NHS Supply Chain - An SME Champion

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1 NHS Supply Chain - An SME Champion Parliamentary brief Summer 2015 Current landscape The Coalition s Programme for Government published after the General Election in May 2010 outlined its overarching commitment to promote small and medium sized business (SME) procurement. It did this by introducing an aspiration that: 25% of government contracts should be awarded to small and medium sized businesses; and government tenders should be published in full online and free of charge. The May 2015 General Election resulted in a Conservative Government and the Party s 2015 Election Manifesto included a promise to raise the target for the proportion of central government spend going to SMEs to one-third.. Government has since repeatedly expressed its belief that SMEs have a vital role to play in the growth of the UK economy and can offer more innovative and imaginative, more flexible and more cost effective products and services. Successive announcements of measures and initiatives demonstrate progress towards the Government s objective to: 1) remove unnecessary obstacles that make government procurement difficult for SMEs; 2) make the system more competitive between suppliers; and 3) provide new business opportunities for SMEs. In February 2015, Francis Maude, Cabinet Office Minister, reiterated the government s commitment to SMEs, and referred to Lord Young s 2014 report, Growing Your Business, which proposed procurement reforms which are intended to provide better access for businesses to the 230 billion annual public sector spend in England, has been accepted by Government. The reforms describe the single market principles which suppliers should expect when doing business with the public sector. These principles should simplify and standardise the advertising, bidding and payment of public contracts, and should remove the complexity, cost and inconsistency when trying to sell to more than one public sector body. The Department of Health ensured the proposed actions for NHS providers were incorporated into the Procurement Transparency Guidance issued in March In June 2014, the Queen s Speech introduced the Small Business, Enterprise and Employment Bill. The purpose of the Bill is to build a stronger economy by supporting small businesses as they compete, and ensure they aren't disadvantaged by those that don't play by the rules. The main elements of the Bill include making it easier for small businesses to access finance; improve payment practices between small businesses and their customers; providing small firms with fair access to the 230 billion spent each year in the form of public procurement contracts; and increase the availability and sources of finance for businesses that want to invest. NHS Supply Chain has a key role to play in enabling SME engagement with the NHS and can demonstrate good practice in this area. NHS Supply Chain s commitment to SMEs The European Commission defines an SME as a company under a 50 million Euros turnover and 250 headcount. (EC Enterprise and Industry website: NHS Supply Chain shares this definition, along with the Government s desire for best practice to improve patient outcomes, deliver real savings and enable innovation across the NHS.

2 One of NHS Supply Chain s priorities is to improve SME engagement with the NHS. Our direct experience working with SMEs means we understand the benefits that these suppliers can bring to the NHS in terms of savings delivery, innovative and cost effective products and services. Current records show that 80% of all our contracts include SMEs as awarded suppliers and SMEs represent 30.2% of sales across NHS Supply Chain s full contract portfolio. NHS Supply Chain is committed to providing savings and benefits to NHS trusts by offering a fair and equitable environment for suppliers of all sizes to ensure our range embraces high quality and innovative products. In 2011, at the request of the NHS National Procurement Council, an NHS Supply Chain Medical Market Supplier Board was established. The Board provides a forum for open and constructive communication between NHS Supply Chain, industry and trade associations, the government and other stakeholders to help develop and implement improvement initiatives, talk about opportunities and share issues and strategies on areas such as: supply chain management, product introduction, procurement processes and procedures, innovation, codes of conduct and NHS engagement. A key focus for the Board is removing complexity and improving effectiveness in the supply chain to increase value for the NHS and its suppliers. The Board also provides an opportunity for NHS Supply Chain to work with suppliers to develop a joint vision in response to the changing NHS landscape, as well as working together to generate increased savings and benefits for NHS customers through both cash releasing savings and cost avoidance. At the inaugural Board meeting in September 2011, members identified SMEs as a subject for focus and further understanding. The Board agreed to formulate, from appropriately experienced representatives of its membership, an SME Special Interest Group (SIG). An SME research paper was produced in August 2012 in order to gain further insight into issues faced by SMEs and their experiences of selling into the NHS and NHS Supply Chain. The SIG also wanted to drive successful opportunities for SME engagement and learn from the experiences of other industries and organisations outside the NHS. The SME SIG used the insight paper to provide a focus for a series of workshops, which supplier representatives attended, that explored the paper s findings and discussed clear actions to tackle those barriers; to develop NHS Supply Chain s sourcing strategies and address any additional issues faced by SMEs. The aim is always to ensure a level playing field for all suppliers, enabling equal access, regardless of size, to both NHS Supply Chain and the NHS. The SIG developed a detailed action plan, which has defined best practice and has been adopted as business as usual by the NHS Supply Chain contracting activity. A key conclusion of the SIG was the need for training and guidance on using the NHS Supply Chain e-tendering service and the processes that companies follow to supply the NHS through NHS Supply Chain. An on-going series of Contracting Workshops are now conducted for new and existing suppliers to NHS Supply Chain. Over 70% of attendees are SMEs. Other recommendations included: 1. improving the visibility of forthcoming tenders In line with government policy, NHS Supply Chain has worked with the Department of Health to support Contracts Tracker. In addition, NHS Supply Chain publishes full tender timetables on the website and communicates this to all supplier associations and their membership, as well as existing suppliers via a link from a bimonthly supplier new update the reduction in duplication of data submission - NHS Supply Chain is addressing this by using open tenders, removing the need for PQQs, and aligning with the Sid4Gov database 3. more accurate forecasting of potential sales - NHS Supply Chain has undertaken an extensive Category Management programme, which includes analysis of the market and a more accurate prediction of sales opportunities. Benefits of using NHS Supply Chain As the national procurement and logistics provider for the NHS, NHS Supply Chain is ideally placed to support the government s aspiration on SMEs. NHS Supply Chain works with clinicians and NHS trusts to understand their needs and match their demands from supplier product ranges and where possible bring products from SMEs to the market.

