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Meditech Surgical
Meditech’s Problems in Introducing New Products and Manufacturing ALL Products
One of Meditech’s new product introduction problems is not producing enough units to
meet initial demand. According to Figures 1-9 1-10 in the case study, The Finished Goods (FG)
inventory falls into the negative almost immediately after introduction and after the peak of new
orders. Meditech's inventory challenges indicate demand forecasting practices leading to the
bullwhip effect (Simchi et al., 2021). The bullwhip effect occurs when minor variances in
customer demand increase along the supply chain as they move up to the manufacturer because
of a lack of coordination (Weisz et al., 2023). Meditech’s strategy for innovation has been to
make small changes to existing products, thereby obsoleting its existing products and causing
problems with suppliers. The process Meditech uses to plan the manufacturing, packaging, and
sterilization seems to hinder them from responding appropriately to demand. The lead time from
suppliers is stated as being 2-16; this lead time has too much variance to forecast adequately.
Systemic and Organizational Problems
One of Meditech's most significant problems is a lack of communication across
departments. Meditech’s hierarchical structure keeps everyone in their silos. If the departments
meet their goals, the managers will not think everything is going well. Also, Meditech delivers to
4-5 major distributors but takes orders from hundreds of regional distributors supplied by the
major distributors. This may confuse and add to the bullwhip effect as the regional distributors
bypass the major distributors. Meditech had also not been collecting data to determine their
forecasting accuracy. Without this data, they cannot know if they are making the correct
decisions. Collecting the data was difficult because Meditech had been using different systems
and methods for storing data. One indication that their forecasting models have not been correct
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is when it is stated that their inventory could be reduced by 40% without affecting existing
service levels.
Customer Service Manager
As the customer service manager, Dan Franklin and his staff were in contact with the
customers. Because one of his goals was to ensure customer satisfaction, he was the only
manager with the incentive to find a solution. The hierarchical and siloed structure of Meditech
did not allow for other managers even to recognize there was a problem at all. The information
Franklin gathered from the various departments showed the issues once compared to each other,
but they may not have alluded to any issues on their own.
Proposed Solutions
Meditech must adopt a standardized information system across its departments to
communicate and share data more effectively. They can also implement supply chain digitization
that could give them access to advanced analytics and systems to reduce costs, increase
profitability, and improve customer satisfaction (Simchi et al., 2021). Some digitized systems use
Artificial Intelligence (AI) to solve some of the problems along the supply chain that cause the
bullwhip effect. Researchers have found that AI has successfully used big data and learning
models to smooth out the bullwhip effect (Weisz et al., 2023).
Meditech should also rethink how it determines what new products to introduce. Because
they are obsoleting their existing products, they may be doing more harm than good. When not
planned and implemented effectively, obsoleting products can lead to a loss in revenue, profit,
and market share (Zhu et al., 2018). New product introduction can also have costs not mentioned
in the case. The cost of the line-workers' design, procurement, marketing, packaging, and
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training. It may be more profitable to hold onto some existing products longer and plan their
replacement more effectively.
Meditech should also seek additional suppliers to establish a more consistent lead time
than 2-16 weeks. Forecasting models may not be as effective if the lead times vary significantly.
The catalog of 200 products should be evaluated to determine what products could be
eliminated. Identifying and eliminating redundant, low-profit, and slow-moving products can
reduce the load on the manufacturing and packaging department so they can focus on more
significant products.
The regional distributors should submit their orders through the major distributors. This
can allow the major distributor to fulfill regional orders from existing stock. This can also allow
them to combine several small regional orders into large orders.
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References
Simchi-Levi, D., Kaminsky, P., & Simchi-Levi, E. (2021).HDesigning and managing the supply
chain: Concepts, strategies and case studiesH(4th ed.). New York, NY: Richard D. Irwin,
Inc.
Weisz, E., Herold, D. M., & Kummer, S. (2023). Revisiting the bullwhip effect: How can AI
smoothen the bullwhip phenomenon? The International Journal of Logistics
Management, 34(7), 98-120. https://doi.org/10.1108/IJLM-02-2022-0078
Zhu, Q., Shah, P., & Sarkis, J. (2018). Addition by subtraction: Integrating product deletion with
lean and sustainable supply chain management. International Journal of Production
Economics, 205, 201-214. https://doi.org/10.1016/j.ijpe.2018.08.035
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