NHSBT BLOOD AND TRANSPLANT 22 MAY 2014

14/55a NHSBT BLOOD AND TRANSPLANT 22 MAY 2014 Title Executive Summary PROCUREMENT OF A PLANNING AND CONTROL SYSTEM This paper sets out a contract recommendation for the purchase of a Planning and Control System (PCS). The system is a key enabler to improving our supply chain process management and therefore facilitating the delivery of cost savings and other benefits. Additionally it is required to support stock management roll out The recommendation is to award the contract to ToolsGroup. Action requested from Board Strategic Priority, Regulatory Requirement or Corporate Risk that this item relates to Organisational forums where the paper (or equivalent paper) has been considered Consultation and Review Equality and Diversity Impact Assessment Sustainability Impact Assessment Author/s Responsible Director NED Reviewers The Board are asked to approve the purchase as recommended. Better integration and planning of the end to end blood supply chain. Executive Team Adrian Chandler (Procurement) Vaughan Sydenham (Finance) Is a Full assessment required: N Is a Full assessment required: N Gerry Gogarty, Assistant Director, Business Development and Strategy James Fishwick, Business Architect, Business Transformation Services Clive Ronaldson Roy Griffins and Jeremy Monroe 1 of 15

NHS BLOOD AND TRANSPLANT 22 MAY 2014 PROCUREMENT OF A PLANNING AND CONTROL SYSTEM (PCS) EXECUTIVE SUMMARY Integrated planning of the blood supply chain is an objective in the current NHSBT strategic plan. The aim is to better understand demand, improve customer service, optimise stock holding, reduce waste and ultimately contribute savings that will support our objective of maintaining the price of blood. Demand at blood group level is not well understood, forecasts are based on issues, not true customer demand. Existing systems are fragmented. There are limited common data sets and there are several single points of failure where the organisation relies on individuals running personalised databases and spreadsheets. High stocks are consequently held as a buffer. As NHSBT does not have an Enterprise Resource Planning (ERP) system to support supply chain, finance and HR, a PCS presents a cost effective alternative and more sophisticated solution for supply chain planning. PCS is a key business enabler for improving our supply chain process management and therefore will facilitate the delivery of cost savings and other benefits, as follows: The Stock Management project (VMI) requires PCS for a planned roll-out. The temporary IT tool used for the stock pilots is not scaleable to more hospitals, and is not robust or stable. PCS coupled with TMS and Stock Management, will allow NHSBT to understand and gain tighter control of the key value streams. PCS will provide a future platform for :- o improving collection forecasts allowing hospitals to view and adjust forecasts, o creating demand driven blood group collection plans, taking the impact of marketing on collections, and o providing an alternative improved way of collecting Blood Stocks Management data.(bsms) Additionally the PCS system will deliver the following direct benefits:- Identification of those few patients with high demand, enabling a quick response to meet specific patient need. Identification of multiply transfused patients (e.g. sickle cell disease and thalassemia) enabling NHSBT to provide blood on the shelf ready for these planned transfusions. 2 of 15

Improved service to hospitals by better matching supply to demand, and o A reduction in substitutions from 1.5% to 1%. o A reduction in age of issue from 13.6 days to 10 days. Age of issue is one of the key drivers for hospital satisfaction, an improvement in age profile will increase satisfaction scores. NHSBT recurring savings of 219,000 per annum for staff reductions across the supply chain; waste improvement, and overnight movement reductions. There is also a one-off reduction in stock levels of 155,000, whilst ensuring the protection of vulnerable groups e.g. O- and B-. RECOMMENDATION Subject to the outcome of discussions at the Board Development day, the Board is asked to approve the purchase of a PCS system from ToolsGroup for 337,000. In addition to this 333,000 of implementation costs are required making a total investment of 670,000. 3 of 15

