Service Excellence Awards 2006: Winner - Public Services

NHS LOGISTICS

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Last Updated: 31 Aug 2010

Last year, NHS Logistics delivered £780m of consumable items to the health service, from dressings and syringes to food and stationery. This service is to be outsourced to DHL Exel and renamed 'NHS Supply Chain', with the intention that it will continue to supply the daily product needs of more than 600 hospitals and other NHS organisations.

The NHS is famous for big numbers and NHS Logistics is no exception. Its fleet of 250 lorries makes a total of 1,200 deliveries a day and serves 10,000 delivery points from six distribution centres. Feeding this logistical challenge are some 80,000 customer ordering points, putting through 33 million orders a year from a catalogue of 51,000 product lines.

Managing director Barry Mellor knows the importance of processing those orders accurately. 'Even a 1% error rate on 33 million orders is a big number,' he says. Latest figures show 98.4% of orders were processed error-free, with more than 98% also reliably delivered within an agreed half-hour window.

The organisation is proud of its use of technology and e-commerce in creating a slicker, lower-cost and more collaborative supply-chain service. NHS Logistics receives nearly all orders electronically, either through its website or via a PDA-based system called e-DC (electronic data capture), distributed to customers. These technologies have reduced transaction costs to below 39p for every product line ordered, compared to £7.05 for old manual systems.

The organisation also provides e-billing and information reports that highlight, for example, how to get a better price next time by buying in bulk. An online NHS supply-chain knowledge centre also offers customers best-practice case studies and analysis tools.

Warehouse-side, a voice-activated headset technology called Talkman is aimed at improving picking accuracy and efficiency. Orders are picked and confirmed by voice, and warehouse staff no longer have to keep going back to their trucks to check details.

NHS Logistics is a non-profit organisation with surpluses redistributed in the form of reduced servicing costs or by giving cash rebates to customers based on volumes of business. So cost-savings have directly benefited customers, with NHS Logistics' service charge reduced last year to its lowest ever at 9.5%.

The organisation has worked with a range of NHS trusts to implement lean supply-chain principles, so removing the need for stocks held locally. This has meant more efficient consumption and cash savings for trusts that can be redirected to frontline care. As well as delivery to within a half-hour window from a standard 48-hour lead time, there is a five-hour 24/7 emergency service for meeting unexpected needs.

Using the incentive of sharing its own savings, NHS Logistics has also agreed more efficient delivery schedules that allow better use of its vehicle fleet as well as reducing onsite congestion at trusts. Last year's savings from such changes amounted to £300,000. Customers are also invited to logistic clinics to thrash out problems face-to-face.

NHS Logistics set up the UK's only logistics benchmarking club (www.logmark.org), which now has a membership of 30 blue-chip organisations, and in the past year has shared best practice with service organisations such as First Direct, Adnams Brewery and Bromford Housing Group.

It has also been working on improving the electronic interface between customers and product suppliers, with the aim of having a supplier-managed e-catalogue. A portal already gives suppliers access to information on outstanding customer orders, their own stock position on NHS Logistics' shelves and customer demand. The improvement in supply-chain visibility has helped increase product availability, service levels and customer satisfaction. Suppliers using this portal have seen their sales grow by 15%.

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