PowerPoint Presentation
Meditech Surgical
About the CompanyParent Company
Largo Health CompanySpun off from Largo to avoid distractions from other Largo businesses and acquire market share.
Product
Endoscopic Surgical InstrumentsFall under Minimally Invasive Category
Primary Competitor
National Medical CorporationCreated $800 million of Market over a decade.National Medical concentrated on selling to surgeons.
Strategy Followed by the CompanyAggressive competition with National Medical Corporation
Developing new, low cost innovative instruments
Selling them through a first-class sales force.
Old products were updated with innovative features and presented to the market as new products.
A dozen or more new products would typically be introduced by Meditech in any given year.
Problems FacedGrowing customer dissatisfaction
Strained production capacity
Meditech consistently failed to keep up with demand during the flood of initial orders.
Poor service Delivery - customers had to wait over six week to have their orders delivered.
DistributionDistribution through a Central Warehouse
Primary Channels
Domestic DealersPrimarily for domestic salesOrder and receive products from multiple manufacturersIndependent and autonomous entities
International AffiliatesWholly owned subsidiaries of Largo HealthcareProduct shipping throughout the countryInternational affiliates submit orders to Meditech and Meditech fills them with available product.
Internal OperationsAssemblyManually IntensiveComponents parts placed in Inventory after Quality AssuranceRun by a team of cross-trained production workersTypical cycle time 2weeksLead time 2-16 weeks
PackagingUsing several large packaging machinesEnough capacity, has not restricted output
SterilizationUsing a large cobalt radiation sterilizerCan sterilize as much product as will fit inside its four walls.Capacity limitations not a problem
Operations Organization
Production Scheduling and PlanningBroken down into two partsPlanning, based on monthly forecasts, of assembly and component parts ordersDaily scheduling of packaging and sterilization based on finished goods inventory levels.
ForecastAnnual forecast during fourth quarter of each fiscal year.Monthly forecast based on annual forecast
Assembly Planning
Based on monthly forecast Determining Transfer Requirement by following equation Transfer Req. = Demand forecast for the month + Safety Stock- Current inventory level
Production Scheduling and PlanningMRP System
Monthly forecastLead time for assembly, packaging & sterilization Current parts, bulk, and finished goods inventory levels.
Packaging & sterilization
Scheduled based on needed replenishment of finished goods inventory.Packaging and sterilization operations are considered one operationOrder point/order quantity (OP/OQ) basis.
Production Scheduling and Planning
Material being pushed through assembly into bulk instrument inventory based on monthly forecast
Pulled through packaging/sterilization into finished goods inventory, replenishing being done from what was sold from finished goods the day beforeFig: The Meditech Production Process
Reasons for ProblemsProblems with new product introduction
Data to measure forecast accuracy had not previously been tracked
Forecasts and demand information had not been kept.
High finished goods inventory levels
Despite the high levels of inventory, the actual service level over the previous years were disappointing
Panic ordering from dealers and affiliates.
Decentralized nature of the regional warehouses
Problems with data gathering
Weekly Demand Pattern
Variation in production schedules exceedingvariation in demand
Q1)Problems in introducing new productsForecasting had definitely been a problem, but determining its extent was difficult. Data to measure forecast accuracy had not previously been trackedMeditech does not have separate forecast for new products. It goes from the yearly forecast schedule
Every time a new product was introduced it resulted in serious supply problems[2-16 weeks] which in turn resulted in the dissatisfaction of customer due to poor service resulting from each product introduction.
Backorder cancellationsdue to high waiting time
Meditech gives the impression that they were using a cost-effective supply chain, instead of a responsiveness supply chain that they should have been using considering highly innovative products.They should plan a new introduction cycle two months before the sales force starts marketing the product
Q1)Problems in introducing All products
Meditech has too many products to be efficient at manufacturing from one facility.
Inaccurate forecasts based on split of yearly forecasts
Lack of information co-ordination
Centralization of data is missing
Q3) Why is Customer Service Manager the first person to recognize the major issues?
Q3) Why is Customer Service Manager the first person to recognize the major issues?
Steps to Fix the Problems
Centralization in Data storage : Uniting POS , Distribution Channels and Production Channels. Role of technology.
Leaner Product Portfolio.
Need to keep high Service levels. Standardizing a certain safety stock level in inventory. Focus in improving Supplier Lead time which is presently 2-16 weeks.