The Department of health in the United Kingdom decided to outsource the procurement and logistics functions that were at that time being managed by the National Health Service (NHS). Their main goal was to reduce overall costs while guaranteeing end-to-end supply chain control and increasing sales. The NHS transferred resources by establishing a Master Services Agreement (MSA) with Exel, a private sector logistics provider. The MSA created a new private organisation called NHS SC, owned and operated by Exel. NHS supply chain would take over the procurement and logistics responsibilities that the NHS formerly managed.
Critical success factors:
- Filling skills gaps: Procurement professionals from the private medical, retail sector were brought into the NHS to complement existing public sector expertise. New management roles were created and filled with staff that had both public and private sector expertise. They worked with both the NHS supply chain and NHS teams.
- Creating a governance structure with equal representation from all parties: The contract agreement included the establishment of a Joint Working Committee for managing the outsourcing relationships and ensuring collaboration and information sharing. Representatives from both the outsourcer and provider were on this committee.
- Communication: Clear communication channels were set up through the MSA to ensure information sharing between the outsourcer and provider through managers working across the two entities and joint teams.
Lessons learned and key takeaways
Performance metrics and monitoring
A robust performance monitoring system was put in place to mitigate the inherent risk in outsourcing.
- The provider’s performance was monitored using a broad range of metrics, and the Joint Working Committee regularly reviewed the results.
- These monitoring systems help solve the trade-off between governmental control over the outsourcing and the autonomy of the service provider to operate strategically.
There must be a balance between formal (contractual) guidance from the outsourcer and informal governance mechanisms.
- The outsourcer must be willing to collaborate and share knowledge with the provider.
Summary of Enabler Tool: People
As you worked through the Enabler Tool, People, you have learned about workforce development and how the four pathways — Staffing, Skills, Working Conditions, and Motivation—to build human resources interact with the enablers. This tool also introduced you to several workforce development tools and resources. In the following Enabler Tool, Technology, you will learn how various digital tools can help you maintain and interpret data and information for a more efficient supply chain.
Source: Heather Skipworth, Emanuela Delbufalo, Carlos Mena, Logistics and procurement outsourcing in the healthcare sector: A comparative analysis, European Management Journal, Volume 38, Issue 3, 2020, Pages 518-532, ISSN 0263-2373, https://doi.org/10.1016/j.emj.2020.04.002. (http://www.sciencedirect.com/science/article/pii/S0263237320300542)