operations are considered one operation because bulk instruments flow through packaging, into the sterilizer, and into finished without being inventoried. (See Figure 1-7 for a diagram of the entire production process.) The entire packaging/sterilization process can be completed for a batch of instruments in about one week. The scheduling of packaging/sterilization is done on an point/order quantity (OP/OQ) basis. [I.e., when finished goods inventory drops below the predetermined point (OP), a replenishment order for more packaged/sterilized product is initiated. The size of the order in terms of number of instruments is always equal to the predetermined order quantity (OQ).] Another way to view the scheduling process is to think of material as being through “pushed” assembly into bulk instrument inventory and as being through packaging/sterilization “pulled” into finished goods inventory. The push through 22 DESIGNING AND MANAGING THE SUPPLY assembly is based on the monthly forecast determined before the month’s demand actually arrives. The pull through packaging/sterilization simply replenishes what was sold from finished goods the day before. NEW PRODUCT INTRODUCTIONS, HIGH LEVELS OF INVENTORY, AND POOR SERVICE LEVEL Over the past several years, Meditech has introduced dozens of new products into the market, mostly by updating existing products. Meditech to continue this strategy of continuously obsoleting its own products by constantly introducing innovations. While the innovative products have been well accepted by the marketplace, each new product introduction has resulted in a nightmare of supply problems. Dan Franklin felt that customers were beginning to tire of the poor service resulting from each introduction. Through many meetings with hospital material managers, Dan began to realize the full scope of his customers’ frustrations. Franklin not figure out why Meditech consistently had shortages with each introduction. Forecasting had definitely been a problem, but determining its extent was difficult. Data to measure forecast accuracy had not previously been tracked, nor had forecasts and demand information been kept. Data gathering requires a lengthy process of going back through hard copies of prior monthly plans and entering the information by hand into a
operations are considered one operation because bulk instruments flow through packaging, into the sterilizer, and into finished without being inventoried. (See Figure 1-7 for a diagram of the entire production process.) The entire packaging/sterilization process can be completed for a batch of instruments in about one week. The scheduling of packaging/sterilization is done on an point/order quantity (OP/OQ) basis. [I.e., when finished goods inventory drops below the predetermined point (OP), a replenishment order for more packaged/sterilized product is initiated. The size of the order in terms of number of instruments is always equal to the predetermined order quantity (OQ).] Another way to view the scheduling process is to think of material as being “pushed” through assembly into bulk instrument inventory and as being “pulled” through packaging/sterilization into finished goods inventory. The push through 22 DESIGNING AND MANAGING THE SUPPLY assembly is based on the monthly forecast determined before the month’s demand actually arrives. The pull through packaging/sterilization simply replenishes what was sold from finished goods the day before. NEW PRODUCT INTRODUCTIONS, HIGH LEVELS OF INVENTORY, AND POOR SERVICE LEVEL Over the past several years, Meditech has introduced dozens of new products into the market, mostly by updating existing products. Meditech to continue this strategy of continuously obsoleting its own products by constantly introducing innovations. While the innovative products have been well accepted by the marketplace, each new product introduction has resulted in a nightmare of supply problems. Dan Franklin felt that customers were beginning to tire of the poor service resulting from each introduction. Through many meetings with hospital material managers, Dan began to realize the full scope of his customers’ frustrations. Franklin not figure out why Meditech consistently had shortages with each introduction. Forecasting had definitely been a problem, but determining its extent was difficult. Data to measure forecast accuracy had not previously been tracked, nor had forecasts and demand information been kept. Data gathering requires a lengthy process of going back through hard copies of prior monthly plans and entering the information by hand into a
CHAPTER_1_Introduction_to_Supply_Chain_M.docx