The Warehouse’s Role in Optimizing Healthcare Supply Chains: A Conversation with Matt Stewart

In a recent episode of Tecsys’ The Great Supply Chain Podcast, I had the pleasure of discussing warehouse optimization in the healthcare industry with Matt Stewart, CEO and managing partner at RiseNow, a leading supply chain advisor and integrator. Our conversation touched on the challenges and opportunities in healthcare supply chains, the role of technology and the future of warehouse design. Let’s look at the key takeaways from our conversation. 

The Role of Warehouses in Optimizing Healthcare Supply Chains 

Warehouses are the lifelines of healthcare supply chains. They ensure the smooth delivery of medical supplies and pharmaceuticals, maintain proper inventory levels, and ultimately, ensure that patients receive the care they need. However, supporting these critical operations can be complex and challenging, especially under constant pressure to reduce costs and increase efficiency. 

The Impact of Automation and Warehouse Design 

The quest for efficiency is why forward-looking supply chain leaders are exploring automation and intelligent warehouse design to significantly reduce costs and labor demands. As Stewart highlighted, many health systems are excited about the idea of being like an Amazon fulfillment center, with full automation including automated guided vehicles, autonomous mobile robots, scanning systems for sorting, automated storage and retrieval systems. However, each health system should quantitatively evaluate what level of automation makes sense for them. When properly planned, some level of automation can improve productivity, reduce errors, increase quality and create more reliability for the facilities they serve. 

Real-World Example: Slotting Program 

One practical example of warehouse optimization is the implementation of a slotting program. For a capital investment of around $40,000 and ongoing maintenance costs of $4,000 per year, a facility can significantly increase productivity. For instance, Stewart explained how one facility that RiseNow worked with saw a 31% increase in productivity in a zone that produced 60% of the volume. This not only reduced labor requirements but also eliminated the premium cost of overtime labor.

The Future of Warehousing in Healthcare 

Looking ahead, most billion-dollar revenue health systems and larger are expected to move to some form of self-distribution or consolidated service center (CSC) model in the next five years. This shift is making warehouse optimization and automation more justifiable for healthcare supply chain leaders. However, it's essential to have a warehouse system that can integrate with these solutions to ensure that results are maximized. 

Advice for Healthcare Supply Chain Executives 

One key piece of advice Stewart had for supply chain executives looking at optimizing their healthcare supply chain is to start changing their definition of an enterprise resource planning (ERP) provider. Stop looking first to the ERP providers for everything supply chain. The outdated adage "if our ERP provider does it, we're going to go to them over a best-in-class platform that specializes" is setting many health systems back years. It's making it even harder for them to be agile in times like this. ERPs have their place, but organizations that know the sweet spot between what ERP does best and which best-in-class solutions can help make their ERP perform even better, are much more successful in the end. 

The warehouse plays a vital role in optimizing the healthcare supply chain. With the right level of automation and intelligent design, warehouses can significantly improve efficiency, reduce costs and ensure the smooth delivery of medical supplies and pharmaceuticals. As we look to the future, it's clear that the role of warehouses in healthcare will continue to evolve, and it's up to us to stay ahead of the curve.