The third problem that was identified for the company was that pertaining to the high level of finished goods being held at the company for products which were not in the production stage. The excess of finished goods inventories add up to the storage and management costs (Higgins).
Through the analysis of the supply and demand statistics as well as the order placement by the dealers and affiliates it was determined that the problem of high level of inventories of finished goods for already established products was occurring largely due to the change in the demand of the products and the orders being placed by the dealers and affiliates of Meditech. The dealers and the affiliates used to stop their ‘panic’ based buying of products once they were established in the market and moved out of the introduction phase. This was because the dealers and the affiliates themselves had excess inventory of products left over from the product introduction stage due to their panic and speculative buying. The Meditech Company however tended to increase the production capacity of the products in order to meet the demand of the new products in the product introduction phase. This however tended to add to the problem of inventory build up as the orders increased, but the production rate and operating capacity of production of new products remained high over the period of time. From the systems point of view, this problem occurred to the lack of an integrated and networked system for supply management between the dealers and the affiliates and the Meditech Company.
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