Inventory Models 1. What are Meditech’s problems in introducing new products? In manufacturing ALL products?
Meditech was in the situation of new product introductions resulting in excess demand and shortage of supply problem. There were constant shortages with new product introductions. Dealers and affiliates started increasing order size or “panic ordering” hoping to have better chance at receiving some of the order. The increased demand depletes inventory and causes back orders. In response, production is forced to increase output to meet demand and replenish inventory. Once an acceptable level of inventory is reached production finally decreases output and variations finally start to minimize.
In terms of manufacturing all products, Meditech was responsible for producing over 200 end products which only compounds their difficulty to manage inventory. The panic ordering taking place was raising demand and placing a strain on inventory and delivery timelines.
Meditech has introduced dozens of new products by concentrating on innovation, product cost, and strategy. Meditech continued to make products obsolete by constantly innovating and updating older products. However, because of the forecast problem, Meditech consistently had to “play catch up” caused by the shortage of each new product introduction. They needed to manage inventory better because of too many high levels of finished goods inventory, which added to the poor service level problem and the increased demand caused back orders. Therefore, Meditech needs to outsource low margin products, obsolete non-value products, and increase process capability. 2. What is driving these problems, both systematically and organizationally?
The article stated “regional dealer warehouses act as independent entities, autonomously determining when to order new supplies and how much to order.” The