Hospital Supply Chain Survey Indicates Value of Self-Distribution

DENVER, CO–(Marketwired – April 10, 2017) – Standardization and direct-to-manufacturer pricing are the top two drivers of self-distribution for US health systems, according to a recent survey of healthcare supply chain executives. The research, sponsored by Swisslog Healthcare, investigated the healthcare trend of self-distribution and development of consolidated service centers (CSCs) to enable centralized operations.

“As health systems innovate to remain financially viable, one strategy that continues to drive value is the centralization of services lines within a consolidated service center,” explains Andrew Campbell, Director of Solutions Management for Swisslog Healthcare. “Our survey found that 26% of health systems are considering self-distribution and 37% report already transitioning to this model. That’s completely disruptive to the traditional supply chain processes that have shaped healthcare in years past.”

The research revealed that health systems of all sizes are moving toward a self-distribution model. Even the smallest Integrated Delivery Networks (2-5 hospitals) are finding value in the consolidated model. As expected, the largest systems reported the highest adoption, indicating that with greater size comes a greater level of complexity and therefore a greater need to streamline operations. Large networks also tend to have higher purchasing volumes, giving them greater negotiating power and the ability to transition to direct-to-manufacturer contracting.

In addition to standardization and direct purchasing, executives ranked these reasons for implementing a CSC as very or somewhat important:

  • Reducing inventory waste
  • Reducing inventory overhead
  • Automating manual processes
  • Adding service lines
  • Cleansing item master

When planning for a consolidated service center, many health systems report exclusively focusing on centralizing the distribution of med/surg supplies. Often, the initial project return on investment (ROI) is based solely on this single service line. After med/surg consolidation (92%) the next two largest CSC services included Print Shop (56%) and Laboratory (48%).

Developing a CSC includes an investment in more sophisticated material handling equipment (MHE) than is needed in a central storeroom at a hospital. Fifty-six percent of self-distributing health systems reported that in hindsight if they could have done something differently in their CSC, they would have purchased more automation. These respondents identified pick-to-voice technology (20%) and Radio-Frequency Identification (RFID) Technology (20%) as future MHE considerations.

“Health systems need greater control of and visibility to supply location and movement, driving interest in RFID technology. Implants and other medical devices have historically been targets for virtual monitoring”, says Campbell. “However, with a CSC model in place, health systems can track pallet movements and tote shipments from the dock to par locations or desktops. This enables full-spectrum monitoring and traceability for most med/surg replenishment lines and potentially pharmacy, durable medical equipment and other supplies depending on the scope of a health system’s CSC services.”

The complete findings from this survey, conducted by the Journal of Healthcare Contracting, have been compiled in a research report, available for download at

About Swisslog

Swisslog designs, develops and delivers best-in-class automation for forward-thinking health systems, warehouses and distribution centers. The company offers integrated solutions from a single source — from consulting to design, implementation and lifetime customer service. Behind its success are 2,500 employees worldwide, supporting customers in more than 50 countries.

Swisslog is a member of the KUKA group, a leading global supplier of intelligent automation solutions.

Editorial Contact:
Beth Riggio
Senior Manager – Marketing
Swisslog Healthcare
Phone: 303.373.7952
[email protected]