GS1 requirement will force NHS to change inventory management strategy

Nicola Hall
posted by Nicola Hall
25 February 2015

The way in which inventory management in the NHS has been managed has had an impact on suppliers for years. For some it has proved beneficial while for others, the lack of organisation has caused a headache.

The procurement and inventory management landscape will take a first step towards change this June when hospitals across the UK are expected to have a GS1 strategy in place.

Currently medical suppliers are required to comply with packaging and labelling requirements as part of CE marking that enables medical products to be placed on the market. So why do those requirements not include barcode or identification to a global standard, such as GS1?

The GS1 initiative is great but one wonders why it is separate to CE marking requirements. Some suppliers are advising it will take them years to change their packaging to comply. But if this was a CE or FDA mark requirement, the turnaround time would no doubt be much quicker. The Unique Device Identification (UDI) initiative in the US is witness to this.

In terms of the unique identification of product and prices that GS1 facilitates, one could argue currently suppliers benefit from the chaos of hospitals being unaware of existing stock levels, contracting separately, and out-of-date stock.

In addition, many hospitals feel it is not possible to either return - as contracts don’t appear to allow for it - or sell-on, slow-moving good inventory, as they will become liable for placing the product on the market; but the responsibility always travels back to the manufacturer.

There is a healthy second-hand equipment market so why, in these days of cost cutting, can validated inventory not be re-allocated between different organisations in the NHS? I recently heard of a trust that had identified £2 million of slow-moving stock, but had no outlet to sell the items on, and as it no longer used the items, ultimately faced £2 million of waste - which is a case for tighter inventory management controls in its own right.

When an item has been sold to a customer, the returns, and sell–on circumstances need to be addressed at the contract level. But when the inventory remains the property of the supplier, the emphasis from the supplier can be very different. Some suppliers hold up to six times their annual turnover in consignment stocks on hospitals shelves in the UK and across the globe, they have to maintain and manage this distributed inventory, and this ultimately makes the unit cost of their products higher.  There is no ‘no-cost to the NHS’; we are all paying extra to maintain consignment stocks on shelves whatever the published deal.

Another recent practice is a supplier charging a set fee to enable a group of hospitals to consolidate the purchase of sutures. Once again, a supplier is making additional revenue from the customer by offering a service which they would be able to achieve with good systems in place.

The utopia is clear visibility across the supply chain for customers and suppliers of inventory, batches and pricing, combined with the ability for the NHS to truly share resources. A clearer picture of stocks, and demand to the suppliers, will help manage the production requirements better, eliminating costs at every stage throughout the process. As the GS1 strategy starts becoming a reality more costly practices that are not currently visible for the supplier and the customer will become apparent. It seems a shame the customer and the suppliers are not working together to ensure benefits for both.

☛ Nicola Hall is managing director at Ingenica Solutions

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