14/55b NHS BLOOD AND TRANSPLANT 22 May 2014 Title Executive Summary Stock Management Project Expansion This paper provides a summary of the business case covering the expansion of a Vendor Managed Inventory (VMI) stock management service to 20 hospitals. As a prelude to this business case, stock management pilots were conducted with 8 hospitals and desktop stock modelling exercises carried out with a further 6 hospitals. Average outcomes from the 8 active pilot sites were as follows: Ad hoc (i.e. unplanned) deliveries were reduced by c. 30% - an average saving, per site per annum, of 2,419 (-69 deliveries) RBC (Red Blood Cell) time expired wastage was reduced by c. 30% (excluding group AB units) - an average saving, per site per annum, of 2,832 (-23 units) Platelet wastage was reduced by c. 25% - an average saving, per site per annum, of 2,892 (-14 units) RBC stock levels held by hospitals were reduced by c. 8% (-10 units) The recommended option describes expanding the programme to 20 sites i.e. the eight existing pilot sites, the six desktop sites (which would receive an active VMI service) and six additional, strategically-selected sites. This proposal is dependent on the development of a Planning and Control System (PCS) which is described in a separate paper. This initiative delivers a number of benefits resulting from closer working between NHSBT and hospitals, including financial benefits of 811,000 to the 20 hospitals involved over a 5 year period. The lost contribution to fixed costs resulting from the recurring reduction in demand will need to be managed as part of demand and cost reduction planning. Although the project expansion represents a significant cost pressure for NHSBT, it provides benefits for hospitals and supports NHSBT s ambition to be the best organisation of its type in the world. Action requested from the Board Strategic Priority, Regulatory Requirement or Corporate Risk that this item relates to Subject to the outcome of the Board development day, the Board is asked to approve the expansion of the stock management project from 8 to 20 hospitals. Delivering a modern and world-class blood service. NHSBT Stock Management Board report Page 1 of 9
Organisational forums where the paper (or equivalent paper) has been considered Equality and Diversity Impact Assessment Sustainability Impact Assessment Author Responsible Director NED Reviewers Executive Team Is a Full assessment required: No Is a Full assessment required: No Teresa Allen Dr Huw Williams Dr Christine Costello, Andrew Blakeman NHSBT Stock Management Board report Page 2 of 9
NHS BLOOD AND TRANSPLANT May 2014 STOCK MANAGEMENT SERVICE SUMMARY The Integrated Transfusion Services (ITS) programme is designed to integrate NHSBT more closely with hospitals, with the aim of increasing the quality of customer service, improving patient outcomes and reducing cost. One of the key initiatives in this programme was the development an NHSBT-managed blood stock replenishment system. A project was initiated to determine whether we could successfully extract data from hospital transfusion laboratory systems and develop a safe and effective method of automatic blood stock management. This initial proof of concept work is now complete, and has established that it is feasible for NHSBT to manage such a system. Eight hospitals participated in the pilot with a further six hospitals providing desktop data for stock modelling purposes. A number of operational benefits were realised from this work for both hospitals and NHSBT. Hospital transfusion laboratories benefited from a managed service which increased efficiency and managed stock more effectively. There was also a small but cumulative financial benefit at each site associated with reduced costs from holding lower stock levels, fewer deliveries and wastage due to stock age expiry. NHSBT benefited from improved stock visibility and direct access to data to better inform planning processes and to smooth orders and workload. There was however an implementation cost and a loss of financial contribution associated with reduced hospital deliveries, reduced hospital stockholding and wastage. This was partially offset by a reduced requirement to collect, test, process and distribute the units which would otherwise have been ordered or wasted. Long-term, our aspiration is to provide a stock management service supporting a significant proportion of national demand. This document recommends an expansion of the pilot programme to a total of 20 hospitals, supported by a more stable, fully automated Planning and Control System. This would replace the software being used for the pilot sites which is insufficiently robust to support a greater number of hospitals. This phase is designed to ensure that we can provide an effective service to a greater number of hospitals (some of which are large and complex) using the PCS. Should the expansion be successful, the next step would be a further expansion of the service to 65 hospitals covering around 40% of national red cell demand. Longer-term, it is envisaged that a stock management service could be provided to around 110 hospitals representing 70% of national red cell demand. A further 161 increasingly small hospitals represent the remaining 30% of demand and in this group the returns and benefits of a stock management service decline substantially. RECOMMENDATION Subject to the outcome of discussions at the Board development day, the Board is asked to approve an extension of the current stock management programme to 20 hospitals over an 18 month period. This will cover around 12% of national red cell demand and 17% of platelet demand. The implementation of this next phase of work requires an investment of 476,000. This recommendation is dependent upon on the procurement of a Planning and Control System which is the subject of a separate Board paper. NHSBT Stock Management Board report Page 3 of 9
