SUPPLY CHAIN MANAGEMENT
QUESTION 1: Case Analysis: MEDITECH SURGICAL.
1. What are Meditech’s problems in introducing new products? In manufacturing ALL products? When Meditech introduces new products, the company’s output is exceeded by a higher demand, consequence of a great amount of initial orders from customers. As a result of this situation, the company faces shortage at the beginning of introduction, product cannot be delivered at the agreed time, back orders accumulate and lead times increases. This company is not matching supply and demand adequately. Next figures (1 and 2) extracted from Simchi, L. & Kaminsky, P. (2008). Designing and Managing the Supply Chain show this situation in a clear way.
Figure 1. Production reaction to a new product introduction.
In the introduction month (month 0), demand increases overpassing the planned production and creating the matching problem. Figure 2. Production reaction to unexpectedly high demand (not a new product introduction)
Meditech’s reaction to abrupt changes in demand for other products is also slow. The company is not matching demand with production in a consistent way. The main problem in production is the assembly process which is constraining the overall productivity of the system. As a consequence of these supply problems regarding the “matching” issue, service level is slow and customer’s dissatisfaction is increasing. In the health care industry, poor delivery service is a serious issue. To avoid internal supply problems, some customers are incurring in “panic ordering”, thus creating an increase in the inventory level and back orders of Meditech. The most serious issue of this case is that Meditech’s reputation is being affected by the stated problems.
2. What is driving these problems, both systemically and organizationally? In both categories, System and organization, there are driving problems that will be described and analyzed below. Systematically:
* Planning with forecasts
Meditech’s production planning is based on monthly forecasts of assembly and component parts order. Simchi (2008) stated that the first principle of forecasting process is that they are always wrong. Even with advanced forecasting techniques it is impossible to achieve an exactly demand prediction for any item. “At the root of most business decisions is the challenge of forecasting customer demand, it is a difficult task because the demand for services and goods can vary greatly”. The variability in demand leads to inaccurate forecasts which are deriving in inaccurate production plans for assembly process, plans that not allows the company to match the demand changes. Related with forecasting, the internal policy which states that weekly production schedules cannot be changed with at least one week’s notice reduces the flexibility of the company to respond to real demand from customers.
* Assembly process: bottleneck
From the case information, Assembly process which is manually intensive is identified as the bottleneck in the system: Required time for assembling a batch of instruments: 2 weeks
Required time for assembling a batch of instruments: 2 weeks
According to Goldratt (1986), bottlenecks must be scheduled based on demand and maximizing the throughput of the resource, but in this case and as a consequence of inaccurate forecast, the schedules are not correct. Moreover, if it is necessary to modify the assembly schedule because of changes in demand, the change is possible only after a week. * Push-Pull boundary
Currently, assembly is working with a Make To Stock strategy while packaging is working with a Make To Order strategy. Considering the uncertainty in demand and that assembly process is the bottleneck of the system, the push-pull boundary is not well allocated. “Pull process may also be referred as to reactive process because they react to customer demand”. Meditech’s assembly process needs to react...
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