Harvard Case - Stock-up vs Stock-out: The Inventory Management Dilemma at a Mobile Clinic
"Stock-up vs Stock-out: The Inventory Management Dilemma at a Mobile Clinic" Harvard business case study is written by Alan W. Zeller, Kwan Eng Wee, Sin Mei Cheah. It deals with the challenges in the field of Operations Management. The case study is 9 page(s) long and it was first published on : Jan 10, 2022
At Fern Fort University, we recommend a multifaceted approach to address the inventory management dilemma at Mobile Clinic. This involves implementing a combination of lean manufacturing principles, demand forecasting techniques, and technology-driven solutions to optimize inventory levels, minimize stock-outs, and ensure efficient service delivery.
2. Background
Mobile Clinic is a non-profit organization dedicated to providing healthcare services to underserved communities. They operate a fleet of mobile clinics equipped with essential medical supplies and equipment. The case study highlights the challenge of managing inventory effectively, balancing the need to avoid stock-outs with the desire to minimize waste and unnecessary expenses.
The main protagonists are the organization's leadership, including the CEO, who is grappling with the financial implications of inventory management, and the operations manager, responsible for ensuring smooth clinic operations and effective resource allocation.
3. Analysis of the Case Study
This case study presents a classic example of the inventory management dilemma faced by many organizations. Mobile Clinic's situation can be analyzed using the following frameworks:
Operations Strategy: Mobile Clinic's operations strategy is focused on providing essential healthcare services to underserved communities. This mission necessitates a reliable supply chain that ensures timely access to critical medical supplies. However, the organization's limited resources and the unpredictable nature of patient demand create a complex operational environment.
Supply Chain Management: The case study highlights the importance of a robust supply chain for Mobile Clinic's success. The organization's supply chain involves sourcing, storage, and distribution of medical supplies. Challenges include managing inventory levels, ensuring timely delivery, and maintaining product quality.
Inventory Management: Mobile Clinic's inventory management approach is characterized by a lack of data-driven decision making. The organization relies heavily on intuition and historical trends, leading to inconsistencies in stock levels and potential stock-outs. This situation underscores the need for a more sophisticated inventory management system.
Demand Forecasting: The case study emphasizes the difficulty of accurately forecasting patient demand. This unpredictability makes it challenging to determine the optimal inventory levels for each mobile clinic. To improve forecasting accuracy, Mobile Clinic needs to leverage historical data, seasonal trends, and potential future events.
Technology and Analytics: The case study highlights the potential of technology to enhance Mobile Clinic's inventory management practices. Implementing an Enterprise Resource Planning (ERP) system could streamline operations, improve data visibility, and facilitate data-driven decision making.
4. Recommendations
To address Mobile Clinic's inventory management challenges, we recommend the following:
1. Implement a Lean Manufacturing Approach:
- Value Stream Mapping: Identify and eliminate non-value-adding activities in the supply chain.
- Just-in-Time (JIT) Production: Order supplies closer to the time of need to minimize holding costs and reduce waste.
- Kanban System: Implement a visual system to track inventory levels and trigger replenishment orders.
- Continuous Improvement: Foster a culture of continuous improvement through Kaizen events and regular process analysis.
2. Enhance Demand Forecasting:
- Historical Data Analysis: Analyze historical patient data to identify patterns and trends.
- Seasonal Adjustments: Factor in seasonal variations in patient demand.
- Event-Based Forecasting: Consider potential events that could impact patient demand, such as public health emergencies or seasonal outbreaks.
- Statistical Forecasting Models: Utilize statistical forecasting models to generate more accurate demand predictions.
3. Leverage Technology and Analytics:
- Enterprise Resource Planning (ERP): Implement an ERP system to manage inventory levels, track orders, and provide real-time visibility into supply chain operations.
- Inventory Management Software: Utilize specialized inventory management software to optimize stock levels, automate ordering processes, and generate reports.
- Data Analytics: Use data analytics to identify trends, optimize inventory levels, and improve forecasting accuracy.
4. Optimize Logistics and Distribution:
- Centralized Inventory Management: Establish a central warehouse to manage inventory and ensure efficient distribution.
- Route Optimization: Develop optimized delivery routes to minimize travel time and fuel consumption.
- Efficient Delivery Systems: Explore alternative delivery methods, such as mobile clinics equipped with on-board inventory management systems.
5. Foster Collaboration and Communication:
- Cross-Functional Teams: Establish cross-functional teams to improve communication and coordination between operations, procurement, and finance departments.
- Regular Reporting: Implement regular reporting mechanisms to track inventory levels, stock-outs, and other key performance indicators.
- Open Communication Channels: Encourage open communication channels to facilitate information sharing and problem-solving.
5. Basis of Recommendations
These recommendations are grounded in the following considerations:
- Core Competencies and Mission: The recommendations align with Mobile Clinic's mission to provide essential healthcare services. By optimizing inventory management, the organization can ensure that critical medical supplies are available when and where needed.
- External Customers and Internal Clients: The recommendations consider the needs of both external customers (patients) and internal clients (clinic staff). By minimizing stock-outs, the organization can improve patient care and reduce operational disruptions.
- Competitors: While Mobile Clinic operates in a non-profit environment, the recommendations can help the organization improve efficiency and effectiveness, enabling it to compete for resources and funding.
- Attractiveness: The recommendations are expected to generate positive financial returns by reducing waste, minimizing holding costs, and improving service delivery.
6. Conclusion
By implementing these recommendations, Mobile Clinic can transform its inventory management practices, creating a more efficient, responsive, and cost-effective supply chain. This will enable the organization to better serve its mission of providing essential healthcare services to underserved communities.
7. Discussion
Alternative approaches to inventory management include:
- Outsourcing: Mobile Clinic could outsource its inventory management to a third-party logistics provider. This could offer cost savings and expertise, but it also introduces risks related to control and security.
- Inventory Pooling: Mobile Clinic could explore inventory pooling with other non-profit organizations to leverage economies of scale and reduce holding costs. However, this approach requires careful coordination and trust among participating organizations.
The recommendations are based on the assumption that Mobile Clinic is committed to improving its inventory management practices and has the resources to implement the necessary changes. Key risks include the potential for implementation challenges, resistance to change, and the need for ongoing monitoring and adjustments.
8. Next Steps
To implement these recommendations, Mobile Clinic should:
- Phase 1: (3 months) Conduct a thorough analysis of current inventory management practices and identify areas for improvement.
- Phase 2: (6 months) Implement a pilot program to test the effectiveness of the recommended solutions in a limited number of mobile clinics.
- Phase 3: (12 months) Roll out the implemented solutions across all mobile clinics, ensuring ongoing monitoring and adjustments based on performance data.
By following these steps, Mobile Clinic can overcome its inventory management challenges and ensure a sustainable and efficient supply chain that supports its mission of providing essential healthcare services to underserved communities.
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Case Description
The case illustrates the inventory management dilemma at The Star Clinic, a mobile medical clinic. The resident doctor at the clinic prefers commonly prescribed medicines, in particular Panadol, a brand of paracetamol (a pain relief drug), to be well stocked whereas the procurement manager seeks to minimise the holding cost of medicines. Wanting to set a very high patient service level, the doctor is demanding paracetamol to be readily available and dispensable at all times in the clinic. Patients should not need to wait three days before the next batch of stock arrives. On the contrary, the procurement manager adopts a financial perspective and focuses on the profit-and-loss reporting of the company. How can the clinic resolve the dilemma and enhance its inventory allocation and service levels?
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