3 In addition, as local sourcing and sustainability issues become increasingly important for the NHS, NHS Supply Chain can work with trusts to help them meet their own local targets around areas such as use of local suppliers. Despite being a national organisation, NHS Supply Chain is also able to work with SMEs locally as part of national framework agreements to provide easier market entrance for SMEs who may struggle to achieve national volume delivery requirements. Equally, once only tendering with NHS Supply Chain opens up the national NHS market to SMEs. Our positive relationship with SMEs extends across both non-medical and medical categories. For example, in the non-medical field, NHS Supply Chain has established a network of approximately 30 regional and local SMEs delivering locally sourced fresh produce to hospitals in their vicinity through the Fresh Fruit and Vegetables Framework. NHS Supply Chain also has a framework agreement in place for meat and poultry with a similar number of regional SMEs and a milk, dairy and bread framework agreement with a network of over 20 SMEs supplying local hospitals. Cash flow can be a limiting factor for SMEs, particularly those in their infancy. NHS Supply Chain supports new entrants to the NHS market through reliable payment terms which is particularly important given the current financial climate. Use of the Department of Health Consumables Fund through NHS Supply Chain supports prompt payment, in return for NHS savings on unit price. Furthermore, NHS Supply Chain s strength and scale as a national provider to the NHS removes the need for SMEs to invest precious resources in back office functions such as warehousing, freight and customer services. We have the capacity to manage these key elements offering a significant cost saving to SMEs as an additional benefit. From an NHS trust perspective, NHS Supply Chain s commitment to working with SMEs can help trusts to comply with the government s SME targets for public sector procurement as well as increasing value across the supply chain. NHS Supply Chain also has strong expertise in medical categories where, through our single point ordering service and invoicing facility, some SMEs have gained access to the NHS market and achieved strong sales growth, using the bespoke NHS Supply Chain Supplier Portal and also using the e-direct delivery route. Testimonial: Endoscopy Consumables supplier Pennamed has experienced 20% growth through edirect We are a clinical SME. We have increased the number of hospitals we deal with through NHS Supply Chain. edirect is easy to deal with, problem free and offers great support to us as a supplier. The ecommerce website is real-time keeping all parties informed at the touch of a button, giving time back to our administrative staff. The NHS Supply Chain online catalogue enables SMEs to benefit from the single shop window for all their products, including innovative technologies, visited each month by over 93,000 unique users helping generate 5.1m orders. Buyers work with suppliers to organise bulk buy and commitment deals and have proven to deliver incremental sales growth. Testimonial: Endoscopy Consumables supplier Medical Innovations edirect has facilitated access to the NHS for our more specialist or newer products, whereas NHS Supply Chain stocked items are for proven high volume lines. This benefits Medical Innovations in a number of areas, including consolidation of smaller orders, single point invoicing and once only tendering. We now see NHS Supply Chain edirect an essential element in our route to market. Case study 1: Gama Healthcare - Member of the Association of British Healthcare Industries (ABHI) and Medilink Three years ago, Gama Healthcare introduced specialist wipes to the market. The business has grown rapidly since then from having no sales to enjoying sales of 4.2million per annum along with a recognised brand Clinell that customers ask for by name.

