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The Importance in Coordination of "Just In Time Inventory" (JIT) and the Relationship Between the Wholesaler/Distributor and a Healthcare Facility

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Introduction

The Importance in Coordination of "Just In Time Inventory" (JIT) and the Relationship Between the Wholesaler/Distributor and a Healthcare Facility Introduction: In business-to-business marketing, an institutional customer, a healthcare organization in this case, buys goods for use in its operations. Healthcare organizations have a broader range of purchase requirements than corporations. They purchase goods from janitorial suppliers, office suppliers, food suppliers, to name a few, but more specifically, they purchase goods from medical/surgical suppliers. It is worth noting that institutional customers make up one third of the business market sector. Healthcare organizations are always aware of the value of efficient buying and are diligent in maintaining up-to-date, sophisticated approaches to purchasing goods and services for their facilities. They have a largely staffed Materials Management Department (Purchasing) comprised of buyers, JIT coordinators, healthcare professionals (i.e., physicians, nurses), and product evaluation committees to help assist in the process of determining product benefits and services for the organization. They also help in the developing delivery timetables, maintenance contracts and pricing to satisfy the Materials Management Department. Healthcare organizations participate in what is called group purchasing to secure lower prices, improve quality, and reduce administrative costs. This leads to greater competition among its suppliers, which benefits the organization. Healthcare organizations achieve many benefits of cost efficiency and quality assurance in consolidating purchases through a centralized purchasing function. With that said, relationships between business marketers, the healthcare organization and their wholesaler/distributor, are very important. Long- term relationships are important in that they are built on trust and demonstrated performance. They require open lines of communication between buying and selling organizations. Long- term relationships also require delivering on promises. As long as quality, cost, technology, and delivery requirements are met, the supplier will have the business. Relationship marketing centers on all marketing activities directed toward establishing, developing, and maintaining successful exchanges with customers. The manufacturer's customer is the wholesaler/distributor. ...read more.

Middle

It is noted that physical distribution interfaces with channel management and JIT philosophy is essential and regarded as a behavioral concept to encourage a cooperative spirit among channel members in their efforts to develop an effective and efficient physical distribution system. Also highlighted was the principal function of inventory its ability to increase profitability through manufacturing and marketing support. And critical to the maintenance of adequate inventory is a review procedure designed to evaluate, on a continuous basis, vendors, transportation suppliers, back orders and damaged goods. A principal advantage of physical distribution physical distribution system monitoring is its usefulness in identifying developing trends. Early recognition of changing demands/trends leads to improved customer service, defined as "interrelated package of activities provided by a supplier, which creates time and place utility for a buyer and ensures form utility." Also mentioned that is associated with customer service is stockout level, channel communications, order cycle time and variability of delivery time. And finally, the authors mentioned to initiate the flow of goods through channels, information is needed about the organization system, its communication system, and its purchasing and inventory policies. The Just-In-Time production and inventory concept is bringing about higher productivity. A critical element mentioned in the operation of a JIT system is the human relationships and involvement of manager's attitudes. The authors concluded by indicating that physical distribution interfaces with the channel system by providing supporting services. Applications of modern management techniques can lead to faster response within the channel, with result profit improvement. Contributing to the JIT method is lower cost, more capable and faster transportation service. Manufacturers, distributors, and retailers must develop strong system approaches based on cooperation and mutual trust. The leaders of channels who are planning marketing strategies for the future would be well advised to consider the use of the Just-In-Time inventory concept. Discussion of Topic: One of characteristics of business markets is Supply-Chain Management (physical distribution/logistics). ...read more.

Conclusion

In the working relationship between the healthcare organization and its supplier/distributor, the marketing channels can be complex in that the hospital needs a wide variety of different medical/surgical supplies from many companies. It is the job of the distributor/supplier to facilitate/coordinate with these companies to bring all the supplies together and make sure they are delivered to the hospital on time - just-in-time (JIT). Managing marketing channels is challenging. The advantages of healthcare organizations and distributors/suppliers utilizing the JIT method are the cost savings, lower inventory levels and lower costs to carry inventory; improvement of product quality; maximize efficiency, the benefit of having reliable supplier(s) to coordinate and deliver the supplies on time; and provides optimal levels of customer service. The disadvantages of JIT are: as inventory levels decrease, stockout costs increase; weather, strikes and other supply interruption can occur; and, with having to order hundreds of thousands of different products, order processing can be a difficult; and often a sole supplier is used for delivery products and a hospital can become vulnerable if that sole supplier shuts down for some reason. Conclusion: These two members of the marketing channel -healthcare organizations and wholesalers (distributors/suppliers) and the concept of relationship marketing help each other succeed in reaching their financial goals. In turn, this effect will enhance their long-term relationship. JIT systems are built on trust, demonstrated performance, and a close supplier-customer relationship. Business is all about relationships. The better understanding the channel partners have of one another, the better their businesses will grow and prosper. In working in the healthcare industry for over 19 years (17 years at Northside Hospital), I feel that Just-In-Time Inventory used in the healthcare setting along with their channel partner, Owens & Minor, Inc., its distributor/supplier of medical/surgical supplies, has proven to be successful in controlling healthcare costs and improvement of inventory management through innovative services in supply-chain management, logistics and technology. Both the hospital and its distributor/supplier work together as a team in delivering products and services to maintain a strong focus on their top priority-excellent patient care - to the final consumer: the patient. ...read more.

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