Free American Hospital Supply Corp.: The ASAP System (A) Case Study Solution | Assignment Help

Gary F. Smith
Written by Gary F. Smith
Publish Date: 2024-11-03

Harvard Case - American Hospital Supply Corp.: The ASAP System (A)

"American Hospital Supply Corp.: The ASAP System (A)" Harvard business case study is written by Michael R. Vitale. It deals with the challenges in the field of Accounting. The case study is 16 page(s) long and it was first published on : Jul 10, 1985

This case study solution recommends that American Hospital Supply Corp. (AHSC) proceed with the implementation of the ASAP system, but with a focus on addressing key challenges and mitigating potential risks. By implementing the ASAP system, AHSC can streamline its operations, improve efficiency, and enhance customer service, ultimately driving profitability and market share growth.

2. Background

American Hospital Supply Corp. (AHSC) was a leading distributor of medical and surgical supplies to hospitals in the United States. In the early 1970s, AHSC faced a number of challenges, including:

  • Rising competition: The market was becoming increasingly competitive, with new entrants and existing players expanding their product offerings.
  • Increasing costs: The cost of labor, materials, and transportation was rising, putting pressure on AHSC's profit margins.
  • Inefficient operations: AHSC's existing order processing and inventory management systems were inefficient, leading to delays and errors.

To address these challenges, AHSC developed the ASAP system, a computerized order processing and inventory management system designed to automate and streamline its operations. The system was a significant investment for AHSC, and the company was facing pressure from its board and investors to demonstrate its value.

3. Analysis of the Case Study

The ASAP system presented a significant opportunity for AHSC to improve its operational efficiency and profitability. A comprehensive analysis of the case study reveals several key aspects:

Strategic Framework: AHSC's strategy was focused on growth and market share expansion. The ASAP system was a key component of this strategy, as it was expected to enable AHSC to:

  • Reduce costs: By automating order processing and inventory management, the ASAP system was expected to reduce labor costs, improve inventory turnover, and minimize waste.
  • Improve customer service: The system was designed to provide customers with faster and more accurate order fulfillment, enhancing customer satisfaction.
  • Gain a competitive advantage: The ASAP system was expected to give AHSC a competitive edge over rivals who were still relying on manual processes.

Financial Analysis: The ASAP system was a substantial investment for AHSC, requiring significant capital expenditure. However, the potential benefits were also significant, including:

  • Increased revenue: By improving customer service and reducing delivery times, the ASAP system was expected to increase sales.
  • Reduced costs: The system was expected to lead to significant cost savings through automation and improved efficiency.
  • Improved profitability: The combination of increased revenue and reduced costs was expected to drive significant improvements in profitability.

Operational Analysis: The ASAP system was designed to address several key operational challenges:

  • Order processing: The system was designed to automate the order processing workflow, reducing manual errors and delays.
  • Inventory management: The system was designed to optimize inventory levels, reducing stockouts and excess inventory.
  • Delivery: The system was designed to improve delivery efficiency and accuracy, reducing transportation costs and improving customer satisfaction.

Management Accounting: The ASAP system required a significant shift in AHSC's management accounting practices. The company needed to:

  • Develop new performance indicators: To track the performance of the ASAP system, AHSC needed to develop new performance indicators, such as order fulfillment time, inventory turnover, and customer satisfaction.
  • Implement activity-based costing: To accurately allocate costs to different products and services, AHSC needed to implement activity-based costing (ABC) to account for the costs associated with the ASAP system.
  • Develop new budgeting and forecasting techniques: To accurately budget and forecast the costs and benefits of the ASAP system, AHSC needed to develop new techniques that incorporated the system's impact on operations.

Risk Management: The implementation of the ASAP system also presented several risks, including:

  • Technical challenges: The system was complex, and there was a risk of technical problems during implementation and operation.
  • Resistance to change: Employees might resist the changes brought about by the ASAP system, leading to delays and disruptions.
  • Cost overruns: The project could experience cost overruns, exceeding the initial budget.

4. Recommendations

To maximize the benefits of the ASAP system and mitigate potential risks, AHSC should:

  1. Develop a comprehensive implementation plan: This plan should outline the project's scope, timelines, budget, and resources. It should also include detailed plans for training employees, managing change, and addressing potential technical challenges.
  2. Establish clear performance indicators: AHSC should develop clear performance indicators to track the system's impact on key metrics, such as order fulfillment time, inventory turnover, and customer satisfaction.
  3. Implement activity-based costing: To accurately allocate costs to products and services, AHSC should implement activity-based costing to account for the costs associated with the ASAP system.
  4. Develop a robust communication plan: AHSC should communicate the benefits of the ASAP system to employees, customers, and investors, addressing concerns and building support for the project.
  5. Establish a dedicated project team: AHSC should establish a dedicated project team with the expertise and authority to manage the implementation of the ASAP system.
  6. Conduct pilot testing: Before full-scale implementation, AHSC should conduct pilot testing of the system to identify and address potential issues.
  7. Monitor performance and adjust as needed: AHSC should continuously monitor the performance of the ASAP system and adjust its implementation plan as needed to address challenges and optimize its effectiveness.

5. Basis of Recommendations

These recommendations are based on the following considerations:

  • Core competencies and consistency with mission: The ASAP system aligns with AHSC's core competencies in distribution and logistics and supports its mission of providing high-quality products and services to its customers.
  • External customers and internal clients: The ASAP system is designed to improve customer service and efficiency, benefiting both external customers and internal clients.
  • Competitors: The ASAP system is expected to give AHSC a competitive advantage over rivals who are still relying on manual processes.
  • Attractiveness ' quantitative measures: The ASAP system is expected to generate significant financial benefits, including increased revenue, reduced costs, and improved profitability.
  • Assumptions: The recommendations are based on the assumption that AHSC has the necessary resources and commitment to successfully implement the ASAP system.

6. Conclusion

The ASAP system represents a significant opportunity for AHSC to improve its operational efficiency, customer service, and profitability. By carefully planning and managing the implementation process, AHSC can maximize the benefits of the system and achieve its strategic goals.

7. Discussion

Alternative Options:

  • Delaying implementation: AHSC could delay the implementation of the ASAP system, but this would risk falling behind competitors and losing market share.
  • Outsourcing order processing: AHSC could outsource its order processing to a third-party provider, but this would potentially increase costs and reduce control over operations.

Risks and Key Assumptions:

  • Technical challenges: The ASAP system is complex, and there is a risk of technical problems during implementation and operation.
  • Resistance to change: Employees might resist the changes brought about by the ASAP system, leading to delays and disruptions.
  • Cost overruns: The project could experience cost overruns, exceeding the initial budget.
  • Assumption of successful implementation: The recommendations are based on the assumption that AHSC has the necessary resources and commitment to successfully implement the ASAP system.

8. Next Steps

  • Develop a comprehensive implementation plan: AHSC should develop a detailed implementation plan within the next 3 months.
  • Establish a dedicated project team: AHSC should assemble a dedicated project team within the next month.
  • Conduct pilot testing: AHSC should conduct pilot testing of the ASAP system within the next 6 months.
  • Monitor performance and adjust as needed: AHSC should establish a system for monitoring the performance of the ASAP system and making adjustments as needed.

By following these recommendations, AHSC can successfully implement the ASAP system and achieve its strategic goals of growth, profitability, and market share expansion.

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Case Description

American Hospital Supply, the largest firm in the U.S. hospital supply industry, has achieved success in part through the use of information systems. Changes in the hospital marketplace suggest a shift in strategy would be appropriate. What role should information systems play in future strategies?

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