1. Background The stock management project was a proof of concept initiative to implement an in-house developed Vendor Managed Inventory (VMI) solution for eight NHS hospitals. VMI is a means of optimising supply chain performance in which the manufacturer is responsible for maintaining the customer s inventory levels and replenishes stock automatically based upon mutually agreed levels of stockholding. This concept is routinely used by many distribution chains, and for example is common practice in hospital pharmacies for the management of pharmaceuticals. The purpose of the project was to establish whether NHSBT could work with hospitals to develop such a system i.e. an automated inventory replenishment tool to maintain blood safety stocks, reduce stock wastage and optimise deliveries. The VMI service was supplemented by desktop modelling and analysis with a further 6 hospitals. The proof of concept work has been successful, and a Detailed Business Case has now been developed recommending the extension of the VMI service from the 8 pilot sites to a further 12 hospitals. Progress was reported to the Board in March and September of 2012 and again in January and July of 2013. An expansion of the number of VMI pilots and desktop pilots agreed in July 2013 has been achieved. A further Board update was submitted in March 2014. The core objectives of the proof of concept work were to: (a) Build an in-house VMI solution that would have the capability to interface with hospital IT systems and enable NHSBT to automatically replenish stocks to mutually agreed stock levels. (b) Optimise the stock management and transport arrangements at VMI sites. The data collection and analysis were designed to gain a full understanding of the potential to deliver improvement in key areas such as stock inventory levels, stock fate, ad hoc delivery levels and wastage volumes. (c) Run the pilot solution for a period of time and assess the outcomes pre- and post-vmi for the sites involved, in order to provide a validation of the operational benefits of such a service. This initiative is one component of a wider strategic vision of optimising the end to end NHS blood supply chain to release cost savings back to the NHS for frontline patient care. 2. Pilots The pilot hospitals for the VMI service were the Blackpool Victoria Hospital, The Royal Bournemouth Hospital, The Royal Liverpool University Hospital, Liverpool Women s Hospital, Broadgreen Hospital, The John Radcliffe Hospital, The Horton Hospital and the Churchill Hospital. This selection of hospitals provided a good spread of sizes, types and specialties (both single, multi-site and satellite as part of larger Trust and teaching hospitals). The VMI pilot programme was implemented for routine components only and represented 65,500 red cell units (3.8% of total red cell issues) and 12,200 platelet units. 3. Summary of the benefits identified from the pilots To date an aggregated total of over 6 years of VMI has been sustained without incident at the 8 hospitals. The following averaged (annualised) outcomes provide a high level insight in to what has been achieved through the pilot: Ad hoc deliveries reduced by c. 30% - an average saving, per site per annum, of 2,419 (-69 units) RBC time-expired wastage reduced by c. 30% - this excludes AB units - an average saving, per site per annum, of 2,832 (-23 units) NHSBT Stock Management Board report Page 4 of 9
Platelet wastage (including MONU 1 and SONU 2 ) reduced by c. 25% - an average saving, per site per annum, of 2,892 (-14 units) Reduction in RBC stock levels held by hospitals by c. 8% (-10 units). 4. Customer Feedback The hospitals involved in the pilot took part in a customer satisfaction survey. The feedback received was positive. Improvements in operational efficiency, risk reduction and enhanced quality of patient care have been observed. A representative selection of comments is listed below. The changes to stock minimum and maximum levels (especially for platelets) have been praised by clinicians due to the improved availability of platelets on demand. We would not have had the confidence to implement this without the data and advice provided by the NHSBT. The extension of the pilot duration allowed us to prove that the financial savings we set out to achieve have been met, but importantly we are confident that as a team we have improved efficiency, improved service for patients and provide a higher quality and more patient focused service as a result of this pilot. The automatic stock replenishment reduces the risk of human error and provide an important safety check of essential minimum stock levels. The fact that routine orders are just automatically generated has meant that the staff are less distracted by having to remember to do a blood order at the prescribed time. This means they are able to just continue with their work and just concentrate on non routine requests as required. Senior staff and laboratory support staff have had some time released due to the lean delivery process. Real data has given us greater confidence to reduce our red cell stocks from what was previously believed to be optimum. 1 Medically Ordered Not Used 2 Surgically Ordered Not Used NHSBT Stock Management Board report Page 5 of 9
