Healthcare Distribution Center Design

Meaningful Work that Impacts Lives

In healthcare distribution, the connection between distribution center performance and human impact is easy to see. At Zion, our purpose is to leave a positive impact on the lives of those we touch. For our team, that includes helping healthcare companies increase capacity, improve accuracy, and build new capabilities within their distribution centers.

This blog explores what makes healthcare distribution center planning unique, as well as the technologies and automation solutions some companies are using to support these complex operations.

What Makes Healthcare Distribution Center Design and Implementation Unique?

Healthcare distribution centers must be designed for speed and accuracy in a highly regulated, high-stakes industry. The processes, systems, and equipment inside these facilities must support a range of requirements that are often more complex than those found in standard distribution environments.

1. Government Regulations and Company-Imposed Requirements

Healthcare supply chains must adhere to a wide range of government regulations and internal company requirements. Examples include:

Product Attribute Tracking: Depending on the product class, each SKU may have attributes that must be tracked, such as lot number, dosage for pharmaceuticals, expiration date, serial number, and more. These attributes can influence how a product is stored, handled, and picked.

Some products also have excursion limits, meaning they can only remain outside their required temperature-controlled environment for a specific period of time before their integrity is compromised.

Accountability and Traceability: Every product movement within the distribution center, from receiving through shipping, must be time-stamped and captured. This creates the need for more advanced Warehouse Management Software (WMS) capabilities, or a combination of WMS with Warehouse Control System (WCS) or Warehouse Execution System (WES) functionality.

2. Customer Service Level Agreement Variability

Most healthcare companies serve large and varied customer lists that may include doctors, hospitals, distributors, clinics, and other healthcare providers. Each customer may have a different negotiated service level agreement, which directly impacts how orders are created, prioritized, and fulfilled.

Examples include:

Expiration Period Tolerance: First Expiration, First Out (FEFO) requirements can impact both storage and picking methods.

Serial Number Requirements: A specific serial number may be assigned to a specific customer, requiring a more involved process to store, track, and locate the exact item.

3. Special Storage and Handling

Healthcare distribution centers often support a wide range of products with unique storage, security, and environmental requirements. These requirements can significantly influence facility design, process flow, and automation selection.

Some of the most common storage and handling considerations include:

• Hazmat

• Dangerous goods

• Quarantine

• Temperature control, including freezers, refrigerators, and excursion limits

• Narcotic classification requiring DEA cages

• High-value goods

4. Intra-Day Peaks

Compared to industries such as retail, where seasonal peaks like Black Friday and Cyber Monday are common, healthcare distribution volumes are often more consistent throughout the year. However, these operations can still experience significant daily and weekly peaks.

Order cutoff times play a major role in creating daily peaks. Hospitals, clinics, and physician offices often place orders shortly before the shipping deadline, creating concentrated periods of activity. Monday can also become a common weekly peak, as orders accumulate over the weekend and need to ship at the start of the work week.

These intra-day and weekly peaks can have a significant impact on facility design. In some cases, the system must be designed specifically to handle these regular spikes in volume.

5. Unique Value-Added Services

In healthcare distribution, it is common to support additional processes such as kitting, returns processing for loaned inventory, sterilization, specialized packaging, and more. These services add operational complexity and must be considered early in the facility design process.

6. Accuracy is Critical

The consequences of shipping the wrong product can range from a poor customer experience to a life-threatening situation. If the wrong product is shipped to a patient’s home, it could result in the use of the wrong medication. In a hospital setting, receiving the wrong product could delay a procedure and disrupt a patient’s care.

7. Ergonomic Work Environment Standards are High

Many healthcare companies hold a high standard for ergonomic worker safety. This has an important impact on both process design and equipment selection.

8. Patient on Table” Orders

Healthcare operations may also need to support “patient on table” orders, which are emergency surgery products strategically positioned near major airport hubs so they can be shipped as quickly as possible.

Designing a healthcare distribution center requires more than fulfilling orders. From regulatory compliance and product traceability to specialized storage requirements, service level expectations, value-added services, and ergonomics, every aspect of the operation must be designed with precision and purpose.

Healthcare Distribution Center Design and Automation Considerations

In healthcare distribution, automation is often pursued to improve operational efficiency, compliance, accuracy, speed, space utilization, and worker safety. Designing the right processes and identifying automation systems that fit the operation requires both technical expertise and practical experience in healthcare.

Looking at Automation Through the Healthcare Lens

Because of the complexity involved in licensing a healthcare distribution center, many healthcare companies plan for a longer facility lifecycle. While companies in other industries may work with shorter planning horizons, healthcare companies may plan to remain in a facility for 10 years or more. As a result, healthcare companies tend to evaluate space planning, partner selection, and ROI through a different lens.