1. BACKGROUND Better integration and planning of the end to end blood supply chain is a key focus for the NHSBT 2013/18 strategic plan. The intention being to maximise customer service, optimise inventories, reduce waste and maintain or reduce the price of blood. To deliver this goal NHSBT faces the following challenges (Fig. 1): Donors 1 2 3 7 9 10 ISP (supply & demand planning) Hospitals Patients 3 Collections planning Manufacturing planning Inventory planning 11 Transport planning 8 VMI planning Collections Processing Distribution Delivery 6 4 5 Fig. 1 Service to Hospitals and Demand Management 1. Demand at blood group and hospital level is not well understood - recent falls in demand have not been equal across all blood groups with some vulnerable groups reducing at a slower rate than major blood groups and constituting an increasingly larger share of total demand relative to the population. 2. Demand forecasts are based on issues data; as such any substitutions mask the true demand. 3. Low confidence in mid-long term demand and collections forecasts, there is a lack of capability, data and tools. 4. Hospital demand is highly variable inconsistent ordering practices lead to high variability and errors in orders, which lead to high variability in demand and therefore higher stock holdings in NHSBT (bullwhip effect see appendix 1). 5. No visibility of hospital stocks and usage fate and waste data are inaccurate and time consuming to capture. 6. Stock management project cannot rollout without PCS. The IT tool used for the pilots will not scale to more hospitals, and is not robust or stable. NHSBT Optimisation 7. Scenario planning - more sophisticated planning questions are being raised, e.g. demand forecasts of lesser components such as pooled granulocytes, HLA platelets and low volume red cells. 8. Optimising stock across the business - it is estimated as much as 5% of all materials moved overnight are at the wrong location the next day. 9. No single version of the truth blood supply planning data is captured in different unintegrated systems. This is prone to error, with multiple data sources used to inform strategic business decisions. 10. Reliance on a few key individuals risk and exposure through key personnel leaving the business along with knowledge and personalised data sets. 11. NHSBT may be holding too much or too little stock there is limited capability to react to stock changes at Stock Holding Units until after the event. 4 of 15

To address these challenges NHSBT needs to build an end to end supply chain planning capability supported by an integrated planning and control system (PCS). The PCS initiative is one element of a roadmap (Appendix 2), and forms part of an overarching cohesive plan to establish supply chain skills and build capability. Q3&Q4 2013/14 Q1&Q2 2014/15 Q3&Q4 2014/15 2015/16 Build capability Setup ISP process Recruit and appoint Master Scheduler Develop planning team capability processes, SOPs, training... Supporting IT Complete PCS proof of concept TMS project (works with PCS) PCS phase 1 ISP, Demand, Inventory and Stock Management PCS phase 2 Collections/Supply Hospital Integration Pilot Stock Management Rollout PCS to pilot hospitals Full rollout to new hospitals Complete To-do Fig. 2 This process is well under way (Fig. 2) with the external appointment of an experienced Master Scheduler together with the establishment of a specialised Integrated Supply Planning (ISP) team. The PCS proof of concept (complete in Q4 13/14) confirmed that the tool could support VMI stock management and demand planning. Why does NHSBT need a PCS when larger organisations do not have one? Large supply chain organisations typically have Enterprise Resource Planning (ERP) systems, which support all their supply chain, finance and HR system needs. An ERP contains planning functionality within it, so a separate PCS is often not required. NHSBT does not have an ERP system, and a PCS solution is both a cheaper and more sophisticated option for supply chain planning (especially at managing short self life products). PCS will ensure that stock is always in the right place at the right time by improving demand forecasts, reducing safety stock and coordinating the amount of each blood component collected. 2. SCOPE The PCS project will deliver improved supply chain planning business processes and capability. This will be supported by an IT system that has the capability to collect near real time stock and fate data from hospital systems, and supports end to end (demand to supply) supply chain planning required to: 5 of 15

Create detailed blood group, SHU and hospital demand forecasts using a single set of agreed data. Automatically create the demand and supply forecasts and KPI reports for the ISP process and meetings. Support supply chain scenario planning calculate impact of changing stock levels on collections and manufacturing capacity. Provide a dashboard to manage stock, demand and highlight any exceptions. Calculate how much safety stock should be held for each product at each site and SHU. Calculate what blood to distribute around NHSBT sites to ensure that it is always in the right place at the right time, and interface into Pulse. Provide the IT to support the Stock Management project interface to hospital IT systems, calculate optimum stock levels and automatically create orders in Pulse. Automatically collect Blood Stocks Management Scheme (BSMS) data from hospitals that the Stock Management project is rolled out to, and load it into the BSMS system. 3. BENEFITS A PCS will improve demand forecasts and provide a more effective tool and information for managing supply and stock. This will allow the project to least match the best performance over the past seven years in the key metrics shown below. Year Benefit 7/8 8/9 9/10 10/11 11/12 12/13 13/14-25% best in past Meet best in past +25% best in past Inventory (Red cells) 44,340 57,046 50,727 49,958 41,620 53,844 51,733 One off saving 7.5K units 116K One off saving 10K units 155K One off saving 12.5K units 193K Waste (Red cells t.exp) 0.19% 0.49% 1.10% 0.61% 0.90% 1.01% 0.75% 50K 3375 units Reduce to 0.5% 67K 4000 units 84K 5625 units Age at issue (days) 10.2 12.2 13.5 13.5 13.0 13.8 13.6 12.5 Days 10 Days 7.5 Days Substitution n/a n/a n/a n/a 1% 1.2% 1.5% 1.25% 1% 0.75% Direct benefits to the patient Ensure blood is available e.g. currently spikes in demand for vulnerable blood groups can exhaust NHSBT s stock. This can be caused by accidental over ordering by a hospital, or a few individual patients with high demand. These spikes are unlikely to be immediately identified, especially if substitutions are made. The PCS will identify such issues quickly and support a co-ordinated response to meet patient need without delay. 6 of 15

