Catheter Supply at a District General Hospital
A district general hospital spends £2.4 million a year on urinary catheters across nine wards. Seventy-eight per cent of volume sits with one supplier under a contract that expires in four months. The supplier has requested a 14% price increase, citing resin costs. Its credit score has fallen two grades, and it missed two deliveries last quarter, leaving OTIF at 86%. Clinicians insist on the incumbent's latex-free silicone design; any alternative needs a six-week product evaluation and clinical sign-off. Stock covers 19 days at average usage of 1,150 units a week. The supplier is also the only source of the catheterisation packs used by the emergency department. The trust has a 6% savings target and a new procurement business-partner model. Finance wants a decision in three weeks.
1. Assess the supply, commercial and clinical risks and recommend the procurement approach for the next four months, justifying your priorities.
Read the worked answer
Priority: continuity first, price second. The 14% claim is material, but the supplier’s two-grade credit deterioration and 86% OTIF are more dangerous. At 1,150 units a week, 19 days’ stock is roughly 3,100 units - less than three weeks of cover and far too thin for a sole-sourced, clinically constrained item. The emergency-department pack dependency turns a ward-level shortage into an urgent-care risk.
I would separate the must-haves from the negotiables:
- Bridge supply: authorise an immediate spot buy or distributor order to lift cover to 6–8 weeks. This costs money but is cheaper than clinical substitution under pressure.
- Conditional short extension: offer the incumbent a six-month extension, not a four-month renewal, with a capped price increase linked to a published resin index, delivery credits and a stockholding obligation.
- Parallel qualification: start the six-week clinical evaluation now, not after the extension. Aim for a second source covering at least 30% of volume within 9–12 months.
- Price challenge: request open-book cost breakdown and benchmark against comparable silicone catheters. Accept only documented, indexed cost pass-through; reject margin recovery disguised as resin inflation.
- Clinical engagement: frame the trial around patient safety and product continuity, not procurement preference. A clinician-led reference group reduces the risk of a late veto.
The recommendation is a controlled dual-track: secure supply through the incumbent while creating credible alternative capacity. Accepting the 14% without conditions leaves the trust exposed to the next increase; refusing it without bridge stock risks a ward-level stock-out.
2. Design the negotiation and contract strategy with the incumbent if a short extension is pursued.
Read the worked answer
BATNA and leverage. The trust’s short-term BATNA is weak on clinical suitability but stronger on price: a distributor can supply interim stock, and the evaluation could qualify an alternative. I would not threaten switching unless the evaluation is funded and timetabled. The incumbent’s interest is a predictable revenue stream and a referenceable NHS customer; that is tradeable.
Opening position: reject the 14% as a blanket increase. Offer an indexed increase capped at, say, 6–8%, with a review at six months. Ask for a cost breakdown by resin grade, conversion, packaging and freight.
Tradeables:
- A six-month extension with an option to extend for three months in return for price discipline and 95% OTIF.
- A volume commitment on the core catalogue in exchange for 30 days’ consignment stock at the supplier’s cost.
- Faster payment terms only if the supplier accepts delivery credits and open-book review.
Contract terms to secure: price adjustment formula with audit rights; service credits for late delivery; stockholding and allocation priority; right to dual-source without penalty; exit assistance and last-time-buy; product-change notification; business-continuity plan; step-in rights for the emergency-department packs.
Walk-away point: if the supplier refuses transparency, refuses stockholding and maintains 14% while OTIF remains below 90%, escalate to executive level and accelerate qualification. A short extension must buy security, not simply defer the problem.
3. How would you manage internal stakeholders and implement the decision within the three-week deadline?
Read the worked answer
Week 1 - establish the facts and the governance route. Convene the clinical lead, finance business partner, ward managers and emergency-department representative. Present the stock cover, OTIF trend, credit score and cost impact in one risk paper. Agree the decision criteria: patient safety, supply continuity, cost and clinical acceptability. Register the issue on the corporate risk register so the executive owns the residual risk.
Week 2 - run the commercial and clinical workstreams in parallel. Procurement negotiates the conditional extension and bridge stock; clinical services scope the six-week evaluation; finance models the 6% savings target against the likely price increase. Be explicit that the savings target may need a compensating overachievement elsewhere if continuity is bought. Avoid letting finance dominate the decision with a short-term price comparison that ignores stock-out cost.
Week 3 - decision gate. Take a one-page recommendation to the procurement director and medical director: approve the extension, bridge stock and evaluation funding. Publish a simple RACI: who authorises spot buys, who signs off clinical change, who monitors OTIF weekly.
Implementation controls: weekly OTIF and stock dashboard; escalation trigger at 10 days’ cover; monthly supplier review; clinician update at each evaluation milestone. Communicate to wards that the product is not changing yet - uncertainty itself drives hoarding and complaints.