MGMT3018
Operations and Materials Management
Semester 1 –2023, Bentley
Group Assignment
Format: Business Report
Group members: Maximum 4 students
Due date: (Friday, 26th May, 11:59 PM)
Submission: Online through Turnitin
Marks: %50 marks
1 Objective
This assessment item relates to the course learning outcomes 1, 3 and 4 as stated in the unit outline.
2 Scenario
2.1 Introduction
MedCom1 an Australian-based manufacturer of medical instruments that are used to treat a specefic type
of medical disease. The firm was established in 1990 and is currently focused on medical devices for this
particular medical condition. In 2015 earned revenues of AUD $17.3 billion and operates in over 35 countries
either with its own sales offices or distributor networks. But, during last years in 2020 and 2021 its revenue
was significantly decreased due to COVID-19 global pandemic( See table 1 but is was recovered in 2022.
The medical condition affects up to 20% of adults to varying degrees, and so the firm anticipates that the
potential market is significant. The firm believes that around 90% of sufferers of the medical disorder remain
undiagnosed and are therefore untreated (and so do not demand the medical device). They have two major
competitors based in the USA (which dominate the North American market, leaving MedCom with 10%
market share) and one in Europe which has around 60% of the European market and 20% of the Japanese
market. MedCom has around 30% of the European market and 60% of the Japanese market. Moreover, 44%
of revenue is generated in Japan; Europe accounts for 26% of revenue; North America accounts for 8% of
revenue; Australia accounts for 5% of revenue; and the remainder is generated globally. There are two major
products, flow generators and the masks and other accessories, accounting for 58% and 42% of revenue,
respectively. The markets are quite competitive in terms of the product costs, but MedCom is recognised
as having been at the forefront of research in this area and has a good reputation amongst the medical
facility customers. Since 2015 MedCom has deliberately sought to create a wide range of products targeted
at home-users, in an attempt to capture more market share here. This intentional product proliferation has,
however, put increasing pressure on manufacturing at MedCom.
1This is a fictitious company but shares similarities with some real companies. Many of the details are fabricated, and there
is not intended to be any relationship to any real company
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Table 1: MeCom Revenue from 2009 to 2022
Year Revenue ($million)
2009 3,570
2010 4,175
2011 4,594
2012 4,527
2013 7,245
2014 7,928
2015 17,322
2016 12,906
2017 15,230
2018 15,293
2019 16,202
2020 13,102
2021 11,102
2022 15,250
There are two major product categories: the capital-intensive unit (containing mechanics, electronics,
etc.) and the accessory category (consisting primarily of the masks and tubing, and other accessories for the
equipment). The capital-intensive unit contributes 60% of revenue while sales of the accessories generate
40% of revenue.
The medical devices market is highly regulated globally, forcing extremely high standards for manufactur-
ing, distribution, and information management. All products must comply with medical regulation regimes
in a variety of countries, which are designed to ensure the safety of citizens. Compliance requires extensive
testing, documentation, and management of changes and information associated with the product. At any
time detailed information may be requested, and if the information is not available, or indicates possible
problems (such as quality of products or contaminated components), this could result in product recalls or
being barred from supplying a particular market.
The CEO has asked the Chief Supply Officer (CSO) to reduce the total costs so that their products will
remain competitive in the international markets. The CSO has assembled your team from the operations
and supply chain staff to tackle this problem.
2.2 Manufacturing
Lean manufacturing was briefly introduced by the old Operations Manager five years ago. After one produc-
tion line was converted to use Lean philosophies, customers soon began to complain that they were unable to
acquire products when required. The fall-out was significant and two key accounts (large medical facilities)
were lost as a result. The CEO told the CSO to stop using Lean manufacturing immediately. After a return
to the previous production system, products have been more readily available for customers.
A past consultant developed a system, based on the Economic Production Quantity (EPQ) formula,
to help determine the optimal production runs on a key piece of equipment that was identified to be a
bottleneck. This is based on the EOQ formula, but accounts for the fact that ‘delivery’ of each order is not
instant, it occurs over a period of time as the items are produced, while they are simultaneously being ordered
by customers. Solving the EPQ problem for each of the five major products produced on the production
line, the consultant recommended that they produce in batch sizes suggested by the formula.
