Nhs Logistics Case

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This case was prepared by Robin Lane, Mike Sweeney and Brad Lincoln at the Cranfield School of Management, Cranfield University, Cranfield, Bedford, MK43 0AL, England, as a basis for class discussion rather than to demonstrate either effective or ineffective business administration. © Cranfield School of Management

Supply Chain Management in the NHS du
Jim frowned deeply as he strode down the corridor. He had just left a meeting with the Chief Executive of Morecambe Bay Hospitals NHS Trust about the latest Cost Improvement Programme. As manager of the Supplies Department, Jim’s target was to help save 2.5% of the nonpay expenditure budgeted for supplies in the new financial year. Whilst they had made savings close to this figure in the previous year, further savings might be much more difficult. Acute hospital trusts accounted for 80% of the expenditure on supplies by National Health Service (NHS) trusts in England and Wales. In 1994/95 medical and surgical supplies represented the largest single element of this expenditure. Others (gas, oil, rent, etc.) 24% Drugs 16%

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Transport 6% Office supplies 9% General supplies 6%

Medical and surgical supplies 26%

Building materials 13%

Source: ‘Goods for your health’, Audit Commission, 1996

Figure 1: NHS Trust expenditure on supplies in 1994/95

The Morecambe Bay Hospitals NHS Trust covered 4 hospitals, one of which was the Royal Lancaster Infirmary. Together they included about 50 major areas such as wards,

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Supply Chain Management in the NHS

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clinics, and operating theatres. Each of these areas specialised in treating different groups of patients (e.g. Ward 4 for geriatric patients with acute conditions) or different sets and severities of medical condition (e.g. the Maternity Unit and the Operating Theatres). Each area used a combination of general medical consumables, such as bandages, and special items, such as hip joints. Most of these items were stored in the areas themselves, usually in a room alongside the ward or the operating theatres. As items were used, replenishment quantities were ordered through the Supplies Department. The Supplies Department and NHS Supplies Although located at the Royal Lancaster Infirmary, Jim and his staff in the Supplies Department were part of the Customer Services Division of NHS Supplies. As a Customer Services Team, their role was the procurement of goods and services to meet the needs of the Morecambe Bay Hospitals NHS Trust. NHS Supplies was a Special Health Authority formed from the supplies organisations of the English Health Authorities and Trusts in 1991. As part of the NHS it was a not-for-profit organisation. In 1997 its Customer Services Division was used by 75% of all NHS trusts to manage their purchase and supply activities. Compared to the figure of 95% in 1992, this indicated a trend for trusts to take on their own procurement (or use another service provider) since NHS Supplies had been formed.

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NHS Supplies

Customer Services

Wholesaling

Purchasing

Figure 2: The three divisions of the NHS Supplies Authority.

The Wholesaling Division of NHS Supplies sold a wide range of goods to NHS trusts, aiming to offer the best value for money for their requirements. In 12 depots around the country it stocked a wide range of goods including food and cleaning materials as well as medical...
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