Procurement Excellence in the Medical Sector
Hospital chain achieves savings through first generation outsourcing
Our client is a leading provider of mental healthcare and adult social care in the UKThe company has more than 200 sites and is Private Equity owned. Our joint project had the goal of increasing the group’s profitability without compromising patient care.
Objective: Cost reduction combined with service optimization
As a result of the ongoing consolidation in the healthcare market, new opportunities are arising for clinics to achieve economies of scale and therefore save costs. All while maintaining the same or even higher levels of service. Thanks to KGM Strategy’s expertise in the healthcare sector, we were commissioned to identify possible partners for the outsourcing of service packages, including in catering and cleaning services, on a national level and to jointly establish corresponding processes.
Approach: Creating long-term partnerships
As part of a systematic, predefined process, we introduced first-generation outsourcing for catering and cleaning together with the client.
The first step was to assess the initial situation. During on-site visits to the clinics, we recorded the catering and cleaning processes in the individual clinics, as these previously acted independently of each other and had different processes and contracts. In order to achieve full transparency and to completely capture the current state of the services, the project team converted all recorded costs into full-time equivalents (FTE). This created comparability of services, which we were then able to compare with existing UK hospital standards (NHS).
This evaluation ultimately formed the basis for defining the target state. Together with the client, we defined a standard that would apply equally to all clinics in the future. We drew up specifications for the required services, including service levels, and derived possible optimization and savings potential from them.
Based on these specifications, we then conducted extensive market screening and identified suppliers that could meet our client’s requirements and with whom we entered into subsequent discussions. With the goal of establishing a clear process for all sides and building long-term partnerships with the suppliers, we also supported the negotiations and the tender and mobilization process in practice:
To understand service requirements, service providers visited the largest 42 sites. Local catering and cleaning requirements were then recorded in room books and catering profiles. Each of these clinic visits was also an opportunity for informal negotiations. In this context, we were able to clarify any questions from the suppliers, as well as from the respective clinic management, and overcome resistance to the approach.
In various workshops, we created a common understanding of the requirements for the service providers and made the defined standards tangible in practice. We brought together all of our client’s internal stakeholders to present the new concepts, refine them through customer feedback, and train employees to implement them.
For catering, face-to-face workshops were held with management and potential suppliers to have the opportunity to taste the food, examine the equipment and get an impression of the suppliers’ capabilities. For cleaning services, we held online workshops to clarify all requirements and supplier capabilities.
In order to obtain feedback from suppliers and test some ideas, we first conducted an initial pilot tender. With an overview of the relevant conditions, we then went into the main tenders and obtained binding offers from the selected service providers.
In addition to the rounds of conversations that had already taken place, the project team finally conducted formal negotiations with the new partners to contractually fix all cost components as well as qualitative factors.
Results
- Reduction in total cost of ownership with simultaneous improvement in services
- Utilization of economies of scale and standardization across the entire Group
- Professionalization of cleaning and catering services by specialized service providers
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