Case Study Of Value Chain At O & M

Value Chain at O&M:

O&M offers a considerable value-added services in medical supply chain. O&M provides information on product demand and purchasing patterns to the manufacturers for better managing their operations and production schedules. O&M also allows the customers to access and select different brands of surgical and medical supplies. O&M owns and manages the inventory of products, and then makes deliveries to the customers as part of either a just-in-time or stockless system. Hospitals prefer to purchase in smaller quantities from the distributor who stocks and keeps track of the inventory. In turn, manufacturers are able to avoid this labor- intensive activity of breaking down larger packaging and delivering in smaller batches. O&M also maintain the contractual agreements and tracks the prices for a variety of different

Cost-plus ties all the importance of the profit to the price of the product instead of the service provided. So in case of O&M, they had to give up their profit to transport bulky but cheap products and could gain only by transporting expensive products. To avoid the high distribution charges occurred due to transport of expensive items, the customer may tend to buy the same from the manufacturer directly instead of the distributors. This leads to the loss of profit for distributors because they are now left with only the inexpensive orders to deal with. Cost-plus pricing allows customers to buy the lowest quantity possible and replenish as often as necessary with no additional charge. Despite seeming more convenient, time and resources are actually wasted by the hospitals that place more frequent orders rather than manage their current inventory more effectively. For the manufacturers on the other hand, cost-plus pricing attracts customers (hospitals) to purchase directly from them but this will lead to inaccurate demand data flow the