# The A to Z of Healthcare Logistics Healthcare is unique among global industries because it is directly responsible for the lives of billions of people. Population growth, advancements in medical technology, and improved access to care continue to expand the industry’s importance. According to Deloitte, global healthcare spending is expected to keep rising and remain a vital pillar of economic growth and development. But the effectiveness of healthcare depends heavily on the efficiency of its supply chain—and the COVID-19 pandemic forced the industry to rethink the principles and priorities behind those supply chains. Healthcare logistics is complex, spanning multiple stakeholders, geographies, products, and service models. Understanding it requires breaking down how healthcare supply chains work, who participates in them, the trends shaping them, and why resilience has become as important as efficiency. > **Deloitte:** Global healthcare spending was expected to reach a **10.3% compound annual growth rate (CAGR) in 2023**. ## The Various Arms of Healthcare Logistics Healthcare supply chains are built to ensure patients receive the medical products they need. Over time, these supply chains have become highly efficient—but also highly complex. A McKinsey report noted that healthcare supply chains can start in Asia and circumnavigate the globe twice before reaching their final destination. Despite this complexity, healthcare logistics can broadly be understood across three stages: first mile, middle mile, and all-mile delivery. The **first mile** involves pharmaceutical companies and medical equipment manufacturers. Once healthcare products are produced and ordered, they are shipped to distribution centers. The **middle mile** covers the movement of products from manufacturers to distribution centers, hospitals, clinics, pharmacies, and other healthcare facilities. The **all-mile** focuses on getting medicines and healthcare products directly to patients. This stage has become increasingly important as online pharmacies, telemedicine, and digital healthcare services have grown rapidly in the post-pandemic world. > **Rock Health:** Venture capital investment in digital health in 2020 was **2x higher than in 2017**. Healthcare is no longer confined to traditional facilities such as hospitals and clinics. In many cases, care can now be delivered at home, making reliable all-mile delivery of healthcare products a critical part of the patient experience. ## Healthcare Logistics: From Past to Present Until the 1980s, healthcare supply chains were largely decentralized and manually operated. Each hospital or healthcare center calculated its own supply needs and contacted vendors independently. In practice, every healthcare facility operated as an isolated supply chain. This created several problems. Hospitals had limited leverage with suppliers, which increased procurement costs and contributed to higher healthcare costs for patients. Manual inventory management also created room for errors, often resulting in oversupply, wastage, or shortages of products needed by clinicians. Healthcare supply chains have since become more centralized. Integrated delivery systems (IDSs), which are healthcare company groups owned by a single parent company, have helped supply chain managers gain better inventory visibility and coordinate the flow of data and resources. IDSs also allow healthcare organizations to work with group purchasing organizations (GPOs). GPOs pool procurement needs across multiple hospitals, increasing bargaining power with suppliers and helping reduce supply costs. Over the past decade, healthcare logistics has seen accelerated digitization, advances in logistics technology, and growing adoption of data analytics. The goal is better supply chain visibility, more accurate inventory tracking, and reduced wastage. > **Coherent:** The healthcare supply chain management market was estimated at **$2.08 billion in 2021**, with a projected **9.3% CAGR from 2021 to 2028**. The pandemic accelerated digitization in healthcare supply chains, telemedicine, and digital healthcare. These shifts have matured the all-mile stage of healthcare logistics. > **McKinsey:** Telehealth usage in 2021 was **38x higher than the pre-COVID-19 baseline**. > **Rock Health:** The U.S. digital health sector received **$14.7 billion in funding in H1 2021**, up from **$1.1 billion in 2011**. As a result, patients can increasingly receive healthcare services and medicines at home, often on the same day, supported by parallel advances in supply chain logistics. ## Challenges Shaping Healthcare Supply Chain Optimization ### Supply-Demand Mismatches Healthcare supply chain stakeholders may have different incentives, but they share a core objective: patients and clinicians must have timely access to the right healthcare products. This is difficult to achieve. Hospitals typically stock **6,000 to 8,000 SKUs** and may have nearly **35,000 products** on their formulary—the list of drugs and medicines they can procure at any time. > In 2019, supplies accounted for an estimated **40% of total hospital budgets**. Clinician product preferences are a major factor affecting hospital supply needs. Without strong communication and standardization, hospitals may either hoard products or overstock to accommodate many preferences, leading to wastage. One U.S.