4 Key tools Gama Healthcare was able to utilise by working with NHS Supply Chain were: - NHS Supply Chain weekly sales and gap analysis reports that help their sales teams provide support to customers and target new opportunities more effectively. - Uploading data sheets and product images to NHS Supply Chain s online catalogue enabling infection prevention and control teams to evaluate them more easily. - Product advertising in the national catalogue and cloths and wipes catalogue to drive awareness of their product range to NHS Supply Chain customers. - marketing programme, to promote new products launched between issues of the national catalogue. Collaboration with NHS Supply Chain has had a positive impact on Gama Healthcare in a number of ways. It helped Gama Healthcare gain national coverage for its innovation rather than growing sales on a trust by trust basis. Furthermore, by only needing to pitch their product to NHS Supply Chain, Gama Healthcare was also able to overcome two significant barriers to entry. Removing the need for trusts to go out to tender under EU public procurement rules to buy their products; Offering trusts an easy route for ordering and receiving their products. Case study 2: Clinimax Ltd - Member of the Association of British Healthcare Industries (ABHI) Supported by a solid evidence base and endorsement from the Health Protection Agency s Rapid Review Panel, Clinimax, an SME specialising in the development and manufacture of infection control products for the healthcare profession, needed an outlet to enable them to access the NHS with their revolutionary new broad spectrum disinfectant product, Difficil-S. NHS Supply Chain was able to support a pilot of Difficil-S as a new and innovative product helping to combat Health Care Associated Infections (HCAIs). Following the pilot and subsequent successful tender as part of NHS Supply Chain s Pharmacy Bulk contract, and utilising NHS Supply Chain s sales, marketing and logistics programme alongside their own, Clinimax has now seen over 60 trusts either trialling or converting to Diffcil-S. In addition, by using NHS Supply Chain s weekly sales reports, Clinimax was able to provide established and new customers with training and support for Difficil-S. Good Practice Through open engagement with all suppliers, NHS Supply Chain has created conditions conducive to supporting SME access to the NHS market: Full work plan published on website. Transparency of opportunities to tender for NHS Supply Chain contracts on the Government s Contracts Finder portal. Local supply can be translated into national coverage through NHS Supply Chain s network. Electronic, consistent procurement process through e-procurement solution Intenda 1. Once only tender response to reach NHS SMEs don t have to respond to each individual trust. 1 Intenda is NHS Supply Chain s e-procurement system.

5 Innovation scorecard available to fast track new products; Successful product adoptions to date include: Tournistrip a disposable tourniquet to combat the risk of HCAIs; Bailey s nail nipper designed to combat repetitive strain injury (RSI); and SportVis a product giving patients a faster return to pain-free and disability-free sporting and daily activities. Pilot contract approach available to test the market on product volumes below EU Public Procurement regulations thresholds. Sustainability content within the contract tender process to support SME participation. Increased and off-line supplier support within certain tender processes, for example fresh produce. Challenges Whilst NHS Supply Chain is supportive of the Government s commitment to SMEs, the business has to be fair and equitable to all suppliers in its business approach to comply with EU public procurement regulations. Equally, there are challenges that remain due to the size and nature of SMEs. NHS Supply Chain s SME Engagement Insights paper facilitated through the Supplier Board and the Board s SME SIG, highlighted the following challenges: Capability limitations before, during and after contract tendering. Lack of awareness of tender opportunities The current economic climate, presenting problems with cash flow for some SMEs due to tighter bank lending restrictions and loan availability. SMEs also face challenges due to the scale and nature of the NHS market: Clinical adoption of new healthcare brands introduced by SMEs can be slow. Even when successful at tender stage, SMEs struggle to raise the profile of their products across the fragmented NHS landscape. - Dealing with larger numbers of SMEs in some categories may not deliver best value to the NHS in terms of cost compared to dealing with fewer larger suppliers. Conclusion The NHS Supply Chain model enables SMEs to gain access to the NHS market and the benefits of partnership can clearly be seen. To increase sales for SMEs, some procurement behaviour within the NHS will need to change in terms of embracing less prominent brands and comparable products. NHS Supply Chain is continuously looking to improve its engagement with SMEs with the ultimate aim of Championing SMEs to bring innovative and cost effective products and services to the NHS. About NHS Supply Chain NHS Supply Chain is operated by DHL as Agent of the NHS Business Services Authority. It supports the National Health Service (NHS) and other healthcare organisations in England and Wales by providing end to end supply chain solutions. NHS Supply Chain manages the sourcing, delivery and supply of healthcare products and food for over 1,000 NHS trusts and healthcare organisations. It provides a single point of access to over

6 300,000 nationally available, transactable lines ranging from bandages to sutures, from gloves to implants, and surgical equipment. In addition, we can help you plan your investment in medical capital equipment such as MRI scanners, linear accelerators and patient monitors. Contact for further information: Joanna Morrison, Head of Public Affairs & PR Tel: