Case Study Analysis: JIT Implementation Initiative At Global Drug And Tech Company

This case is about Global Drug and Tech Company (GDTC) which is located in Denver and has its production facility located outside of Denver. It discusses about how Production manager Martha Higgins reacted to JIT implementation initiative within GDTC.

Value Discipline

While going through the case I realized that GDTC was very specific about its one strategic priority. This value was unique and was placed to derive good marketplace and good place amongst the customers. Generally, it is seen that if a company s much more into operational excellence they are less in product development and innovation but in this case, we can see that GTDC was planning to form a global unit by acquisition of new generations drug. I sensed an urged in the product development. GDTC has plans to acquire number of herbal and traditional medicines in countries like Brazil, China and Ghana. Thus, I see that the most valued discipline adopted by GDTC is Product Leadership.

The corporate disciplines GDTC includes:

• Teamwork
• Product management
• Marketing
• Quality Production.

GDTC’s Customer Value Proposition:

Product: GDTC manufactured and marketed four groups of nonprescription drugs. They held a 20 percent share of Western U. S. adult nonprescription analgesic markets and a 50 percent share of the pediatric nonprescription analgesic markets.

Service: With the use of Push Strategy GDTC's products are offered with discounts to retailers for volume purchases and in turn, the retailers, now having large quantities in inventory pushed the product to the end-customer. Immediate supply of drug was also offered from one of its distribution centers.

Profit Model

After reviewing the case the most suitable profit model in GDTC’s case seems to be “Price based on product costs plus margin model”. This is a more traditional product pricing model. In this model the price is set at 5-10 times the product cost to cover various expenses. This seems to be the profit model which GDTC uses because it not only produces large quantities but also has total unit sales of about 800% million (single dose annually). Which means they are able to sell their products while maintaining profits. They are able to do this by producing large quantities and selling products by offering huge discounts or incentives to the retailers and yet they are able to maintain huge percentage of shares in the nonprescription analgesic markets.

Significant value-adding intermediary role using JIT:

Improving their information systems will hep them collect large amount of data about their customers and suppliers hence giving them a better idea of how they could target and improve their sales to maintain their product leadership. 2)Drug manufactures have not integrated JIT manufacturing regardless of its possible advantages. Other than this most of the medicinal companies are not ready to accept if this implementation would really help or benefit the medicinal companies. JIT works on a simple principle which promotes superiority in supply chain by reducing inventory. Medicinal companies would be much more interested in research and development rather than inventory management.

On the other hand, generic drug making companies will be more beneficial by implementing JIT as they are more likely to drive manufacturing innovation to reduce cost as they have very thin profit margin.

How would JIT benefit operational Flow

Companies adopting JIT would need to build closer relations with suppliers and customers. Ideally, goods would be produced only in time to meet the customer's needs. Similarly, supplies would arrive when necessary. If the plant had to produce the same range of products in the future hence this would minimize inventory yet retaining the same response time to customer demands. Two important goals in managing operations is reducing cost and improving quality. JIT is always referred to manufacturing operations, but I believe it can be applied be to both manufacturing and non-manufacturing industry as both create end product and services.

The basic operational flow followed by GDTC is as follows:

Logistics: Being aware of the demands through customers and the retailers company decides to produce doses. Production:Below is the general process involved in manufacturing a drug or transforming it from raw material to final product. Granulation process helps in compressing the material in one single compressed tablet. The final step in the production process involved packaging, which was fully automated except for loading packaging materials and pharmaceuticals into hoppers on the packaging equipment.

Marketing: Use of Push strategy - offering discounts on products when purchased in bulk. Sales: Total unit sales were about 800 million single doses annually which included 20% and 50% share of adult nonprescription analgesic markets and pediatric nonprescription analgesic markets respectively. The major problem as discussed in the conclusion was after sales GDTC was unable to track the customer behavior and so they were unable to create or produce drugs. Once the drugs were sold to the retailers they were not able to track customer feedback or customer demand. This was creating a problem in analyzing the market affecting the production. GDTC's solid dose pharmaceuticals - For this process the Formulation was currently labor intensive and not automated.

Formulation the batch of dry chemicals - It was mechanically mixed to combine the ingredients into small granules. The final step in the production process involved packaging, which was fully automated except for loading packaging materials and pharmaceuticals into hoppers on the packaging equipment. With the help of digitization i. e. with the help of computers materials were tightly controlled. Each production lot was tracked using the company's computer, and the production controllers were able to quickly check the status of each lot. Information on location in the plant, status (that is, in-process, in quality hold, or available for processing) and yield allowed the controllers to reschedule operations at any work center almost as soon as production problems were identified. Customers would be companies needing medicines from different countries across the globe. Providers would comprise of retailers who would act like suppliers and provide these drugs out to the customer.

GDTC had failed over the last decade to invest satisfactorily in the information technology that supported its logistics, industrial, book-keeping, promotional and sales activities. Major issue faced by GDTC was they had no common database no data integration services enabled making it difficult for them to recognize the business procedures across the enterprise. Their situation worsened because these applications and their data were often operated from diverse technology platforms, making it difficult to integrate across applications or with providers and clients. While these current information systems worked fine and ‘got the job done, most were quite patched up and linked together hence became a single point of failure. After reviewing these issues faced by GDTC I feel with limited budget GDTC should go for “Rationalized Data IT architecture stage”.