-based hospital reportedly saved **$30,000 per year** by reducing the number of sanitizer types stocked across its healthcare system from 30 to three. ### Rising Uncertainty Across the Supply Chain COVID-19 exposed the vulnerabilities of efficient but globally distributed healthcare supply chains. The risk landscape now includes cyberattacks, tariff wars, political instability, natural disasters, and pandemics. > **McKinsey:** Over a 10-year period, MedTech companies could lose an estimated **38% of one year’s earnings** from shocks. Pharmaceutical companies could lose an estimated **24% of one year’s EBITDA** from shocks. > Forty weather disasters caused **$40 billion in losses in 2019**. > Ransomware variations increased **2x from 2018 to 2019**. Because healthcare supply chains are deeply interconnected, disruptions can ripple across the entire industry. This has made resilience a top priority. Historically, resilience often came at the expense of efficiency, but advances in supply chain technology are making it possible to pursue both. ### Manual Operations and Limited Data Visibility For much of the 20th century, key supply chain functions—sourcing, inventory, and payments—were handled manually. Manual processes limit scale and efficiency. > **Cardinal Health:** In a survey of hospital supply chains, **45% of respondents** said manual supply chain tasks negatively affect patient care. Another **45%** said supply chain tasks take too much time away from patient care. Manual operations also tend to create data silos. When information is fragmented, organizations lose visibility into the overall health of the supply chain and miss opportunities to analyze performance holistically. ## Technologies Affecting Supply Chain Visibility Well-functioning healthcare supply chains are essential to improving access to and quality of care. In a post-pandemic environment, supply chains must become both more resilient and more efficient. > **Cardinal Health:** **94% of respondents** agreed that supply chain management is crucial to solving key healthcare challenges. Supply chain risk management is now as important as optimization. Technology adoption is helping healthcare organizations improve both. ### Internet of Things (IoT) IoT-enabled devices help healthcare companies track consignments from the first mile through to the end consumer in the all-mile. Locus TrackIQ provides ground-level fleet visibility through a LiveView dashboard, helping teams prepare for unforeseen events. It also helps delivery executives complete more tasks by identifying optimal routes. For healthcare companies operating in all-mile delivery, customer experience is a key differentiator. TrackIQ’s white-labeled tracking links allow end customers to monitor the status of healthcare orders and provide feedback. ### Automation Automation helps healthcare supply chain teams complete repetitive tasks faster and more efficiently, freeing teams to focus on resilience and scaling operations. Hospitals can use supply chain and inventory management platforms to automate sourcing, purchasing, and inventory processes. With AI and machine learning, these platforms are expected to become more advanced. For healthcare and digital companies operating in all-mile delivery, Locus’ Orchestration platform helps optimize shipping through automation. It supports automated order pushing through custom rules and streamlines carrier management through pre-negotiated rates, minimum guarantees, automated payments, and reconciliation. ### Data Analytics AI and machine learning have driven a major shift in how supply chain data is analyzed. In logistics, this enables companies to improve critical performance metrics and meet service-level agreements with greater precision. Locus DispatchIQ supports cost-based route optimization by planning fleet routes around real-time variables and constraints such as traffic, fuel usage, location proximity, and delivery requirements. It also helps optimize fleet mix and allocation by accounting for vehicle usage, customer preferences, delivery executive skill sets, lunch breaks, sick days, and time slots. Locus TrackIQ also helps uncover fleet patterns by analyzing metrics such as mileage performance, driver history, idling, and stoppage times. ### Predictive Analytics Healthcare supply chains must prepare for shocks in an increasingly uncertain world. McKinsey highlights detailed risk diligence, understanding the magnitude and likelihood of risks, and adopting supply chain best practices as essential to building resilience. Many structural changes require significant capital investment, making it important to evaluate whether those investments will deliver the desired outcomes. Locus NodeIQ uses predictive analytics to help decision-makers create a digital twin of an existing supply chain network. With this model, teams can run “what-if” scenarios, assess likely risks, and evaluate whether network changes would make supply chains more efficient and resilient. ## Building Resilient Healthcare Supply Chains Healthcare supply chains continue to face major challenges in the aftermath of COVID-19, with bottlenecks and delays likely to persist. In this environment, resilience and optimization must work together to support sustainable growth. Since 2016, Locus has used advanced logistics technology to help redefine supply chain operations, supporting more visible, efficient, and resilient logistics networks for industries including healthcare."