Comment: Driving greater cost efficiencies in the public sector

29-Feb-2016

Nigel Crunden of Office Depot calls for a more-strategic approach to NHS procurement

As budget cuts continue relentlessly the search for cost efficiencies becomes more difficult as organisations become leaner. In many cases the efficiencies that ‘meet the eye’ have already been made. In this feature Nigel Crunden, a business specialist at Office Depot, describes the importance of taking a more-strategic view

As budgets continue to be squeezed in the public sector, organisations are increasingly looking for ways to drive greater efficiencies and reduce costs. In a recent letter to staff, managers at a north west London heathcare trust urged employees to cut down on unnecessary spending and streamline procurement costs. This included asking them to ration paper and stationery, cut down on taxi journeys, and re-use furniture where possible.

Although these are simple tactical measures that staff can implement, public-sector bodies need to look more widely at the procurement function and other areas of the organisation to drive cost savings at a strategic level

Although these are simple tactical measures that staff can implement, public-sector bodies need to look more widely at the procurement function and other areas of the organisation to drive cost savings at a strategic level.

This should start with simplifying the supply base. There will be some benefit in addressing waste at a practical level, such as avoiding the printing of documents and by sharing transport. However, the procurement function is one area that organisations can consolidate without negatively affecting operations.

Simplify the supply base

Public-sector organisations should start this process with an audit of the whole supply chain. This will allow them to identify the right supply partners to move forward with. Decision-makers need to be ruthless in their approach in terms of working out where real value can be added.

By choosing just a few key suppliers that can go above and beyond, this reduces the overall complexities within the supply chain and therefore allows vendors to identify opportunities for public sector bodies to consolidate and make greater savings.

By choosing just a few key suppliers that can go above and beyond, this reduces the overall complexities within the supply chain and therefore allows vendors to identify opportunities for public sector bodies to consolidate and make greater savings

The key to a successful and healthy supply partnership is allowing partners to get as close to the organisation as possible. This can be facilitated by agreeing a set of Key Performance Indicators (KPIs) from the outset and implementing an open line of communication where the supplier is able to continuously monitor orders.

Streamline orders

Increasingly, procurement managers are moving the conversation on from price. Although a competitive price on products and services is important, organisations are looking for a partner that can take their operations to the next level. Suppliers that can offer multiple goods and services under one roof are those worth keeping. However, it would be more prudent to choose a supplier that is consistently able to pro-actively identify opportunities to drive greater cost savings and act more as an extension of the organisation itself. Quality suppliers are now providing customers with access to digital ordering systems, which shows them specifically how savings are being made and where else in their supply chain they might benefit. This type of interactive system can spark the discussion between buyers and suppliers about where else they can add value.

Smaller organisations can also see some benefit through procuring multi-purpose products and ensuring that suppliers group together orders to cut down on the number of deliveries made

In terms of specific products and services, large NHS healthcare organisations have the most opportunity to drive greater economies of scale through bulk ordering of supplies. As the NHS is under increasing pressures to reduce costs; it is the larger trusts that can drive those economies of scale, but they need to be of a certain size to do so. However, smaller organisations can also see some benefit through procuring multi-purpose products and ensuring that suppliers group together orders to cut down on the number of deliveries made. For example, smaller NHS organisations might choose dual-use cleaning products or opt for green cleaning products that have a longer shelf life. On a tactical level, of course, organisations need to be training staff on the best way to use products, but it is in the ordering process itself that the most savings can be made.

Efficient space management

Space is actually one of the most-valuable commodities in the current climate for public-sector organisations. The potential to drive greater cost efficiencies through effective space management is often overlooked. It’s been well documented that Health Secretary, Jeremy Hunt, has a vision to digitise the NHS by 2017, but this is a goal that all public sector organisations should be looking to achieve.

As public-sector budgets continue to be squeezed, it is those organisations that take a pro-active approach to driving cost savings that will ultimately enjoy a smoother ride

Digitally storing files can have huge benefits for government organisations, where it is essentially a core function to look after valuable documents on behalf of the public. NHS trusts, for example, are seeing great benefit in outsourcing their file storage to specialist procurement handlers that are able to store records offsite and provide them with instant access to files as and when needed. This not only opens up more space onsite, which can then be put to greater use, but also ensures that files are also backed up securely.

As public-sector budgets continue to be squeezed, it is those organisations that take a pro-active approach to driving cost savings that will ultimately enjoy a smoother ride. By taking wider measures now to address the current challenges, public-sector organisations can continue to provide the same level of service without negatively impacting day-to-day operations.

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