The Meditech's problems

(Q1) What are Meditech’s problems in introducing new products? In manufacturing all products?

§ Whenever a new product is introduced by meditech, the customers seem to get frustrated because of the service problems faced by them. This phenomenon seems to occur every time the company introduces a new product. This has really frustrated the customers. There is a continuous shortage of supply when a new product is introduced, for reasons unknown. Forecasting in the organisation has always been a problem. No data related to forecasting was kept in the organisation which evened worsened the case. Moreover high levels of finished products were also continuously posing a problem. The inventory levels by higher than 40% which was a heart breaking figure. When comparing the actual service levels with the inventory levels there was a wide gap between the two. Moreover it was difficult for the management to reduce the levels too much as they feared that the performance of the company may go down even more. Panic ordering from dealers and other buyers also posed to be a big problem for the company. Panic ordering causes unrealistic increase in demand of a product. It was found out that due to the nature of the work it was very difficult to forecast the correct level of demands, moreover there was no way that panic ordering could be controlled because there was nothing people at meditech could do about the actions and inactions of their buyers.

(Q2) What is driving these problems, both systematically and organisationally?

§ Issues like incapability of the management to forecast the sales and other requirements was one of the major issues which were leading to this problem. Behaviour of buyers was also one of the reasons for these problems. Unpredictable nature of demand of product was aggravating this problem. Moreover the management was not being able to decide on a fixed finished goods inventory level. There was always fluctuation in the finished goods inventory level. Analysts found out that finished goods inventory level was up to 40% higher than needed. The company has not kept any records for proper forecasting which has created more problems. Unsure demands by the buyers are also a problem. Many times company is faced by the problem of false demands.

(Q3) Why is the customer service manager the first person to recognise the major issues?

§ The customer service manager is the person who is the actual in charge of all the sales that takes place in the company. He is the one who is in direct contact with both the customers and the production department. He is responsible for attending to the problems and grievances of the customers. If a many customers revert back to him with similar problems he knows that there is something wrong in the new product issued. It is his job to help out the customers with their problems and at the same time he also needs to get to the core of the problem. Once he knows why the problem is being caused he conveys the information to the production departments and also chalks out a possible solution for the problem. With his experience of selling the product he is also responsible for helping out the various analysts in properly forecasting the required production and finished goods inventory levels. High inventory levels unnecessarily increase the working capital demands of the company and add up more pressure on them.

(Q4) How would you fix these problems?

§ First of all the company needs to improve its forecasting methods. Proper forecasting shall sort out half the problems of the company. A simple statistical method of linear regression based on past forecasting data will help the company in doing so. Moreover the company needs to carefully follow its own demand and supply trends. Whenever the company is introducing a new product for the first few weeks the demand of the product is becoming excessively high. But at the same time as soon as the first few weeks are through the demand is suddenly stabilising. Moreover the general demand of the products of the company is much low than the actual supply. The company needs to lower down its excessive production, but this should happen keeping in mind the fact that the company should be capable enough of meeting the high initial demand of a new product. The company should also realise that due to panic ordering most of the times false demand is created which increases the pressure on the company. The company should develop ways of assessing these false demand situations. Moreover the company also needs to reduce its finished goods inventory levels; this will reduce the pressure on the company and will also reduce the working capital needs of the company.