Rationalized data

In this stage of architecture companies implement EPR systems across the business process so that they can tightly link systems, process and all departments in a company. GDTC has a major problem connecting with all the systems and departments which is making it difficult for them to understand the business processes. For process optimization and process extension, process linking and data integrating ERP solution is much needed. Simple formation of Data Rationalization can be visually demonstrated as: Keeping in mind current and future plans as described in the case Data Rationalization (By Implementation ERP system) is the best IT investment with limited budget.

Data Rationalization (ERP implementation) will help in following ways:

Efficiency: This will help GDTC in minimizing repetitive work and which will help to streamline the business process. It will help to monitor all business data from anywhere. All department data can be viewed in one single repository.

Integrated Information: Logistics, industrial, book-keeping, promotional and sales activities data can be accessed at one location. This will help in data consistency and accuracy. This will help in monitoring orders, knowing customers, monitoring inventory etc.

Cost Saving: With help of centralized data and one tool across the enterprise will help is cost saving over different products used in different departments. One single platform will help in scrutinizing real time statistics.

Streamlined processes: As GDTC will grow their operations and responsibilities will grow. With help of such system all the processes will be streamlined by programming business procedures across all the departments.

Productivity: It will help in saving time and increase productivity levels.

Customer Service: With rationalized solutions it will provide easier and effective customer service.

Why other IT architecture stages are not suitable:

Application silo: This architecture comes into picture when a company plans to maximize business units or functional needs. In addition to this it involves higher cost of ownership, higher cost during development, Higher cost for production support, Higher cost for maintenance and enhancing applications.

Standardized technology: This architecture comes into picture when company seeks to enable IT inefficiencies through shared services. This will not satisfy any issues faced by GDTC. For standardizing technology, one should have the base platform in place but problem with GDTC is incorporation of data. Without data in place and all the systems integrated standardization of technology won’t make any sense.

Modular: GDTC is not is seeking for global flexibility or none for their plans indicated they are in need of global flexibility with loosely coupled IT enabled process components. Thus, Data Rationalization (ERP implementation) is the suitable architecture keeping in mind current and future strategies and budget limitations.

Conflicts and challenges faced by Martha Higgins in the adoption of JIT

Building closer relationship with suppliers and customers:

Challenges:

• Since goods will have to be produced in time to meet all the customer needs and demands to maintain a good flow of demand and supply it is very important to derive new strategies to maintain closed relationship with suppliers and customers.
• To do that the company will have to adopt new strategies such as implementing CRM solutions which could be time consuming and expensive.

Solutions:

• They could derive ways like collecting survey data with information about their suppliers and customers through various surveys sent out. This would help them to better understand their Suppliers and customers.
• Sponsoring various events to build relationships would also help in setting up a good rapport.
• Offering discounts and other incentives while selling products will add in building a good relationship with customer and suppliers.

Minimizing inventory while retaining same response time to customer demands:

Challenges:

• According to Martha she knew that lowering of inventory levels would progressively expose more problems.
• She wasn’t sure what new problems they would come across. Also, reducing the level of inventory would expose production and process problems as well.

Solutions:

• With the survey’s collected GDTC would be in a position to analyze the market better and will help them to monitor demand and keep and store their inventory accordingly.

Time required to complete setups:

Challenges:

• If the costly downtime had to be controlled setup times will have to be reduced.
• To install installments longer setup times are must because they would need more fine tuning and adjustments to make sure the equipment runs effectively.
• If smaller lot sizes were to prove economical the change over times will have to be reduced as per the production manager.
• They would also need to hire setup crews to complete the setup. Everything would be time consuming if a new setup is required.

Solutions:

• Analyzing if the setup is actually required and then hiring required man power accordingly. Man power would involve more costing but once the setup is completed company would be able to retrieve the cost involved with extra man power hired.

Automation of Equipment’s and Reduction of labor force:

Challenges:

• Replacing current technology with automated one will bear highest cost. If they had to buy technology to generate and read bar codes (which was not very expensive) the data, the capture could be sent to a central database.
• This would mean it would be possible to reduce the flow of paper work and also the number of employees. But the labor cost was only a small percentage of the total cost hence, reduction of labor would prove to be very insignificant in reducing the total cost.

Solutions:

• No process in manufacturing is 100% automated and thus automation would require few labors to work on. Company can use this man power in some other jobs where processes cannot be automated.

Labor and Material variance reports:

Challenges

• Since, the labor and material variance reports were recorded using a software that was developed inhouse if JIT was implemented these reports might not be necessary.
• So, finding a way to find the bottlenecks in the production process would be something that needed to be worked on they would also have t come up with a new way of recording the government health and inspection audits which are sensitive in nature. If they decide to stop using the inhouse software for building labor and material variance reports.

Solutions

• With implementation of Data Rationalization (ERP implementation) with lower budgets generating reports would be possible from single repository with accurate data.

Higher cost of technology Investments:

Challenges:

• When Martha entered the floor for inspection she roughly jotted down new technology implementations and processes which would roughly cost around 2. 5$ million for 3-year strategic plan. With this she would renew GDTC Information systems and manufacturing technologies. This overall change would involve relative costs and implementation time frames associated with it.

Solutions:

• Keeping in mind current and future plans as described in the case Data Rationalization (By Implementation ERP system) is the best IT investment with limited budget.

According to the case the total amount that had to be invested in a three-year strategic plan for technology investment is 2. 5 million. Implementing an ERP system would give them an access to an enterprise database which includes customer and supplier database. Hence helping them improve the relationship between customers and suppliers and to keep a close watch on trend through analytics. It would give them an idea to create an inhouse planning scheduling an executing system.