Blood for multiply transfused patients - certain patient groups are regularly transfused; these include patients with sickle cell disease, thalassemia and other chronic diseases. A PCS would allow hospitals to enter dates of transfusion ahead of time and allow NHSBT to provide blood on the shelf ready for these transfusions. This would be particularly useful in the patients with sickle cell disease and thalassaemia who may have blood groups or antibodies that means they are less easy to provide for on a day to day basis and who sometimes need large volumes (up to 10 units) of this blood. This would benefit patients, hospitals and NHSBT. Substitutions reduced to 1% - from 1.5% as the optimal stock will be held in SHU s. Patients will receive better matched blood. Direct benefits to hospitals Age of blood at issue is circa 3.5 days lower age at issue is an important factor for customers and is a key driver of hospital satisfaction. It directly impacts on wastage at hospitals. Substitutions reduced to 1% - hospital satisfaction as well as On Time in Full (OTIF) will be improved with a reduced level of substitutions. The stock management project can only be rolled out with a PCS the following benefits will be realised by the Stock Management project for each hospital that the service is rolled out to: o Ad hoc delivery based cost saving average per site: 3,200. o RBC time expired wastage cost saving based on wastage reductions average per site: 2,700. o Platelet wastage cost saving based on wastage reductions average per site: 4,400. o Reduction in RBC stock held by hospital - average per site: 600. o Save hospitals having to manualy enter BSMS data (~10 WTE across the NHS). Benefits to NHSBT Reduce the amount of materials moved overnight ( 52,000 p.a. saving) to the wrong locations (currently min. of 5%). The overall national level of A- red cells is adequate to meet demand. However, some centres are significantly overstocked whilst others are under stocked. This misalignment currently results in stock outs at blood group level, increased substitutions and increased cost of urgent and ad hoc redistribution of product between SHUs. Ensure the right amount of stock is held (one off saving 155,000) the PCS will ensure NHSBT does not hold too much or too little stock by regularly calculating safety stocks based on more granular demand and supply data. A reduction in three WTE over the lifetime of the project ( 100,000 p.a. saving) - achieved through reduced duplication, manual effort, spreadsheet maintenance, increased transparency and improved business reporting. Rely on a few key individuals minimise risk to the organisation through ensuring tools and data are accessible in one location rather than multiple sources and exposure to key personnel leaving the business along with knowledge and own iteration of tools/data. 7 of 15

Adopt management at Blood Group level, reports can be produced on a monthly, weekly and daily basis to show any gap between the quantity of supply and the demand for a particular group or product type. This can be used as part of the decision making process on when to increase advertising and donor pool engagement for specific blood groups. Alerts can be configured to provide critical warnings to users of demand which appears to be abnormal, whether high or low. Critical warnings to be investigated as soon as possible whereas less severe warnings can be used to inform and correct future forecasts. Scenarios can be built and used to conduct what-if analysis or conduct more strategic level planning of the supply chain. This may include modelling the impact of demographic changes over a long term, emergency and disaster planning (e.g. flu pandemic) and blood supply network structural changes. Leverage investment in the Transport Management System (TMS) system the PCS and TMS together will allow NHSBT to further optimise the transport service. Benefits to the donor Make best use of the gift of donation reduced red cell wastage by over 4000 units per year. Make best use of donors time improved demand forecasts and earlier sight of stock issues will improve collections planning and ensures that the right donors give blood at the right time and place. Future benefits: the PCS system will also be used to support the following. Creation of collection forecasts based on business plans and panel performance trends. Providing a portal for hospitals to view and adjust forecasts (i.e. demand for x will be y units higher for a few weeks due to ). Creating collection plans for each session based on blood group level demand and collection forecasts (pull supply chain). Review how PCS could be used to support marketing by o Tracking the impact of marketing on collections focus marketing spend where is works. o Gain earlier sight to collection and stock issues to better inform marketing effort. Review the 165,000 Blood Stocks Management Scheme operation to see if PCS could save cost and improve the offering. 8 of 15

