NHS: Transforming Supply and Distribution Efficiency

Though implemented in a pre-digital era, this study anticipated many of today’s priorities: achieving more for less, cutting waste through data-informed analysis, and building fiscal sustainability by tackling inefficiencies at their source. This capability is directly relevant toStrategic Prevention Partnerships, as it potentially offers a route to fund developmental primary prevention in local authorities and NHS Trusts or Boards from their existing budgets, rather than having to rely on additional external funding.

Increased developmental primary prevention is a potential route to saving huge sums of cost in areas such as addiction, domestic abuse, poor educational performance, adult mental health and the benefit system, as well as the eight areas identified in the Croydon case study: looked after children, teenage pregnancy, child and adolescent mental health, educational behavioural disorders, NEETs, criminal offending, antisocial behaviour and pupil referral units.

The Challenge
Under increasing public and parliamentary pressure to improve government efficiency, the National Audit Office (NAO) initiated a series of studies across key public services. The NAO, which had recently been granted expanded powers to examine not only financial compliance but also value for money—defined as economy, efficiency, and effectiveness—selected five areas of the NHS to evaluate. One of these areas was the NHS’s nationwide supply and distribution system, an area then consuming substantial budgets.

The Approach
The NAO appointed Cameron Consultants, led by George Hosking, to conduct the review. Drawing on its COGENT methodology—originally designed to return loss-making commercial companies to profit, but equally capable of arming public sector organisations with powerful new insights into their cost structures—Cameron analysed the costs of NHS supply and distribution activities, not by the traditional method of capturing the symptoms of cost –salaries, travel, maintenance, energy, transport – but by relating each of these costs to their root causes of cost: their cost generators.

Analysing a company’s cost structure in this way challenges an organisation’s conventional view that it has large ‘fixed’ costs (such as buildings, warehouses, vehicles, rent, depreciation, cost of capital) which cannot be avoided. Instead, the Cameron approach diagnosed why those costs arose.

Relating those costs to controllable management decisions, such as the range of raw materials or number of suppliers or variations in pack sizes—often uncovers surprisingly different insight into the true costs of activities. The profile of an organisation’s costs when analysed this way, and mapped on to its goods and services, typically looks radically different from what was previously believed.

Services or medicines which previously looked expensive are found to be relatively less, so while others which looked modest in cost are revealed to be prohibitively expensive. Opportunities for cost reduction are identified, and this COGENT approach is typically supplemented by approaches such as bottleneck identification, benchmarking across sites and international comparisons. In the study of NHS supply and distribution costs Cameron revealed systemic opportunities to reduce cost structures without compromising service quality.

The Solution
The study exposed wide discrepancies in supply and distribution effectiveness between NHS regions and locations—similar to the cost-per-bed variations highlighted in the NAO’s Hansard-reported findings (e.g. £895 in Maidstone vs£4,487 in Peckham). Cameron’s work found that the cost per unit of service, ingredient or medicine could vary by multiples depending on the degree of local complexity and inefficiency—often bearing no relation to the intrinsic value of the goods themselves.

Through strategic recommendations Cameron demonstrated how significant cost savings could be made across the entire supply and distribution system. A parallel study found that that the NHS could save £300 million by the more efficient use of land and buildings.

The Outcome
The results were received with strong praise from the NAO. Sir Gordon Downey, then leading the NAO, commended the work and stated that the COGENT methodology would be highly relevant to most branches of the public sector.

This endorsement was significant: it not only validatedCameron’s model as a credible tool for public sector reform but placed strategic cost restructuring—based on root cause analysis—on the map as a potential tool in public service reform.

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