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Improving logistic interactions between Technomed Europe and Technomed Asia : shifting responsibilities

Wijma, Karin Ellen (2009) Improving logistic interactions between Technomed Europe and Technomed Asia : shifting responsibilities.

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Abstract:This report contains a research for a graduation project carried out on behalf of Technomed Europe and Technomed Asia. Together the companies develop, produce, market and sell medical accessories. Problems arising after the transfer of production activities from Technomed Europe to Technomed Asia, in a faster pace than planned, formed the main motive for the research. The research focuses on the logistic interactions between Technomed Europe and Technomed Asia, which are rapidly becoming more and more complex. The main research question is stated below: “How to improve the logistic interactions between Technomed Europe and Technomed Asia” A supply chain framework from literature was used as a guide for identifying and describing ongoing processes in and between Technomed Europe and Technomed Asia. The first phase of the research was to map the logistic processes; information about them was not readily available at Technomed and had to be gathered by the researcher from interviews. Important results from the first phase were the material flow charts for all products assembled at Technomed Asia (relevant products), a description of the information structure at both companies, and a description of the control structure of the supply chain. Within the current, logistical structures, performance measurement is done mainly on an intuitive level. These intuitive measures are not systematically translated into measurable indicators. Key performance Indicators (KPIs) were distinguished by holding Technomed’s intuitive measures and problems against a theoretical framework of KPIs. Among others, important measures of performance are order lead time, forecasting accuracy, Technomed delivery reliability, and stock levels. Current performance is poor; total cycle time can take up to 29 weeks, the CODP is located at 10 weeks before the order, forecasting can be off by 50%, stock takes up 34% of Technomed’s yearly turnover, and 46% of Technomed’s products is delivered late. Research on the causes of poor performance was widely oriented. During the research the lack of shared vision at Technomed Europe and Technomed Asia was striking. Both companies do not work from a common interest or for each other’s interest. They could not do that if they wanted to, because common interests are not known. Communication between the two companies is very poor, which sabotages the positive development of the relation between Technomed Europe and Technomed Asia. Problems mainly correspond with poor performance, and causes are located in many areas. Furthermore, problem areas are strongly interrelated; together they form a complex problem cluster. Referring to the main research question, we find that the focus of the research is on logistic interactions. Prominent logistic problems were: late and unstructured deliveries and requests from Technomed Europe to Technomed Asia, long lead times, obsolete inventory, high stock levels, a high amount of backorders, and a lack of information availability. iii Due to the strong interconnectedness of the problem cluster, solving these problems will automatically affect other problem areas in a positive way. Options for logistical improvement were found from literature and from analyzing all individual steps in the supply chain. Alternative designs were presented, and after close considerations the researcher and Technomed management decided it was best to proceed with the following scenario: · Keeping raw material stock at Technomed Asia · Keeping strategic inventory at Technomed Asia · Installing an information management system at Technomed Asia · Giving Technomed Asia the freedom to make autonomous decision. The main purposes of keeping raw material stock at Technomed Asia are: to create a less hectic schedule at Technomed Asia, to reduce the number of problems with customs and tax. Technomed sells products that, for some customers, are packed in customer specific pouches and boxes. Keeping strategic inventory in Asia, means that a generic product will be kept in stock, and that this product will be pouched and packed after an order has come in. This should decrease total end-product stock levels and the number of stock-outs, by making use of the risk pooling effect. Also it should provide shorter customer order lead times. Free decision making at Technomed Asia should reduce the complexity of managing both raw material stock and strategic inventory and it should also reduce the need for communication, and delays due to the time zone difference. The information system is suggested as a support for all activities mentioned above. Calculations on the effect of risk pooling on DSNE stocks show minimal stock reductions of 19.3%, and maximum stock reduction of 56.8%. The CODP will be located further down the chain, from 10 to 5 weeks before the incoming order. In these 5 weeks strategic inventory will be picked and packed to order, shipped to Technomed Europe, be sterilized, and be checked for quality. iv Products that could reap benefits from keeping strategic inventory are DSNE, DHNE, DMNE and DCNE. The size of the benefits depends on the type of contracts that Technomed makes with customers in the future. Implementation of these changes should be done with great care and not all at once. The information system is a prerequisite for holding and managing stock at Technomed Asia. This information system should be able to communicate with Technomed Europe’s information system and it should be validated in order to open the road to growth of responsibilities for Technomed Asia. Technomed Europe should be the main actor in implementing and controlling the proposed changes. If implementation is done in close cooperation and in multiple, monitored steps, in the researcher’s opinion, the possibilities for success and future development will be great.
Item Type:Essay (Master)
Clients:
Technomed Europe
Technomed Asia
Faculty:BMS: Behavioural, Management and Social Sciences
Subject:85 business administration, organizational science
Programme:Industrial Engineering and Management MSc (60029)
Link to this item:http://purl.utwente.nl/essays/60435
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