Most equipment is run for two-shifts per day. Factory staff education levels are as follows: 10% of the
staff in the factory are highly qualified (holding a Master’s degree or higher); 35% are moderately qualified
(holding a Bachelor’s degree); while 55% are high-school qualified, with some additional workforce training
provided by MedCom. Most degree-holders are technical staff who predominately work on the main day
shift. They are the most capable staff at resolving issues or technical challenges on the production lines. If
production issues occur on other shifts, there are frequently delays as the qualified staff are called in from
home to assist.
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There have been challenges in the contemporary environment and the Operations team has struggled
to maintain production of a wide variety of products, each with reducing volumes, while still ensuring
low production costs are respected. Due to the regulated environment, the setup and changeover of the
production equipment must be conducted very carefully and all steps (including any problems) must be
documented and recorded each time. As a result, there are significant setup times. This means that it is
more economically viable to run larger production batches; yet, if this is done, there are greater inventory
holding costs and the firm is not able to produce a wide enough variety of products to satisfy customers.
Some equipment is run on a third shift on a regular basis to ensure continuity of supply for downstream
processes.
Where there is a problem identified with raw materials, this causes significant challenges to production.
The entire process must be carefully documented. Equipment must be stopped and all finished goods (FG)
inventory must be checked carefully. Faults must be identified and rectified. This causes significant disruption
and is becoming increasingly common. Just last month, this occurred twice, causing three-hour delays each
time.
At the end of the manufacturing the products undergo testing processes on equipment that was designed
and built by engineers at MedCom. They believe that this allows them to test equipment faster and to a
higher level of certainty than their competitors are able to achieve.
Production planners receive estimates from the Sales Division about what the monthly demand for each
product group will be the following month. Production planners believe that this information is usually
late, and they find it is extremely inaccurate. The Sales staff request changes and make updates several
times every week. Most planning and scheduling occurs every month for these product groups, then weekly
for each stock peeping unit (SKU). Every year there is an annual budget and a careful evaluation of the
strategic direction that the firm is taking. Information from the lower managerial levels is fed into the annual
planning document, and new projections are made.
2.3 Inventory
MedCom holds raw Materials, work in progress (WIP), and Finished Goods as inventory. It do not hold
other types of inventory. WIP inventory is predominantly held before the two capacity constrained resources,
reflecting the influence of a ‘theory of constraints’ seminar held several years ago. Raw materials are held in
an onsite warehouse near to the main manufacturing facility. When required the materials can be withdrawn
from stock and moved using manual processes to the appropriate location on the production line in a matter
of hours. Finished goods inventory is held in an onsite warehouse for despatch as required. It has been noted
that some inventory has been accumulated over an extended period of time, reflecting the changing demand
patterns in the marketplace.
2.4 Sourcing
Sourcing and procurement staff frequently complain of being the last to learn about significant changes
in production volumes. They are often ‘caught on the wrong foot’ and struggle to respond to changing
production plans. This may result in expedited orders, which cause significant cost increases but may
frequently be achieved by flexible, local suppliers.
Changes in product designs require extensive documentation by the procurement team as they update
the information management system to accommodate any changes in supply to reflect this. Furthermore,
any changes made by suppliers must also be reflected in documentation within the information management
system, enabling an auditable record to be maintained by MedCom. These regulatory requirements add
significant additional costs to MedCom each time a new vendor is used, or a vendor changes their products
slightly.
Local suppliers are extremely flexible and are usually able to exceed specifications for expedited deliveries.
Many of these are SMEs that have grown with MedCom over the last twenty years, with their own success
linked to MedCom’s success; MedCom remains a significant customer for many key suppliers. However, with
rising labour costs, the materials and services provided by these suppliers have been increasing at a rate
much faster than inflation. The CSO has pressured the procurement team to investigate options for reducing
the procurement spend.
