AbstractHealth‐care costs are increasing rapidly in the developed countries. For many years, logistics has been identified as one of the major cost factors. Such escalating cost is a serious concern for most hospitals as providers of affordable health care but many time‐sensitive logistics services are essential and indispensable. In this paper, we discuss various logistics issues that are cost concerns for most hospitals and address a particular hospital‐internal courier service logistics as an example. Applying optimization‐based approaches on real‐world data from a particular hospital in Portugal, we demonstrate how efficiency and effectiveness can be improved. Computational results show that solution approach based on optimization and process re‐engineering can not only improve the performance measure by more than 50% but also reduce resources necessary to maintain the same level of service as before by 16.67%. We have developed and implemented a fully functional decision‐support system that is now used daily at the Hospital of Braga in Portugal for not only handling the courier service function more efficiently but also for increased flexibility to manage urgent and high‐priority service needs that could not be handled before.