MEDITECH SURGICAL:CASE STUDY ANALYSIS

Rahul P. Dukale

Anand S. Thokal

About the Company

Parent Company

• Largo Health Company

• Spun off from Largo to avoid distractions from other Largo businesses and

acquire market share.

Product

• Endoscopic Surgical Instruments

• Fall under “Minimally Invasive” Category

Primary Competitor

• National Medical Corporation

• Created $800 million of Market over a decade.

• National Medical concentrated on selling to surgeons.

Strategy Followed by the Company

• Aggressive 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.

Distribution

• Distribution through a Central Warehouse

• Primary Channels

Domestic Dealers

Primarily for domestic sales

Order and receive products from multiple

manufacturers

Independent and autonomous entities

International Affiliates

Wholly owned subsidiaries of Largo Healthcare

Product shipping throughout the country

International affiliates submit orders to

Meditech and Meditech fills them with available

product.

Part

Supplier

Meditech

Assembly

Company

Warehous

e

Domestic

DealersAffiliates

Hospitals

and

Surgeons

Internal Operations

Assembly

• Manually Intensive

• Components parts placed in Inventory after Quality

Assurance

• Run by a team of cross-trained production workers

• Typical cycle time – 2weeks

• Lead time – 2-16 weeks

Packaging

• Using several large packaging machines

• Enough capacity, has not restricted output

Sterilization

• Using a large cobalt radiation sterilizer

• Can sterilize as much product as will fit inside its four walls.

• Capacity limitations not a problem

Part

Inventory

Assembly

Bulk

Inventory

Packaging &

Sterilization

FG Inventory

2 to

16

wk

2 wk

1 wk

Production Scheduling and

PlanningBroken down into two parts

• Planning, based on monthly forecasts, of assembly and component parts

orders

• Daily scheduling of packaging and sterilization based on finished goods

inventory levels.

Forecast

• Annual 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

Planning

MRP System

• Monthly forecast

• Lead 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 operation

• Order point/order quantity (OP/OQ) basis.

Problems

• Problems 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

Q1. Problems in Introduction…

• Growing 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.

Driving Forces: Through Ishikawa Fishbone Diagram

Q3. Why is Customer Service Manager

the First to Know??

• Customer service deals with all the complaints and

feedback

• Prime motive is better and quick services

• Continuous strategy making in this direction

• They work with dealers and affiliates hence frequent

contact is there

• Also direct contact with hospital personnel

Steps in Fixing 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.

• CANNOT SURVIVE WITHOUT STATICTICS AND MIS

THANK YOU

Work Distribution

• Both of us did equal work