SUPPLY CHAIN STRATEGY IEM-5763

CASE STUDY ON MEDITECH SURGICAL COMPANY ASSIGNMENT #1 CASE STUDY TYPE A

TEAM MEMBERS VISHAL TAMRAPARNI AKSHAYA SATPUTE VATSAL PANDEY

January 15, 2013

1) What are Meditech problems in introducing new products? In manufacturing ALL products? The objective of Meditech surgical company is to maintain an adequate amount of finished goods inventory so as to cope up with the demand of the incoming orders. The time lag between the arrival of orders and the available finished goods is about 4 months which is unacceptable and also with introduction of new products there was a poor service level that was observed by the Customer Service Manager Dan Franklin. Forecasting was always a problem but the extent to determine the level of inaccuracy of the forecast was difficult. The records of information of forecast and demand were not stored due to which forecast accuracy could not be tracked. The service level in the past year was observed to be below the corporate objectives. With every product launch Meditech has always focused on pushing the product into the market thereby neglecting the customer service for the old products. The manufacturing of the Meditech products takes place in three steps: 1) Assembly 2) Packaging 3) Sterilization With each of the stages having a bottle neck at some point during the process there was some lack of coordination in every stage. For the planning of assembly of a product , using the monthly forecast data the amount of product that needs to be transferred from bulk inventory to finished good is determined and this has a lead time of about one to two weeks. The packaging and sterilization of products are based on the need of replenishment of the finished goods inventory typically a batch of end products take upto one weeks time for packaging and sterilization. Therefore, the total time till the customer gets the product is about 19 weeks which is unacceptable in the global competitive market. With the continuous launches of new products several problems like supply shortages, increased inventory levels, delivery delays and low customer satisfaction have been resulted. The increased frequency of the new product launches by Meditech has often hindered the life cycle of the existing products. As Meditech has a large number of end products which is about 200, It is heavily dependent on suppliers for its material and the lead time from the supply side is about 2-16 weeks after which the products are sent to packaging and then the end products are sterilized, all of these stages delay the launch of products into the market and thereby causes the customers to wait for a considerable amount of time. Meditech has also experienced the problem of panic ordering from dealer and its affiliates.

Meditech is facing a huge problem in keeping track of the information of all the products, which has necessitated it to invest in an efficient data storage system. Meditech has a huge variety of products which makes it challenging for it to be cost effective as well as efficient.

2) What is driving these problems both systemically and organizationally? Systemic Problems: Meditech has always faced an issue of not having an efficient method of storing the information regarding their products. The data storage has not been emphasized much due to which there were a lot of shortages experienced with new introduction. Forecasting is an issue and it has become difficult to determine the extent of the error. There were no records of the previous data to track the forecast accuracy and also the information of the demand patterns was not stored. Meditech was of the opinion that data storage was a tedious task and even if better methodology was adopted there would not be very significant improvements in the forecast. The strategy followed by the company is not well aligned to satisfy the customers Organizational Problems: Meditech follows the strategy of launching either new products or some innovations in their old products at a very high frequency. With the new product launch the company is thriving to provide the best platform in the market for their new product and the entire efforts of the organization are focused on achieving this objective. On the other hand the customer service provided for the older products are not given much attention resulting in dissatisfaction amongst the customers. With the frequent launches of the new products the company has reduced the product lifecycle in the market. As the product range is comprised of 200 different products the company is heavily dependent on suppliers due to which there is an increase in lead time which has resulted in inefficient deliveries.

3) Why is the customer service manager the first person to recognize the major issues? The entire operations organization is structured in a way where all the functions report up thorough the Vice President of Operations Kenneth Strangler and functions reporting to Vice President includes Customer Service Department. Customer Service Manager is a person who is in direct contact with the customers and deals with all the tasks right from customer complaints to establishing strategies that help improve the delivery service to the customers. Customer Service representatives work with the dealers and is responsible for keeping them updated with the latest features and new product innovations. The Customer Service Department is also accountable for updating the delivery schedules to their customers. The manager is also responsible for the issues concerned with

the movement of products out of the finished goods inventory. Basically, Customer Service Department puts in all the efforts to ensure that customer receives the product when it is needed. The Customer Service manager himself arranged many meetings with the hospital managers and realized the full scope of frustrations of his customers due to poor delivery schedules.

4) How would you fix these problems? We would redesign the existing strategy in such a way that it is aligned to meet the customers demands by planning the manufacturing of the products well before the actual orders start pitching in the company. Presently the lead time is about 19 weeks for a product to reach the customer. We would start the production atleast a month prior to the launch of the new products so that the customer need not wait for a longer period of time. We would reduce the frequency in launching the new products so that each product can be effectively marketed. By reducing the frequency of the launch of the lifecycle of each product can be increased. We would divide the workforce into 2 teams wherein one of the teams will direct their efforts to the launch of new products or bring about innovations in their old products and one team will be directed towards meeting the requirements of the customer regarding the old products. This will reduce the problem of customer dissatisfaction and also maintain the reputation of the company. We would also invest in a good database system that would help us store the data regarding all the products and also it could track the information of any product easily. With a good database system we could centralize all the information so that compiling the information would not be an issue and this would also aid in better forecast of future demands.