Meditech’s Production Problems and Their Drivers

It was determined that while the demand for the new products increased dramatically in the market, just after their launch, it tended to steady out in the succeeding weeks, coming down to levels where the company could easily satisfy all the orders coming in for the new products. This helped in revealing that speculative behavior was occurring in the market on the part of the warehousing businesses. The clients of the Meditech Company tended to stock up on the new products and place orders for high volume and amount of the products in order to ascertain that the company would fulfill part of the orders in case the delivery time was delayed, or the demand in the market suddenly increased for the products. This was a proactive measure on the part of the warehousing and inventory-based businesses, but it had repercussions on the image and the reputation of the Meditech Company as it was unable to fulfill the suddenly large orders being placed by the clients of the company.

The main cause of the stock-outs for the new products was the improper demand forecasting, not researching and observing the behavior of the warehousing and inventory-based businesses in terms of the size of their orders, as well as the lack of coordination and supply china management system between the company and its distribution network both in America as well as in the international market.

The problem pertaining to the poor service level of the company was also investigated upon and the research provided that the poor service level of the company was directly due to the stock-outs being faced by the company for new products the dealers and the affiliates of the company tended to panic order the new products striving to stock up on the new products to protect themselves against any increase of demand for the products in the market. This caused the stock-outs at Meditech, creating doubt in the capacity planning and production level of the company. This also affected the service level of the company in an adverse manner, as the company was unable to fulfill the contracts in time, creating a reputation and image problem for the company in the market. The dealers had their own systems for managing demand and supply and placing orders, while the Meditech Company had a separate system for its supply side of the business which forecasted the demand of the product in the market based on past trends. The decentralization in the market, as a result, caused a rift in the systems of the dealers and affiliates as well as that of Meditech, resulting in discrepancies in demand and supply schedules. This directly caused reputation and brand-based problems for the company through the reflection of poor service level, delivery time, and standards of operation of the supply function.

The third problem that was identified for the company was that pertaining to the high level of finished goods being held at the company for products that were not in the production stage. Through the analysis of the supply and demand statistics as well as the order placement by the dealers and affiliates, it was determined that the problem of the high level of inventories of finished goods for already established products was occurring largely due to the change in the demand of the products and the orders being placed by the dealers and affiliates of Meditech.

The dealers and the affiliates used to stop their ‘panic’ based buying of products once they were established in the market and moved out f the introduction phase. This was because the dealers and the affiliates themselves had an excess inventory of products left over from the product introduction stage due to their panic and speculative buying. However, the Meditech Company tended to increase the production capacity of the products in order to meet the demand of the new products in the product introduction phase. However, this tended to add to the problem of inventory build-up as the orders increased, but the production rate and operating capacity of production of new products remained high over the period of time. From the systems point of view, this problem occurred to the lack of an integrated and networked system for supply management between the dealers and the affiliates and the Meditech Company.

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