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Careful sourcing has identified several suppliers in South East Asia that can supply three key compo-
nents/materials that account for 25% of the cost of the capital-intensive unit, and two suppliers of compo-
nents/materials that account for 40% of the cost of the accessories. Preliminary investigations indicate that
deliveries would be unreliable. Samples ordered also had widely varying levels of quality and careful analysis
turned up some dangerous chemical compounds in the plastics from one vendor. These concerns have led to
the retention of the local suppliers, although the procurement team believes that the materials costs may be
reduced by 17% if sourcing the five components/materials from the South East Asian suppliers.
2.5 Interactions with the customers
There are two key market segments: hospitals (or other medical facilities) accounting for 60% of sales,
and home-users (40% of sales). These segments are treated differently. Medical facilities tend to purchase
larger quantities of products at irregular intervals and may have few acquisitions between these planned
acquisitions. The devices are used as part of a larger treatment plan and many of the medical facilities
already have similar devices installed which need to be replaced or repaired on a regular basis. These are
purchased directly from MedCom.
Home-based users acquire the equipment and accessories on a continuous basis, with variable but more
consistent demand in each geographic region. These are purchased from distributors. The distributors
engage in their own forecasts and order from MedCom, but may engage in ‘panic ordering’ if they find they
are running low on stock.
MedCom’s Sales Division uses exponential smoothing forecasting techniques to forecast revenues and
provides these forecasted sales figures to the Operations Manager. The historical data is shown in Table 1.
2.6 What needs to be done to fix the problems
Despite its excellent and modern equipment, MedCom frequently struggles to satisfy demand. Their Delivery
in Full on Time in Spec (DIFOTIS) metric is only 68%. Inventory turns are only a quarter of the inventory
turns at comparable companies. Marketing has reported that customer satisfaction levels are at 78% and
have been dropping steadily over the last five years. Revenues have plateaued over the last two years and
the Accounting and Finance Division is projecting a fall in sales next year. The Finished Goods inventory is
increasing, as some products cannot be sold. Eventually, these products must be disposed of, or liquidated,
at significantly reduced costs, before the technology becomes out-dated, the materials deteriorate (in the
case of some masks and accessories), or a new generation of products are introduced (where old accessories
may not be compatible with the new capital-intensive unit).
The CSO wants to improve MedCom’s manufacturing and supply chain performance. However, the CSO
is not sure how to do this because Lean Manufacturing was previously attempted and was found to fail!
The CSO has established a team to investigate these problems and provide solutions. Your project group
is this team. Your team must investigate and analyse the combination of the various aspects of operations
management to achieve competitive advantage and optimal performance in the supply chain.
There are four roles that team members must assume in this case are:
ˆ Sales Manager: Responsible for demand management, forecasting, and ensuring high service level
for the customers.
ˆ Procurement Manager: Responsible for sourcing materials, ensuring materials are available for
production, supplier selection, negotiation, and supplier evaluations.
ˆ Materials Manager: Responsible for materials planning processes, including coordination of pro-
duction, inventory control, and logistics activities.
ˆ Operations Manager: Responsible for wider supply chain issues, optimisation of resources, balancing
of cost and quality standards, and the interface with marketing department.
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2.7 Project Question
Discuss the key problems that Medcom faces and how it can improve its operations and supply
chain competitive advantage to optimise performance.
Provide recommendations about how they can become more competitive using operations and
supply chain management tools, approaches, and techniques. Make sure you consider the disadvantages
(or negative elements) of the recommendations that you made.
2.8 Notes and helpful hints
ˆ In answering this question, the group must use examples of operations management concepts, tools,
techniques, and approaches to demonstrate strategies that can be used and using the literature to
support assertions and recommendations.
ˆ You can answer the assignment using topics discussed during the unit. These materials should form
the core of the answer. This knowledge will need to be supplemented by reading beyond the materials
provided in the textbook.
ˆ The word limit is not a target that you need to reach – you can submit a shorter assignment. However,
short assignments will probably not contain adequate discussions and analysis and may score poorly.
