1. MBA OPERATIONS
Meditech Surgical Case
Group III
Ankur Verma
Arvinderpal Singh
Balvinder Singh
Bhavya Pabby
Bhupesh Singh
Bhupinder Kumar
Jasdeep Bedi
Ishwar Devgan

2. Introduction
Meditech is a leader in the endoscopic surgical instrument market. The company
manufactures and market low cost endoscopy surgical equipment to hospitals and
independent surgeons. The company’s distribution operation is arranged and managed from a
central storage warehouse that ships its products to domestic and international affiliates. The
organization have been experiencing a good customer service experience in the past,
however, lately customers have expressed concerns with the time products are being
delivered to them. Due to the nature of the industry, the delivery of surgical equipment on
time is extremely important. The on time delivery of products to its customers has become
the main problem for the firm. Currently, Meditech’s customers are waiting over six weeks
for products to be delivered to them. This current practice is not acceptable and must be
addressed by management immediately if Meditech wants to stay competitive and keep its
current market share.
Statement and Causes of the problem
Meditech’s main problem is that a bullwhip effect was produced due to organizational and
supply chain problems. The method used by Meditech to balance customer demands with
planned production is not effectively serving its purpose. The catalogue of products being
offered by Meditech continues to grow and replacing current items, making obsolete old
products that are in their catalogue and current customer orders. Poor customer demands
forecasting, long assembly lead times, and changing products are the main reason why
inventory levels are not enough to satisfy customer’s demands. While the assembly lines try

3. to keep with demand and company’s resources are getting exhausted trying to launch a new
product, the distributors then will increase their product demand, which causes a bottle neck
effect as it moves up the supply chain process. As the initial demand slows down there are
still backup of high demand of inventory being produced. This cycle would repeat again as
new products are being released to the market. Due to these problems, Meditech supply chain
and management has created a poor customer service.
Another problem of Meditech is communication. There is not enough communication
between main operations departments in the company; this is causing information to become
distorted as it makes its way through the supply chain line. The lack of communication and
information increases the firm’s lead to demand variation as orders or demand is being
process through the supply chain systems and departments. In consequence, distributors are
feeling the effect by long waiting periods of time, thus this also causes them to place larger
orders in an effort to help them compensate the waiting time. Panic ordering by distributors is
caused by lack of communication and in turn leads into the problem of the bullwhip effect.
Meditech’s current distribution system is inefficient and obviously is causing an inflated
demand of products. There is not enough information being shared among distributors and
Meditech’s operations. Each distributor receives orders from different regional warehouse,
which makes it hard to see the bullwhip effect. The organization’s forecasting system is also
confronting serious problems. The current organization’s forecast system is determined by
marketing and finance departments on an annual basis. The annual forecast is then broken
down into monthly and weekly forecasts and is frequently adjusted by Central Planners
according to market trends. Meditech has realized that leads to forecasting problems when
they try to introduce new products. The organization realizes that they are unable to
effectively predict demand for new products, which causes large demand fluctuations and
backorders.

4. Decision Criteria & Alternative solutions + Recommended Solution,
Implementation and Justification
Meditech can try few alternatives process to reduce demand variation and the possibility of
panic ordering. The company should improve how customer ordering is processed, they
should more effectively share demand information, and increase lead times on new products.
The forecast methods needs to be upgraded to reflect current needs, the company should also
introduce vendor managed inventory and an e-commerce web site to share information with
its customers. All of these functions should be centralized and shared among all of the supply
chain channels that are involved. With improvements in forecasting it would be much
cheaper and more efficient with the introduction of new products to stock finished goods
inventory based on projected forecasts. By pushing  products int
is anticipating the fluctuations in demands that may be caused with the introduction of a new
product. Meditech will now have products available exactly when the customer needs them,
and will no longer be forced into back order. A push strategy will also allow Meditech to be
more confident in their inventory policies and should allow them to lower their current
inventory policy to a level that is more economical and feasible.
Q1) Meditech’s problem in introducing new products. In manufacturing ALL products.
Meditech introduces 1 new product per month on an average. Most of the new products are
only upgrades of old products. This considerably reduces the life-cycle of the products.
Majority of Meditech customers are Material Managers whose primary focus is on cost and
delivery schedules but not on innovative product features. Though no major problems arise

5. from assembly line perspective, signs of cognitive dissonance may arise in customers. No
attempt is made by Meditech to understand the Demand Dynamics along the product life-
cycle. Qualitative factors that have been identified as critical success drivers for a new
product launch are time-to-market relative to competition or product diffusion. But Meditech
does not launch new products relative to competition and by constantly pushing new
innovations into the market it does not allow its products to diffuse effectively into the
market. Every new product launch requires a lead time of around 5-19 weeks (excluding
design phase lead time) which is very high. With every product launch, pushing the product
into the market becomes the primary consideration of the sales force thereby neglecting
customer service for older products. These constant launches have led to:
• Supply side shortages
• Delayed deliveries (6 weeks)
• Low customer service
• Low customer satisfaction
• Inaccurate forecasts
• High FG inventory levels
The product portfolio of Meditech comprises about 200 separate end-products and the
number is increasing. These wide ranges of products make Meditech rely heavily on suppliers
wherein the lead time is 2-16 weeks. So practising JIT, which would be very effective for
Meditech, becomes impossible in this case. Meditech organizational structure has a long
scalar chain. Information dissemination becomes difficult here if there are too many products
in the portfolio.

6. Q2) Cause of the problems, systematically and organizationally
ISHIKAWA FISH-BONE DIAGRAM WAS USED TO DISSECT THE CAUSE AND
EFFECT
Q3) Why is customer service manager the first person to recognize the major issues?
The scalar chain from Customer Service Manager to the Customer Service Representative is
only of two steps. The representatives work in direct contact with dealers and affiliates and
are often in direct contact with hospital personnel i.e. their consumers. A general rule of
thumb is “If you want the best feedback, ask your consumers”. This network would have
proved effective for feedback-information flow. Mr. Dan Franklin himself held many
meetings with hospital material managers. This brought forth the level of dissatisfaction
amongst his customers, Meditech’s poor service levels and improper delivery schedules.

7. Q4) How would you fix these problems?
The foremost thing we would do is implement an ERP System costing around $100,000. This
would help in better data storage & warehousing, analysis and forecasting. We would reduce
the frequency of new product launches. We would prefer a leaner product portfolio. We
would lay emphasis on better forecasts with a shorter horizon of 1-2 months. We would
maintain a safety stock so as to provide a service level of 95%. We would work to reduce the
assembly cycle time from the current level of 2 weeks. We would look for new and better
supplier relations to reduce the supplier lead time from the current level of 2-16 weeks.
References
1. (Bass 1969, Krishnan 2000)
2. (Porter 1985, Kailash and Lilien 1986)