5. Project expansion options The following options were considered. The first focuses on ensuring that the current eight pilot sites are fully operational and made sustainable but involves no further expansion. The other options describe a wider roll-out to a greater number of hospitals. Option A: sustain the current 8 pilot sites. Do not roll out the service any further but support the current service provided to 8 hospitals. Operationalise the VMI software tool for existing sites only. This sustains the benefits that have already been realised through the pilot. Option B: further roll-out to 20 hospitals (recommended option). Expand the VMI service to 20 sites covering around 12% of national red cell demand the eight existing pilot sites, the six desktop sites and a further six strategically selected sites. This roll out would be completed within 18 months, but is dependent on the availability of a PCS as the pilot software system is incapable of supporting a broader roll-out. The aim of this phase is to ensure that we are able to operate an effective VMI service across a broader range of hospitals supported by the PCS. Option C: a larger roll-out to 65 sites covering around 40% of national red cell demand the eight existing pilot sites, the six desktop sites and a selection of strategically important, high volume or high wastage sites. This is considered to be too ambitious a plan in the shortterm and it is recommended that a broader roll-out be considered once the VMI system is operational in 20 sites (as per Option B) supported by the PCS. All new roll out sites will have VMI installed, minimum stock trigger levels set and levels of stock optimised. Stock level management and VMI will be provided using the PCS. The recommended option will include the current pilot sites, the desktop sites which will convert to an active VMI service (Birmingham Heartlands Hospital, Hull Royal Infirmary, St Mary s Hospital London, Medway Hospital, Scarborough Hospital and Castle Hill Hospital) and will also include Addenbrookes Hospital, the Hammersmith Hospital, the Northern General Hospital, the Royal Hallamshire Hospital, Charing Cross Hospital and Southampton General Hospital. These additional sites were selected based upon the following criteria: willingness to participate in the VMI scheme; size in terms of red cell demand (each is a large hospital); proximity to NHSBT stock holding sites; potential partners for Red Cell reference integration; potential for increased efficiency in terms of reduced stockholding and wastage. The addition of these further sites would expand the scope of VMI to 12% of national red cell demand and 17% of platelet demand. Their inclusion will ensure that: The roll-out plan is achievable in terms of our capacity and capability to implement the programme, and provide further comfort that a wider roll out is viable using the PCS; NHSBT has a solid service platform from which to further expand if the NHS appetite is appropriate. These hospitals have recently re-confirmed their expressions of interest in participating. 6. Project Approach The recommended option incorporates 20 sites and involves a phased roll-out approach. This will be managed by a dedicated project implementation team consisting of project management, business architecture and VMI subject matter experts (known as pilot leads). NHSBT Stock Management Board report Page 6 of 9
Based on the recommended approach of roll-out to 20 sites there will be four key phases which will last until May 2016. There is a significant amount work that needs to be undertaken with each site (around 1 month per site) in preparation for VMI. This work will start in July 2014 although the implementation of the VMI service proper has to be flexible based upon the availability of the PCS (assumed to be October 2014). Each phase will incorporate a review. Once the roll out has been completed for each phase (containing between four sites per phase depending upon the option chosen) and the VMI optimisation service is live, it will be passed to Business as Usual (BAU) operations. The proposed approach will seek to maximise the lessons learned from the pilots and reduce complexity, risk and effort. The approach will be to run a VMI solution using the PCS tool at the site in shadow form, collecting live data which will then be used to optimise stock as the VMI PCS tool goes live. 6. Resources In order to deliver the proposed roll out, a project team will be established under the governance of a project board. This team will consist of 0.8 WTE Project Manager 3, 2 WTE Pilot Leads (2 pilot leads reducing to 1 after a period of transition following phase 1) and 1 WTE Data Analyst (phase 1 only). The team will be supported by a Finance Lead, Communications Lead, Transport Lead, Quality Lead, Customer Services Lead, IT lead and a Hospital Services Lead. 7. The Planning and Control System The IT solution that was used for the pilot programme was developed in-house using Business Objects software. This software is insufficiently robust to support a greater number of hospitals. Therefore, in order to successfully roll out the stock management service the PCS will need to be in place - this constitutes a vital technical dependency as it is the system that will support the expansion. The costs and associated timescales are covered in a separate Board paper. 8. Costs / Benefits This project will lay the foundation for NHSBT s future capability to offer the NHS an end-toend stock management service. As such, financially based quantifiable benefits are limited for NHSBT it is the wider NHS which will see more significant financial benefits attributed to factors such as increased efficiencies, reduced stockholding requirements, ad-hoc transportation and stock wastage. The following table illustrates a forecast based on a five year period (2014-2019). This table covers the implementation options presented in the DBC and the key financial indicators associated with each. Implementing and running this service over 5 years will be at a significant cost to NHSBT, although our NHS customers will reap benefits no matter which option is chosen, ranging from 811,000 for option B to 2,484,000 based on option C (over 5 years). 3 Project management is included as project support costs in the option appraisal. The project management costs would be funded from the baseline BTS budget. Project support costs are outlined in the finance summary table presented overleaf. NHSBT Stock Management Board report Page 7 of 9
