants, NHS’s supply chain is responsible for wide range of functions essential for everyday operations of the organisations and a small disruption in this supply chain can directly impact patient care. Disruptions such as delay in delivery of essential supplies can have adverse effects on patient care. With high demand and budget constraints, the NHS is already working under tremendous pressure. In addition, the NHS is subjected to rigorous regulatory standards to ensure the highest quality of care. Compliance with these standards add complexities to procurement and supplier relationship.
Having a robust supplier management strategy is necessary to ensure these standards are met right from the onset of selecting suppliers and monitored continuously throughout the processes. Moreover, it facilitates collaboration and supports suppliers committed to meeting regulatory standards.
Through strategic supplier management, the NHS can optimise cost-efficiency, negotiate favourable contracts, and identify innovative solutions to overcome budget constraints. It establishes ties with reliable suppliers and foresees any potential disruptions to address them proactively.
Benefits of supplier management
Effective supplier management yields various benefits for the organisation; let's delve into these advantages.
- Cost efficiency
Negotiating favourable contracts is a key element of supplier management that can result in competitive pricing, bulk discounts, and cost-saving opportunities. Cultivating robust supplier relationships allows companies to avoid the expenses associated with establishing deals with new suppliers. Furthermore, maintaining collaborative relationships with suppliers can unveil innovative strategies for cost reduction and resource optimisation. Overall, effective supplier management can yield significant cost savings for the organisation in the long run.
- Quality improvement
Setting benchmark standards in the early phases of supplier management ensures high expectations for product and service quality. Continuous monitoring and evaluation of supplier performance further guarantee compliance with these standards, reducing the risk of defects or non-compliance.
Collaborating with suppliers, providing them feedback, and adopting innovative solutions contribute to the ongoing goal of enhancing the quality of products and services, ultimately enhancing patient care.
- Inventory optimisation
With supplier relationship management in play, organisations benefit from collaborative efforts, especially in areas like improved demand forecasting, reduced lead times, enhanced order fulfilment processes. In effect a more responsive and efficient supply chain. All of these contribute to maintaining an optimal level of stocks, enabling businesses to manage inventory more effectively. This minimises the need for excessive safety stock, reducing waste without compromising the availability of essential items and ensuring consistent, timely delivery of vital supplies.
- Risk mitigation
Supplier management involves the early identification of supplier-related risks. Risks, such as disruptions in the supply chain, financial instability, or geopolitical issues, are predicted, and plans are created for their proactive management. This helps minimise the potential negative impacts and facilitates smooth operations for seamless healthcare delivery.
- Goal alignment
By considering organisational goals from the very start of the supplier selection process, effective supplier management actively contributes to the achievement of these goals. Strategic alignment with suppliers ensures shared goals, fostering a partnership's long-term success and sustainability. Consider the example of the Greener NHS initiative, which aims to reach net-zero emissions. Integrating sustainability into supplier selection and management not only supports a Greener NHS but also minimises the environmental impact of organisations.
Efficiency gains of supplier management
Effectively managed supplier relationships play a vital role in enhancing overall operational efficiency and productivity. By optimising costs, improving inventory management, ensuring quality control, and implementing proactive risk management, it strengthens the supply chain and enhances its efficiency. Streamlined procurement processes, strengthened communication channels, and reduced lead times further contribute to operational excellence. These measures establish a reliable supply chain, fostering strong relationships with suppliers and enabling organisations to respond promptly to changes in market conditions, demand fluctuations, or unexpected challenges, ensuring seamless business continuity.
How Advanced can help you in supplier management
With technology at your service, all these advantages of supplier management can be easily elevated to the next level. Advanced Supplier Management is a centralised solution for all your supplier management tasks, providing complete visibility and control over your supplier relationships. It simplifies tasks such as storing contracts, reviewing supplier performance, conducting supplier risk assessments, and tracking vendor contracts.
The software's built-in dashboards offer real-time data and generate insightful reports, enabling strategic decision-making. It also allows you to gain a full view of regulatory compliance and effortlessly adapt to legislative changes, while efficiently managing crucial information, including insurances, policies, and certifications. This is particularly important with the new Procurement Act, passed in 2023, which emphasises transparency throughout the commercial lifecycle.
Still not convinced. Perhaps figures can persuade you. Take a glimpse into the potential financial savings achievable by embracing Advanced Supplier Management, using the value assessment calculator.
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