Supply Chain Management.
Case Study 1: Meditech Surgical.
1. What are Meditech’s problems in introducing new products? In
manufacturing ALL products?
Seems like the main business strategy of Meditech is to introduce new
products into the market to satisfy the customers’ needs and be up-to
-date in the market. And this might be one of the reasons, which made
the company successful among their competitors. For the company,
introducing and selling the new product wasn’t an issue, since their
products, mostly, updated based on existing products. However,
whenever, Meditech introducing new products, the customer service
level were getting low or to be specific, customers were unsatisfied
with order deliver. The company were facing huge drawback in suppl
y chain to keep up with customer demand, their initial demand. On the
other hand, the inventory of finished products was extremely high that
they could decrease inventory level at least 40%. But they couldn’t
meet the customers demand on time delivery and yet, couldn’t
decrease the inventory! One of the reasons is their forecasting wasn’t
accurate enough. I would say forecasting was terrible since “there was
no routine way to see incoming demand, inventory, or production
demand for particular instrument”. It was hard to do forecasting since
they didn’t have any data on that, or it’s wasn’t in a same format.
Another problem was panic ordering from dealers and buyers. It
caused unrealistic increase in demand of a product and hard to control
since the company can’t control buyers action. This panic ordering
also, made hard to come up with accurate forecasting.
2. What is driving these problems, both systemically and
organizationally?
I think company’s strategy of persistent introduction of the new product
was one the leading reason of creating problems. Not analyzing their
customers’ demand, which causes the wrong forecasting, and
editech’s supply, which causes them shortage with each product
introduction, drive the company’s to the big problem. In the production,
the policy of one week’s notice for responding to scheduling changes
gives the production level acts one week behind the forecasted
schedule. Moreover, the information to have accurate forecast had not
been tracked or kept in the system, which makes forecasting more
hard to obtain and time consuming. Another thing is that Meditech
management ignorance on setting the fixed inventory level. Even
though, they knew that inventory level was 40% higher than required,
they didn’t do anything due to their fear of shortage. And lastly, the
company’s decentralized organization, the dealers the dealers had no
control over the demand from each warehouse, so warehouses could
make a “panic order” creating delusional shortage. Plus, the format of
data storage on different systems was not standardized, which leads to
the problem to generate reports.
3. Why is the customer service manager the first person to recognize
the major issues?
First of all, the customer service manager is the one who directly
contacts and in charge of the customer satisfaction. Therefore, he is
the one, who receives positive or negative feedback from the
customers. And since forecast hadn’t been compared with
the actual demand in the past to track its accuracy, the company could
see the problem and low service level only through customers
complain. Moreover, he could directly see what the main problem is
since customer will tell him what isn’t satisfying them.
4. How would you fix these problems?
First of all, I would work on improving the forecast system. In order to
have a accurate forecasting, the company need to keep a track and
stand ardize data storage to compare the actual demand and forecast
for the last few years. An easy statistical method (linear regression and
etc.) based on past forecasting data will help them to do accurate
analysis. It seems like, the demand for new product in high only first
week and afterward more likely became stable. Second thing, which I
will do, is improve the company’s IT system. The company should have
centralized organizational system; therefore, they could have quick
access to the required data (not going through the papers and hard
copies). And having a standardize format for all forecasting and
demand to utilize the report. Thirdly, since the Meditech reputation
has being ruined due to on-time delivery mistake, the company needs
to gain dealers and buyers trust again. They need to work closely with
buyer to determine their real demand, which also, could help to
decrease “panic order”. And lastly, it would have being really nice to
have latest or innovative IT system, so they could have more
convenient ways for order (online order), supply and delivery the
product.