The Meditech company is a major player in the technology and medical product industry which provides hospitals and medical institutes with supplies, materials as well as technology for surgical procedures, and tools for aiding preparing of patients for surgery as well as helping them recover from operative procedures. The company is relatively new to the industry with only six years of experience in operating in the market as an independent entity. The company has been fighting a product launch battle, facing stiff competition from National Medical. However, the company has only been able to ascertain a major share of the market due to its strategy of targeting the market. While National Medical was targeting the surgeons, the Meditech Company targeted the materials procurement executives at hospitals and health care facilities. The crunch on the costs of medical procedures provided the company with the advantage of attaining a dominant position in the market.
As a result, the company typically launches about a dozen new products every year. However, the company has also been facing massive problems pertaining to new product introduction to the market. The products are well received in the market by the customers, but the introduction problems which are faced by the company are mostly to do with the supply management on the distribution side of the business. Each of the products introduced by the company in the market faced high demand, which resulted in shortages of the product at the supply end of the company, creating a need in the market which was not being filled. This was incremental to the bad reputation of the company in the hospital and healthcare-based industry, where technological products are required frequently and often in emergencies.
The main reasons that were there behind the problems of product introduction being faced by the Meditech Company included the incorrect and insufficient forecasting of demand of the products from the supply management function through the systems being used. This created a gap where the unsatisfied level of demand exists, causing shortages of the product at the end of Meditech when supplying as per the orders of the warehousing businesses, wholesalers, and retailers.
The other problems that were being faced by the company pertained to the high levels of the finished goods inventory at Meditech. After the introduction phase, as the business process and the manufacturing unit was assessed, it was found out in almost the case of every product that the company had more inventory than that it could handle and safely store. This high level of inventory tended to increase the inventory management costs and storing facility costs for the company, adding up the costs of manufacturing and providing the goods to the clients of the company. The high inventory costs and the decreasing capacity of storage at the company helped squeeze the margins of the Meditech company. This resulted in an incremental decrease in the profitability of the company in terms of the revenue earned by Meditech on the sale of its products.
The third main problem that was being faced by the company pertained to the poor service levels of the company, which were directly related to the constant stock-outs of the new products. This decreased the reputation of the company and harmed its image as a company that could not fulfill and keeps its promises and commitments in the forms of the orders placed by its clients.