The healthcare supply chain is entering 2025 on a tailwind of consolidated service center (CSC) momentum. Over the past year, several large U.S. health systems publicly announced they had opened, are building, or are in the planning stages of a CSC.
Key drivers are the desire for greater visibility into and control over inventory, economies of scale/savings and expanded capabilities to support new care sites.
And it isn’t just medical/surgical supply chain consolidation. Health systems thinking more broadly about the benefits of a CSC are also centralizing pharmacy services.
Take Baptist Health as an example. This leading healthcare system in Kentucky and southern Indiana is currently building a 102,000 sq. ft. central pharmacy service headquarters to serve its eight hospitals and 450 care sites.
Looking ahead to the next 12 months, advancements in automated technologies and AI-driven analytics will help to bolster the trend of supply chain consolidation. In turn, the consolidated service center model will help health systems address two critical issues on their agendas: Workforce shortages and sustainability.
Let’s examine how healthcare logistics are evolving using their CSC as a critical strategy for supply chain consolidation. This approach highlights the trends driving digital transformation and the resulting benefits.
Automation, robotics and AI-driven supply chain management have proven effective in streamlining and optimizing logistics in retail and other sectors. Consequently, health systems will increasingly invest in these technologies to gain the same benefits in their CSCs.
Given the fragile nature of the healthcare supply chain today, with continued disruptions and backorders, healthcare leaders recognize the pressing need to manage their medical/surgical and pharmaceutical product inventories more effectively.
This includes automation to streamline and enhance consolidated service center logistics — from item receipt through picking, packing and distribution.
A recent survey of U.S. healthcare leaders found that nearly 20% plan to adopt robotic process automation (RPA) to enhance supply chain strategies over the next 12-24 months.
Another critical supporting factor to successful supply chain consolidation is the application of AI algorithms to data captured through automated processes.
It’s one thing to effectively manage supply inventory stored in a consolidated service center to maximize these assets. It is another to leverage AI-driven intelligence to preemptively forecast demand, quickly detect potential disruptions and rapidly surface actionable insights to navigate away from risk.
In their June 2024 journal article, Artificial Intelligence in Healthcare Supply Chains: Enhancing Resilience and Reducing Waste, researchers from four U.S. universities commented on the strategic and systemic benefits of AI in healthcare inventory management:
“Incorporating AI technologies, including machine learning and predictive analytics, allows for more precise demand forecasting, minimizes the chances of both overstocking and stockouts and enhances overall operational efficiency.”
“Those that have extensively or fully adopted AI-driven inventory management are reaping considerable benefits in terms of improved demand forecasting, enhanced supply chain visibility and reduced operational costs.”
Greater supply chain consolidation, with operations centralized within consolidated service centers, will continue to reduce non-value-added tasks and repetitive roles. Automated technologies and advanced analytics will play a key role in streamlining healthcare supply chain operations.
This shift in labor allocation is a tremendous benefit at a time when healthcare staff shortages continue to rise, with consulting firm Mercer projecting a deficit of over 100,000 healthcare workers in the U.S. by 2028.
In its recent report, Mercer described how process automation can eliminate non-value-added tasks and enable healthcare organizations to reallocate labor resources:
“By identifying tasks that can be automated, redistributed (to other roles) and eliminated, healthcare systems can mitigate or eliminate the inefficiencies and frustrations reported by healthcare workers and promote job satisfaction.”
Increased automation of healthcare logistics not only boosts healthcare supply chain efficiency, but it can also improve satisfaction among CSC associates.
Consider an associate walking 10 miles in the warehouse each shift, lifting and carrying heavy items, which puts them at risk for injuries. Now imagine a robot instructed by the center’s warehouse management system (WMS) bringing the items to the associate for picking and packing.
As reported by the Harvard Business Review, leading logistics and supply chain companies that have employed human-robot collaborative systems (or “cobots”) report benefits including “reduced travel times and fatigue levels, higher productivity and more motivated employees.”
Elevating supply chain consolidation and CSC operations from tactical to strategic will also help healthcare organizations attract top talent with skills to drive innovation forward.
Few, if any, supply chain degree program graduates today are aiming for a career in a health system where much of their time will be dedicated to data entry and putting out fires related to backorders and shortages.
A health system with a consolidated service center featuring advanced automation and AI capabilities on par with that of supply chains in tech-forward industries can attract individuals who want to work at the top of their licenses.
In turn, candidates eager for the opportunity to leverage tech assets in making proactive decisions and taking preemptive actions can accelerate a health system’s journey on the supply chain consolidation maturity curve.
Alongside increased adoption of advanced automation and AI analytics capabilities in the CSC model, some health systems are embracing the opportunity to employ sustainable warehouse management practices as part of their supply chain consolidation evolution.
When designing and planning a new consolidated service center or repurposing an existing space for supply chain consolidation, a health system can incorporate energy saving infrastructure and equipment, such as more efficient heating and cooling systems, light sources and air distribution systems.
Health systems with an advanced WMS in their consolidated service center can enhance both operational and financial performance. When integrated with supply chain management (SCM) solutions that extend into care sites, these systems offer additional efficiency benefits. Moreover, they help reduce the environmental impact of supply chains by optimizing processes and minimizing waste.
For example, WMS and SCM solutions with demand planning capabilities enable a health system’s supply chain team to forecast and optimize the physical location of inventories based on where clinicians are demanding these products. They can directly route items from the CSC to where they are needed, avoiding unnecessary inter-facility transfers, which carry both an environmental and economic price tag.
WMS and SCM solutions with expiry logic and item tracking through to the point of use (POU) enable the CSC team to identify supplies nearing expiry and redirect them to where they can be used ahead of their expiration dates — before they must be discarded into the health system’s waste stream.
The landscape of healthcare logistics is evolving. At the forefront of the transformation is the adoption of consolidated service centers powered by advanced automation, AI-driven analytics and sustainable practices. This shift is set to improve supply chain consolidation efficiency, workforce satisfaction and environmental responsibility. As a result, health systems will be better equipped to navigate future challenges.