By Christoph Marr
The Autumn Budget last year created significant concern amongst many social care providers, especially not-for profit, charitable providers, unable to pass on price increases. While the national minimum wage uplift was expected, and of course paying our extraordinary care workers an uplift is crucial, it was the National Insurance Contribution uplift, coupled with the threshold change, that came as a surprise. In November 2024 the Care Provider Alliance conducted a study involving 1,180 care providers who reported that 73% will refuse new care packages from local authorities and 57% will hand back existing contracts to local authorities. 77% will have to draw on reserves and 64% will have to make staff redundant. We are also now seeing suppliers into care providers push through cost uplifts as suppliers start to protect themselves from the impact of the 2024 Autumn Budget. For a sector which was so badly impacted by Covid, the Autumn Budget will push some not for profit, charitable providers over the edge. It is not uncommon to see all operating costs increased by as much as 10%.
Marr Procurement has worked with over sixty care providers in the last ten years to reduce operating costs. Suffice to say we’ve had a busy four months since the Budget was announced, as care providers are now turning to their supply base to cut costs.
There is no silver bullet to the funding crisis. Many care providers have already started to improve their financial stability through mergers with other Charities. Some have successfully negotiated partial, low-level fee uplifts with local authorities but with limited success. Many care providers started to improve their resource planning some time ago; crucial given for all care providers staff costs remain the dominant operating cost element. Some are now focusing on attracting self-pay service users where tax rises can be more easily passed on. While Covid meant some care providers used reserves to fund pay uplifts for staff, some will now use their reserves to fund improved technology to benefit from better systems integration, improving efficiencies by avoiding duplication of effort and reporting. The challenge with some of these actions is time. Merging is a slow process, investing in technology is typically problematic and again, takes time. Changing and improving resourcing practices is crucial but takes time.
There is a way to cut costs quickly, without compromising on care
Given the fragmented nature of the Care sector, dominated by small and medium sized care operators, most care providers do not have their own in-house Procurement team. Over the last decade, Marr Procurement has worked with over sixty social care providers to cut costs quickly and without impacting on care or quality, where 80% don’t have an in-house Procurement team.
We are seeing substantial savings on material areas of spend like Property, Temporary Labour Agencies, Food, Energy, Insurance and Consumables. In the last six weeks we have seen Waste-related savings of 42%, Food savings of 11%, Insurance savings of 23% and Consumables savings of 39%. There are material savings opportunities out there now and better still, these savings can be delivered fast.
To create a Procurement plan, or cost saving plan, the starting point is to determine your addressable spend, prioritising the highest spend areas.
If you would like help to design and deliver a Procurement plan to generate savings fast, please do get in touch.
10 steps to accelerating the delivery of savings:
- Review your spend data by analysing all spend by category and by supplier.
- Work closely with the Ops, People and Finance teams to identify quick win saving opportunities. (We use 30+ ‘clues’ which help to identify quick win savings opportunities.)
- Combine ‘demand side’ and ‘supply side’ savings opportunities where ‘demand side’ focuses on reducing consumption and ‘supply side’ reduces the cost of goods and services. The best Procurement programmes combine both.
- Identify opportunities for quick savings, (without compromising on care or quality), by changing supplier, negotiating with existing suppliers, and/or consolidating spend with fewer suppliers.
- Once you have removed non-recurring, one-off areas of spend, review supply agreements for termination provisions and historical rebates suppliers might not have passed on.
- Prioritise the savings opportunities and align savings targets to a 12-36 month Procurement plan with clear targets, owners, dependencies etc. This forms the basis of the savings plan. Staggering a Procurement plan in a phased manner helps to soften the Operational impact.
- Working closely with key stakeholders who ‘own’ key supply agreements and the major areas of spend is crucial; winning hearts and minds is a pre-requisite.
- Talk to suppliers and ask for help; often suppliers will support with the delivery of a cost saving plan, for example through alternative product choices, lowering prices, removing delivery charges, reducing deliveries, changing pack sizes etc. It is crucial suppliers can still generate the profit they need in order to operate or your hard-won savings will soon be clawed back. Creating a win-win with suppliers is absolutely crucial.
- Create a tracking mechanism so that promised benefits materialise.
- Arrange monthly Finance/People/Ops reviews with the impacted suppliers.