4. OPTIONS APPRAISAL The project could be delivered using any of the following five IT solutions 1. Spreadsheets/SPSS (as-is) this option has been discounted as it will not support VMI/stock management. Also, the amount of data involved in planning at a hospital and blood group level would require significant manual effort and result in multiple unconnected spreadsheets. 2. Bespoke IT system The long term costs would be higher than buying an existing software system. 3. ERP system ERP systems offer less functionality and are typically more expensive. Vendors have suggested costs > 1M for licences and setup (vs 0.7M from ToolsGroup). 4. Niche blood planning system very few on the market. Those that exist are from very small organisations and are not widely proven. They are also based on different countries systems and likely to need customisation. 5. Niche supply chain planning system 5-10 key vendors providing systems that are used by organisations ranging from SMEs to multinationals. This supports all NHSBT s requirements and provide a platform for future needs (i.e. collection planning). A lower cost than bespoke or ERP options. IT solution 5 has been selected and ToolsGroup chosen as the preferred supplier (through a full procurement process). 5. PROCUREMENT APPROACH Softcat (partnering with ToolsGroup) are the preferred supplier following a competitive process managed through a Government framework. A summary is attached in Appendix 3 1. 6. IMPLEMENTATION APPROACH The project will be managed through the Blood Supply Change Programme Board. An implementation project team has been identified and milestones defined within two core phases: Phase 1: implement Integrated Supply Planning (ISP), Demand, Inventory and Stock Management (VMI optimisation and replenishment) based functions to complete by March 2015. This will be managed in a series of sub phases to incorporate ISP and Stock Management based functions. Phase 2: will implement the Collections and Supply based functions complete by September 2015. An assurance validation of the implementation will be conducted at the end of Phase I. to 9 of 15

7. FINANCIAL ANALYSIS The project will cost 670,000 to implement including 337,000 of capital expenditure. Budgetary impact over six years is 352,000 positive (recurring and non recurring benefits and capital charges) producing a simple pay back of five years and 10 months. There is a recurring positive budgetary impact of c 100,000/annum from year five onwards. The NPV at six years is 166,000 negative, turning positive in Year 8. The PCS system is assumed to have a useful life of 10 years. 10 of 15

8. RISK Ref Description Consequence Severity Mitigation Strategy/Owner 1 This project could be seen as back office and not front line service. Project not approved; SBS proposal put forward instead. M TPB - Director led engagement with senior stakeholders. 2 BAU resources are stretched over a number of key projects. Availability of these resources is critical to the design and implementation and will need careful management. Delay to implement, subsequent delay to benefits realisation and potential project failure. H Project will be managed in discrete steps. Master Scheduler in place during phase 1. 3 Supply chain capability, capacity and knowledge of internal staff to develop, operate and manage the processes is low. Delay & failure to deliver benefits and make use of the system. H BAU resource is being educated through a mix of external training courses and knowledge transfer during workshops. Master Scheduler in place and phasing the development will mitigate the risk. Clive Ronaldson Director of Blood Supply Gerry Gogarty Assistant Director of Business Development and Strategy Blood Supply May 2014 11 of 15

