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Why Cheap Can't Deliver

The NHS England junior doctors' strikes in 2016 highlighted the intense pressures on healthcare providers to deliver 24/7 service amid increased patient expectations and limited resources.
Consequently health services look for cheaper options whilst believing service levels will be retained. This is a myth.

 

Why Cheap Can't Deliver

The importance of reliable service

Healthcare providers plan some six weeks ahead to ensure the theatre and clinic lists operate effectively and efficiently. They make assumptions that instruments and disposables will be readily available for treatment and diagnosis, therefore they depend on suppliers to give a reliable service even when problems can occur. As a Sterile Services Manager from Scotland who visited DTR Medical put it; “If you give us advance warning, we can work round it.”

The pressures on service also come from a chronic shortage of space in most hospitals for storage. Theatres and clinics are focussed on patient delivery and stocks have to be kept to a minimum yet readily available for use. Stockholding is also something every healthcare provider seeks to keep under control to minimise wastage and control costs.

Replenishment arrangements can compound the need for prompt service when the task is overlooked or only takes place in quiet times that are very limited.

For sterile Single-use instrument manufacturers like DTR Medical, the need for a reliable service is vital. Failure to deliver means patients can suffer cancellations and the hospital, frustrated by a lengthening waiting list, will have to seek alternative supplies, often last minute and wasting valuable staff time. In one recent study, 35% of nurses said they faced daily shortages of medical supplies.1

Predicting customers’ intentions

To build a near “just in time” service that meets what the customer needs is a key task facing the supplier.

With production lead times of up to 12 weeks robust forward planning is required to achieve the optimal reliability.  To produce an effective demand forecast of expectations takes time to consider all the factors, but is the essential core of the service deliverable. It must include a reasonable error margin to cope with unexpected demand but not build unwanted stock at the expense of the current lines being ordered.

The healthcare provider should feel confident when forecasts are in place because they see the attention to detail that is given to their needs. Like most suppliers, we welcome advanced warning of activities such as waiting list reduction and outsourcing to private providers because this informs our forward vision.

New Single-use needs

It is very difficult to predict customer requirements in established sectors, but is it almost impossible to be accurate about the growth of new instruments. For example, ophthalmic lines like Vannas and Westcott scissors have seen rapid increases in usage. This is due to a combination of factors including problems with quality or supply from traditional providers and the expansion of services raising the need for extra volume.

The wide range of reasons for Single-use – Time Life & Cost savings, means sudden growth can be generated by new issues customers are alerted to. Obliviously “mad cow disease” and vCJD caused by prion proteins had a significant impact on the need for Single-use instruments. This was particularly true for Frazier and other suction handles used in neurosurgery where effective decontamination could be hard to guarantee.

Could such a change in attitudes occur again and can we predict this? The media always have health scare stories but it is important to remain objective and to listen to our customers for any moves. One such factor that may have momentum is coming from work on Alzheimer’s Disease where amyloid proteins are suspected as having a role. This is certainly one to watch because it could have a bearing on future trends.

The cost of service is capital

Any manufacturing business producing stock knows that a considerable proportion of their working capital is used to build and maintain product on the shelf ready to meet orders.

When prompt delivery is expected, the capital demands are high. Sterile Single-use instruments, like we make at DTR Medical, are one of the keenest supply sectors because acute theatre and clinic patient lists provide constant pressure for new stock replenishment.

Longer production lead times raise the financial burden because more cash cover is needed to be flexible to cope with variation in the rates of use.

A wide product range across many surgical specialities adds complexity and extends the financial pressures.

Simple to say, much harder to achieve and this perhaps explains why some Single-use suppliers struggle to cope with customer orders consistently.

Low prices reduce the cash for stock

Supposedly good deals won on contract with commodity prices appear to be a measure of success for the buyers, but does this work in the long term?

All companies have to watch their cash flow. If they sell product at lower prices, can they afford to cover the capital cost of the stock until they get paid AND be able to buy replacement material for the next delivery?

The answer is no, but buyers who win low prices know they run the risk that supplies may be short and service may suffer. This explains why they need to know about the stability and financial security of the company and other key data.

Is there an optimal answer?

In theory, yes because suppliers to healthcare providers like the NHS make a commitment to be able to meet the contracted volumes on time. Procurement teams set great store by their methodical approach to selecting suppliers taking account all factors as they see them. Often this includes clinical input on quality of samples, but how often is the on-going supply checked to ensure deliveries are made on time so the service can operate smoothly and efficiently?

As the research referred to earlier identifies, this is appears not to be the outcome at the clinical front line on a daily basis.

 

1 GS1 & Nursing Standard, May 2010, Survey of 861 UK Hospital Nurses

 

Source: DTR Medical Ltd

 

 

Why Cheap Can't Deliver

 
 
About The Operating Theatre Journal

The Operating Theatre Journal, OTJ, is published monthly and distributed to every hospital operating theatre department in the UK. The distribution includes both the National Health Service and the Private Sector.

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