1) The most evident systemic issue being faced by Megadrug is that its supply chain is not demand driven.
2) Secondly the production process of the organization is not tightly integrated with the marketplace.
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3) Thirdly the set up time required for changing the product at the production line is long.
As a result of the aforementioned problems in supply chain the company is facing what is known as the “Bullwhip effect (QuickMBA.com, 2007).”
One of the important possible solutions to avoid this kind of a problem both at the market place – the loss of credibility issue and piling of stocks at the intermediate points in the supply chain is to have an effective cross-organizational information management system. The objective of this system is to simply capture the demand that is arising at the retail points, consolidate it, and serve as a trigger or a stimulus to the production process or in the least create a series of alerts that should possibly go right up to the top-management within the organization (Excellence in Warehouse Management).
Some of the key considerations for such a system to be effective are the trust various organizations involved in the supply chain have in the stimuli that get generated and their willingness to respond or react to such stimuli. Another important aspect that is evident in the case study is that the marketing and the production functions within the same organization lack certain amount of credible coordination. If such coordination were to exist, the marketing function would have alerted the production team about their “Poison medicine” educational campaign as a result of which the production team would have been prepared for a sudden surge in demand of this product.
Thus the key learning in this case study is:
1) Requirement of tight integration between the market place and the production function – demand driven production planning
2) Create a system of integration and trust in all the stake holders of the supply chain
3) Coordination between the functions within the organization to ensure brand credibility in the tough market outside of the organization.
Excellence in Warehouse Management.
QuickMBA.com. (2007). The BullWhip Effect. Retrieved January 19, 2009, from QuickMBA.com: http://www.quickmba.com/ops/bullwhip-effect/
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