Space Planning: Ensuring the building is sized appropriately, or has the expansion capabilities to support growth over the life of the facility, is a critical step.

Partner Selection: The longer lifecycle of healthcare distribution centers, combined with the complexity of implementing systems that support their unique requirements, makes OEM and partner selection especially important. Healthcare companies should carefully evaluate the financial stability, strategic vision, product support, and maintenance capabilities of their partners to ensure they can support the operation for the long run.

ROI: Longer building life, combined with critical speed and accuracy requirements, can help justify automation investments. However, ROI remains a key consideration. In healthcare, the equation is often more complex than in other industries. It may include labor and productivity improvements, but it also needs to account for regulatory requirements, risk mitigation, and the ability to consistently deliver time-sensitive products.

What is Required for Successful Automation Planning and Deployment in Healthcare?

Higher Levels of Collaboration and Thoughtfulness: Healthcare companies often have large, diverse planning teams that bring together expertise across product development, compliance, legal, operations, supply chain, IT, and more. Cross-functional requirements, documentation, and planning are critical to success.

Longer Timelines: Because healthcare companies often have more detailed processes, complex data requirements, and extensive testing and validation needs, projects typically require longer timelines. Every stage of the project lifecycle requires a heightened level of attention, from data analysis and solutioning to execution.

Specialized Knowledge and Proven Technologies: There are real advantages to working with partners who understand healthcare. Experienced partners are more likely to have the right security measures in place, relevant integrations already built, and a clear understanding of how to resource a healthcare project appropriately. This is especially important when additional steps are required to address regulatory requirements, traceability needs, validation expectations, and other healthcare-specific considerations.

Integration with Legacy Systems: Many healthcare organizations have highly customized ERP and WMS systems to support their complex businesses. Modifying these legacy systems can be risky and expensive. Because of this, many healthcare companies rely on equipment software, WES, or WCS as an integration layer that enables efficient product storage and flow within the distribution center.

Automation Technologies Addressing Healthcare Distribution Challenges

Many of the same technology and automation solutions used across other industries can also be configured to support healthcare distribution requirements. While some specialized technologies are designed specifically for medical and pharmaceutical applications, many leading automation solutions can be adapted to meet healthcare standards for compliance, traceability, and accuracy.

Examples of technologies being used more widely in healthcare distribution centers include:

System	Description	Notes
Goods to Person	In environments where full-case picking or each picking is required, goods-to-person technologies can help create an efficient and secure picking environment.	To address intra-day peaks, it may make sense to decouple a portion of required picks from the AS/RS system. This can help reduce investment costs. For example, if 12 additional pickers are required for a two-hour intra-day peak, it may not make sense to build the AS/RS system with 12 additional aisles.
4-Way Pallet Shuttle	In some cases, pallet in and pallet out may be the primary requirement of the solution. In these scenarios, 4-way pallet shuttles can be an excellent option to better utilize cube while reducing labor.	These systems can support quarantine requirements by enabling a “system within a system,” reducing the need to tie up labor and dock space for this process.
A-Frames	A-Frames are specialized systems for small units and can be extremely efficient and accurate.	A-Frames are frequently used in pharmaceutical distribution.
Person-to-Goods	Person-to-goods systems are a flexible option that can help improve accuracy and add efficiency. In environments with high SKU counts and low to medium throughput, person-to-goods can be a strong fit.	These systems are highly dependent on volume.

It is important to understand that multiple Original Equipment Manufacturers (OEMs) make their own versions of the systems above, and each may have different mechanical and systems-related capabilities. Not all AS/RS systems operate the same way.

This is where a systems integrator can add significant value. The right integrator should understand the manufacturers, the variations between their systems, and the questions that need to be asked before a solution is selected. The goal is to make sure it is clear how the system will solve the problem, how it will interface with surrounding equipment, and how it will support the overall operation.

You want an integration partner that:

1. Has healthcare experience as a foundation

2. Understands your business requirements in detail

3. Has knowledge and experience with the technology, systems, and available alternatives

4. Has a holistic understanding of the full operation, including upstream and downstream impacts

Designing for What Healthcare Distribution Demands

The most important distinction in healthcare distribution is that behind every order is a patient relying on a product to support their care. This reality influences every aspect of facility design and operation.

A well-designed healthcare distribution center does more than improve operational performance. It helps ensure the right product reaches the right place at the right time, supporting healthcare providers and the patients they serve.

If you are ready to begin the design and implementation of a new distribution center, or make improvements to an existing one, contact Zion today for an exploratory conversation.

Additional Resources from Zion

Read our whitepaper: How to Prepare for a Distribution Center Automation Journey