The Importance in Coordination of "Just In Time Inventory" (JIT) and the Relationship Between the Wholesaler/Distributor and a Healthcare Facility
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. The wholesaler/distributor’s customer is the healthcare organization. The healthcare organization’s customer is the patient. The topic that will be discussed are two members of the marketing channel: the wholesaler/distributor and healthcare organization (retailer), and the elements involved is inventory management –Just In Time (JIT) Inventory and its reliability of the supplier to the organization. Literature Review: In the article, “Just-In-Time Inventory Control: A Subset of Channel Management” by L. Joseph Rosenberg and David R. Campbell, the ...
This is a preview of the whole essay
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. The wholesaler/distributor’s customer is the healthcare organization. The healthcare organization’s customer is the patient. The topic that will be discussed are two members of the marketing channel: the wholesaler/distributor and healthcare organization (retailer), and the elements involved is inventory management –Just In Time (JIT) Inventory and its reliability of the supplier to the organization. Literature Review: In the article, “Just-In-Time Inventory Control: A Subset of Channel Management” by L. Joseph Rosenberg and David R. Campbell, the authors question a major deficiency of distribution theory and analyses of the distribution channels with regard to technologies used by individual organizations in their efforts to structure and control channel activities. The concept of integrated logistics: materials management and physical distribution management are emphasized. It is noted that an efficient marketing channel cannot exist without an efficient physical distribution channel and that Just-In-Time (JIT) Inventory is a significant part of channel management that can improve productivity of the marketing channel. The authors gave a historical perspective of physical distribution and how it emerged during the 1950’s. But more attention was devoted to buying and selling than to the physical handling of products because of the lack of technology available at that time and they felt no improvements could be made in the delivery performance. It was not until the late 1960’s that techniques could be applied to encourage greater channel efficiency and the realization that physical distribution extends far into the marketing channel domain to include service, inventory control and the costs involved in maintaining adequate inventory. 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). This is a technique for linking a manufacturer’s operations with those of all of its strategic suppliers and its key intermediaries and customers to enhance efficiency and effectiveness. The goal of the supply-chain strategy is to improve the speed, precision, and efficiency of manufacturing and delivery through strong supplier relationships. Information sharing, joint planning, shared technology, and shared benefits is a common goal of its members. The wholesaler/distributor offers innovative services in supply chain management, logistics and technology to the healthcare organization, its customer. A strategy used by healthcare organizations for purchasing medical/surgical supplies is called Just-In-Time (JIT). The concept is to deliver defective-free medical/surgical supplies to the hospital just in the time that they are needed. The hospital does not keep inventory on the premises. The goals of JIT are to minimize inventory costs, improve product quality, maximize efficiency, and provide optimal levels of customer service to the healthcare organization. JIT systems are built on trust, demonstrated performance, and a close supplier-customer relationship. To make a JIT system cost-effective means supplies must arrive when needed, so it is imperative a healthcare organization find a reliable distributor for its medical/surgical supplies. Supplier reliability is as important a consideration as competitive pricing for hospitals with minimal inventories. The supplier must also meet quality control standards. Suppliers must be screened, a working relationship must be established and an audit program must be developed to ensure that the supplier complies with the hospital’s needs. The marketing channel, also called distribution channel, is the network of organizations that creates time, place, and possession utilities for consumers and business users. 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. Bibliography Rosenberg, L. Joseph and Campbell, David P. “Just-In-Time Inventory Control: A Subset of Channel Management.” Academy of Marketing Science, Journal of the Academy of Marketing Science. Summer, 1985, Vol. 13, No. 3, pp. 124-133. Interview – Cindy Tatara, JIT Coordinator, Northside Hospital, Atlanta, GA 30342.