ˆ Where you are completing a ‘technical problem’ such as a forecasting problem, make sure that you
commit the ‘technical’ part to an appendix while you retain the output and interpretation of the output
in the main body of the report, referring the interested reader to the appendix for further details. In
many cases, the appendix will rarely be considered; however, you will be surprised at the times when
an executive will, in a sudden fit of curiosity, delve into the appendix and ask incisive questions about
the minutiae contained therein.
ˆ No manager has all possible information before making a decision. Sometimes, crucial information is
not obtainable or cannot be obtained on time or with suitable level of detail. Managers invariably find
themselves dealing with grey areas when information is sparsely available or uncertain.
ˆ Do not get bogged down analysing numbers – focus on the key strategic, tactical, and operational
issues that you can identify. The organisational strategy will influence their capacity, inventory, and
other operational decisions in supply chain management. The numbers describe the detail but they
are only a means to an end.
ˆ Avoid using descriptive sentences and paragraphs – the readers of the report are extremely familiar
with the organisation. Instead – be critical and provide insight. Constantly ask yourself ‘why’ they do
what they are doing and ‘what if’ they change. Base these questions on what you learn in class.
ˆ Be clear about who the audience of the report is. Who are the readers? In this case – senior manage-
ment. Thus, your report should be written in a suitable style.
ˆ You will need to balance the requirements/needs of each position/group member carefully. Conduct
formal team meetings. Record minutes and include these as part of your submission (use an appendix).
There should be evidence of discussions, disputes, and resolution of problems.
ˆ Operations management concepts learnt in this unit must be linked to this assignment. Remember
that this is an Operations Management class; while concepts from other classes may be useful in your
report your main focus and core discussions should focus on Operations Management.
ˆ One final point – make sure that you do not plagiarize from the case study or from other sources. The
penalties are severe. Make sure you quote, paraphrase, and cite all materials and ideas appropriately.
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3 Guidelines
ˆ You must use at least 10 peer-reviewed publications to support your essay. In addition, you will
need to read and refer to non-peer reviewed documents such as books, trade journals and articles to
substantiate your discussion.
ˆ The length should be between 3500-4000 words. This includes only the body of the report excluding
the executive summary, tables, figures, diagrams, cover page, table of contents and references.
ˆ All students should have completed and passed Curtin University’s Academic Integrity Programme.
As such, no academic misconduct will be tolerated.
ˆ Any use of Generative Artificial Intelligence (Gen-AI), such as Chat GPT, RESEMBLE.AI or Mid-
journey, is NOT permitted and will be investigated for Academic Misconduct.
ˆ Size 12, Font Times New Roman. Double-spaced. Margin 2.54 cm all round.
ˆ Use the Chicago referencing style. All references must be cited in the document and also listed in the
reference section.
ˆ Students will be evaluated in terms of their capacity to demonstrate understanding of the key issues
in the relevant literature and applying it to the areas of operations and supply chain management.
ˆ You should demonstrate a mature level of undergraduate writing. Use your spell check functions.
Proofread your document. Writing skills will be assessed. This includes introduction, body, conclusion,
high level of critical analysis and discussion of academic journal articles, supporting articles to the
author’s opinions and conclusions.
ˆ Must demonstrate the breadth and depth of the arguments.
ˆ A professional level of presentation is expected.
ˆ Use illustrations, diagrams, charts and table to enhance your essay.
ˆ Check the Assessment Marking Guide(Rubric) in the corresponding folder in the Blackboard. Make
sure that you can ‘tick off’ the items listed as you are writing or reviewing your manuscript. Many of
these marks are easy to get. Examples: all references must be cited within the text, summary of main
points, using the right referencing style. Check what you have done against the Assessment Marking
Guide and make sure they match closely.
4 Free further support
Further support in the planning and write-up of this assessment is on offer to students. See:
ˆ Academic Communications Development:
https://businesslaw.curtin.edu.au/study/student-experience/academic-communication-development/