Implementation Options Summary Total 2014-19 Description Option A Option B Option C Do minimum' - operationalise the existing pilot sites Preferred Option - 20 sites - 'low risk' Extended 'strategic' Roll out to implementation to c. 12% c. 40% of NHSBT s RBC SC of NHSBT's RBC SC Hospitals 8 20 65 NHSBT Non-recurring Implementation cost 000's (80) (331) (930) NHSBT PMO resource untracked cost 000's (50) (145) 0 NHSBT Non-recurring (cost) 2014-19 000's (131) (476) (930) Hospital Impact (cost)/benefit 000's 523 811 2,484 NHS System Impact (cost)/benefit 000's 392 335 1,555 NHS NPV (cost)/benefit 000's 358 278 1,357 NHS System Payback achieved in 15 months 40 months 33 months Note: The cost of the PCS is not included. Option A represents the minimum cost required to sustain the benefits already realised in 2013/14 as part of the pilot phase. The hospital based impact of activity changes under VMI is measured in line with NHSBT's 2014/15 price list for products and services. NHSBT would incur lost contribution reflecting the full impact of lost income offset by the marginal cost impact of changing activity levels. NHSBT marginal costs (which NHSBT will save if the volume of units required is lower) include the costs associated with the collection, processing, testing and delivery of products. Lost contribution has been excluded from the financial evaluation as it will be managed through demand and cost reduction planning, but is summarised in the table below. Impact on NHSBT contribution 2014-19 Option A Option B Option C Lost Red Cell Contribution (104) (159) (604) Lost Platelet Contribution (109) (185) (450) Lost Transport contribution (116) (217) (640) NHSBT Recurring Impact (cost)/benefit 000's (329) (561) (1,694) Benefits The benefits associated with an expansion of the VMI project are as follows: Qualitative Greater visibility and intelligence across the end to end supply chain, and improved stability and sustainability stock would be monitored on a 24/7 basis. Information will be available, for the first time, via new reporting mechanisms (through the Planning and Control System) on how stock is used, helping both NHSBT and the hospitals to better manage stock. Reduced variability in local demand leading to a smoothing of orders, reduced internal workload and reduced transport movements. NHSBT would have an ability to forecast demand more accurately for VMI sites and understand their blood usage more effectively. Stock wastage would be reduced by ensuring hospitals only receive the stock they need, by type, when they need it. There would be reduced human intervention and more automation of process, leading to operational efficiencies and the reduction of risk of potential errors. Improved customer satisfaction. NHSBT Stock Management Board report Page 8 of 9
Quantitative The following benefits could be realised for each hospital using the VMI service: Ad hoc delivery savings RBC time expired wastage saving average per site: 3,246 (-62 units) average per site: 2,687 (-22 units) Platelet wastage saving based on wastage reductions average per site: 4,382 (-22 units) Reduction in RBC stock levels by hospitals and the cost saving associated with this average per site: 573 (-5 units). These are estimated figures based on our current knowledge of the stock holding and wastage figures for the additional hospitals. The average recurring benefit per hospital under option B is 10,300, delivering total hospital recurring savings per annum of 206,000. Impact on NHSBT income If hospital wastage is reduced, orders will reduce, leading to reductions in income. If ad-hoc deliveries are reduced NHSBT will neither incur the cost nor collect the ad-hoc delivery payment from the hospital these aspects take the form of lost contribution to the business. The lost income from RBC, platelets and transport are summarised above. However this also means that there is a positive impact in terms of a reduction the cost incurred in collecting, processing and testing these components (approximately 3,300 red cell units and 1,400 platelet units for Option B). Success Criteria This next phase of this project will be deemed to be a success if: All 20 sites are successfully migrated on to the PCS; The 6 additional hospitals have committed internal resources in line with the project plan; The financial, operational and customer service benefits experienced by the pilot sites during the proof of concept phase are replicated during the expansion; The new VMI system is proven to be robust and there are no system failures or stock replenishment issues. 9. Summary The stock management pilot programme has demonstrated that NHSBT can safely and sustainably operate a VMI solution for blood components. The project was well-received by hospitals and led to significant local savings. The business case seeks approval for a roll out of a stock management solution to 20 hospitals, representing c.12% of national demand for RBC and c.17% of platelet demand. The preferred roll-out option incorporates 20 sites, i.e. the eight existing pilot sites, six desktop sites and six additional, strategically selected sites. The expansion of the pilot is dependent upon the acquisition of a PCS as the current system is insufficiently robust to support a greater number of hospitals. The expansion represents a significant cost pressure for NHSBT in terms of both the headcount required to run the project, and indirectly, the lost income from blood components. However, it provides benefits for hospitals and supports NHSBT s ambition to be the best organisation of its type in the world. NHSBT Stock Management Board report Page 9 of 9