Vince Pross, Procurement Director at Chelsea & Westminster Healthcare NHS Trust faced the need to make an immediate £1m saving (7%) in his first year increasing to 20% savings per annum by 2008.
“First of all we needed to know what products and services we were buying, from whom and at what price, in a simple spreadsheet we could work from.’
To find this out he asked Coding International Ltd (CIL) to carry out a product coding standardization exercise. As soon as this was finished, the hospital was able to seek better discounts from suppliers and improve their product sourcing. The many longer-term benefits were even more valuable.
The Chelsea and Westminster Hospital (C&WH) is based on the Fulham Road, in one of the most lively and cosmopolitan areas in Central London. It is leading teaching hospital and one of five main teaching centres for Imperial School of Medicine. The current annual influenceable spend on products and services is £14.6m.
Vince Pross had recently joined the management team at C&WH with a remit to drastically reduce the annual revenue expenditure on Procurement. He needed to:
- Reduce stock levels which were too high compared with usage volumes
- Cut process costs which were too high for low value, high turnover items
- Take control of product usage with both rationalization and standardization
- Decrease the number of emergency orders and reduce invoicing and order processing costs
The original data had been created using free texts descriptions, rendering them useless. This was sent to CIL for processing. The work consisted of creating standardized descriptions, built up from the manufacturer’s catalogue numbers (MPCs), from which the correct information could be found. Appropriate National Supplies Vocabulary (NSV) codes were then added. All this new information being cross-referenced to the original data. As an example, for one standardized description C&WH had created 46 duplicates.
Using their programming ability to create detailed reports in various relevant formats, CIL developed reports showing the whole picture of C&WH’s previous year’s spend.
Using the detailed reports C&WH achieved short-term savings by:
- Buying the same product from a different, cheaper supplier
- Reducing the number of small orders placed
- Deciding which items to place in stock and the stock level
Longer Term Savings
Heading Reports in NSV format showed how C&WH could achieve longer term savings by:
- Better catalogue management
- Variety reduction and price tracking
- Reducing the number of Suppliers
- Developing commitment contracts so that partnership agreements can be achieved, which should result in better prices and services. (This has benefits to the Suppliers as well)
Vince has reported that through the information provided by CIL, he was already ahead in making his first year’s savings and was very confident of achieving his long-term goals.