Appendix 1 The Bullwhip effect The true demand for blood becomes increasingly distorted and variable the further down the supply chain you go. Coupled with a poor demand forecasts, this results in high stock levels, increased wastage, high levels of substitution, and higher age at issue. 4 3 Manufacturing sites SHUs do not have distribute all blood to the right product so SHUs based on old substitute stock levels 2 Hospital orders to much or to little in error, being conservative.. 1 Clinician orders to much or too little blood Manufacturing site SHU Hospital blood bank Clinician The PCS project will address issue 3 and 4 above. It will also provide the functionality to address issue 2 (VMI functionality) and 1 (improved BSMS data) for those Hospitals Blood Banks that the Stock Management project is rolled out to. If NHSBT can reduce these 4 areas of variability/noise, and increase its forecast accuracy, then: Safety stocks can be reduced - The amount of safety stock required is calculated based on variability in demand (if there is no variation, safety stock is zero). So, by reducing variability in demand, NHSBT can reduce safety stock levels. The right stock will be moved to the right SHU and Hospitals Blood Bank at the right time - Required stock at SHUs and Hospitals Blood Banks can be calculated accurately by the PCS, and the amount of blood that needs to be sent automatically calculated. The will result in reduced wastage, reduced substitutions, reduced transport costs and improved age of blood at issue. 12 of 15

Appendix 2 - Roadmap Demand Session Inventory & Supply planning mgt Hospital VMI Phase 1 - Q1&Q2 2014/15 Phase 2 - Q3&Q4 2014/15 Vision - 2015/16 Vision 2016+ Scope of this DBC Demand intelligence in a single system Blood group & SHU demand forecasts ISP demand, supply and review reports Supply chain KPI scorecard Stock project Auto replenish VMI hospitals Calculate stock targets for VMI hospitals Hospital waste & stock MI Auto replenish (into Pulse) SHUs based on demand and stock age Calculate daily SHU stock targets based on demand Portal for customer service/field staff to capture demand intelligence AIM2 MAPS/ BDOD Track impact of marketing on collections Collection forecast based on business plan and trends in panel performance Create pack instructions and manufacturing plan for platelets, FFP and Granulocytes Integrate BSMS blood fate/waste data sent electronically from hospital LIMS Rollout to all agreed hospitals Portal for hospitals/dh to add demand intelligence AIM2 demand data used in forecast Session planning driven by blood group level demand plan (pull) Capability & change PCS adopted as the single source of demand intelligence All data required for KPIs is agreed and processes in place to ensure it s captured and of a high quality SHU s and manufacturing use PCS instead of spreadsheets New capability to deliver VMI setup, manage, monitor and support VMI hospitals New capability to engage with hospitals and other key stakeholders to capture and interpret demand intelligence Marketing & ops teams actively use demand and collection forecasts to improve planning processes Major change to the processes, culture and performance management of session planning. Flex collections to better meet demand on-call /more flexible donors, ask donors to come on another date etc. Benefits Forecast accuracy Effort preparing plans OFIT Wastage* Age of blood* Wastage* Substitutions* *Driver - stock is in right place at right time Forecast accuracy Wastage Hospital effort Focus of marketing spend Forecast accuracy OTIF** Substitutions** Age of blood** Wastage** **Driver - Alignment of collections to demand 13 of 15

Appendix 3 PROCUREMENT APPROACH The tender was managed through a Crown Commercial Framework: RM721 Commoditised IT Hardware and Software, Lot 3 Specialist Channel Partners for Software. This framework expires on 31 October 2014. PROCUREMENT PROCESS AND SUPPLIER SELECTION The invitation to tender concluded on the 28 March 2013. 10 suppliers were invited to respond to the PCS tender; Civica UK Computacenter Equanet (no longer on this framework) Fujitsu Services Insight Phoenix Software Softcat Software Box Specialist Computer Centres Trustmarque Solutions Supplier selection Six suppliers responded to the PCS tender; Civica UK (partnering with Demand Solutions) Insight (partnering with Info) Phoenix Software (partnering with FuturMaster) Softcat (partnering with ToolsGroup) Trustmarque Solutions (partnering with Orchestr8) so was not considered for Tender Evaluation. Did not submit a full tender The bidder was evaluated on the basis of the criteria set out in the following table and Softcat (partnering with Tools Group) are the recommended supplier. 14 of 15

Mandatory Criteria Headings Suggested Sub-Criteria (for example only) Percentage Weighting Fitness for Compliance with functional specifications 50 purpose including quality Compliance with non functional specification 10 Delivery Lifecycle costs Product stability and road map 5 Project Management & Approach 15 Software Price (including licences) 10 Implementation Costs 5 Recurring Maintenance as % 5 Evaluation and Supplier Selection The tender evaluation analysis is available on request (commercial in confidence). The proposal is to let a contract for a period of 12 months, with the option to extend by two, one year periods. Terms and Conditions The contract will be let under NHSBT and NHS terms and conditions of purchase. 15 of 15