Supply Chain Management

Case Study on Meditech Surgical

Submitted by: Parikshit Saha Prateek Dahiya Rajat Kumar Randeep Kumar Robin Singh Bhinder Rohit Singhla Sahil Aggrawal Sahil Jindal

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Contents
SUPPLY CHAIN MANAGEMENT .............................................................................................. 1 I.INTRODUCTION- .................................................................................................................. 3 II.STATEMENT OF THE PROBLEM- .......................................................................................... 4 III.CAUSE OF THE PROBLEM ................................................................................................... 5

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I.

INTRODUCTIONMeditech is a leader in the endoscopic surgical instrument market. The company

manufactures and market low cost endoscopy surgical equipment to hospitals and independent surgeons. The company's distribution operation is arranged and managed from a central storage warehouse that ships its products to domestic and international affiliates. The organization have been experiencing a good customer service experience in the past, however, lately customers have expressed concerns with the time products are being delivered to them. Due to the nature of the industry, the delivery of surgical equipment on time is extremely important. The on time delivery of products to its

customers has become the main problem for the firm. Currently, Meditech's customers are waiting over six weeks for products to be delivered to them. This current practice is not acceptable and must be addressed by management immediately if Meditech wants to stay competitive and keep its current market share.

Meditech's main problem is that a bullwhip effect was produced due to organizational and supply chain problems. The method used by Meditech to balance customer

demands with planned production is not effectively serving its purpose. The catalog of products been offered by Meditech continues to grow and replacing current items, making obsolete old products that are in their catalog and current customer orders. Poor customer demands forecasting, long assembly lead times, and changing products are the main reason why inventory levels are not enough to satisfy customer's demands. While the assembly lines try to keep with demand and company's resources are getting exhausted trying to launch a new product, the distributors then will increase their
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product demand, which causes a bottle neck effect as it moves up the supply chain process. II. STATEMENT OF THE PROBLEMMeditech introduces 1 new product per month on an average. Most of the new products are only upgrades of old products. This considerably reduces the life-cycle of the products. Majority of Meditech customers are Material Managers whose primary focus is on cost and delivery schedules but not on innovative product features. Though no major problems arise from assembly line perspective, signs of cognitive dissonance may arise in customers. No attempt is made by Meditech to understand the Demand Dynamics along the product life-cycle. Qualitative factors that have been identified as critical success drivers for a new product launch are time-to-market relative to competition (Porter 1985, Kailash and Lilien 1986) or product diffusion (Bass 1969, Krishnan 2000). But Meditech does not launch new products relative to competition and by constantly pushing new innovations into the market it does not allow its products to diffuse effectively into the market. Every new product launch requires a lead time of around 5-19 weeks (excluding design phase lead time) which is very high. With every product launch, pushing the product into the market becomes the primary consideration of the sales force thereby neglecting customer service for older products. These constant launches have led to: 1. Supply side shortages 2. Delayed deliveries 3. Low customer service
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4. Low customer satisfaction 5. Inaccurate forecasts 6. High Finished Goods inventory levels The product portfolio of Meditech comprises about 200 separate end-products and the number is increasing. These wide ranges of products make Meditech rely heavily on suppliers wherein the lead time is 2-16 weeks. So practicing JIT, which would be very effective for Meditech, becomes impossible in this case. Meditech organizational structure has a long scalar chain. Information dissemination becomes difficult here if there are too many products in the portfolio III. CAUSE OF THE PROBLEM

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IV.

RECOMMENDED SOLUTION, IMPLEMENTATION AND JUSTIFCATION1. The foremost thing to be done is to implement an ERP System having modules of customer relationship management, production planning and control and sales & Distribution which according to the Aberdeen Groups report will cost around $2 million. This would help in better data storage, after sales services & warehousing, analysis and forecasting and also reduce the admin work. It will also help in integrating the decentralized warehouses with each other so that inventory levels can be checked and controlled. 2. The next thing that should be done is reduce the frequency of new product launches. A leaner product portfolio with PULL strategy would be better and will give time to the management to forecast accurately the estimated demand. 3. Emphasis should be laid on better forecasts with a shorter horizon of 1-2 months and maintain a safety stock so as to provide a service level of 75%.

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4. Work should also be done to reduce the assembly cycle time from the current level of 2 weeks. Better supplier relations should be maintained to reduce the lead time from the current level of 2-16 weeks.

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