Case analysis: The challenge facing Carestream Health Inc (CHX)

Case analysis: The challenge facing Carestream Health Inc (CHX) – The case focuses on the challenge facing Carestream Health Inc (CHX), a medical device manufacturer based in Xiamen. Since its inception in 2007…

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Case analysis: The challenge facing Carestream Health Inc (CHX)

Paper details

How to organize your presentation/written analysis:

1. 1. Abstract/Executive Summary: a paragraph or 2 summarizing including recommendations
2. 2. Problem Statement: Overview of key issues arising from case analysis
3. 3. Case Analysis: Theory-driven analysis of case(s) identifying factors underlying key issues 

Solution

Executive Summary

The case focuses on the challenge facing Carestream Health Inc (CHX), a medical device manufacturer based in Xiamen. Since its inception in 2007, the company has grown to be the leading entity in x-ray film production. The organization mostly supplies the Asian market projected to grow at an annual rate of 10%. The company relies on lean production to facilitate efficiency and lower operational costs. So far, the strategy has proved helpful to the organization.

The supply chain is characterized by wide film rolls, the largest share of raw materials, being sourced from America. The sourcing is done from CHX subsidiaries in America. Likewise, CHX also relies on its own internal companies to handle the sourcing. The key cause of concern is highlighted in the labor disputes in America. Dockworkers have gone on a strike, thereby affecting the supply of wide film rolls. The disruption is highlighted as likely to interfere with CHX operations since most of its wide films are transported from America by sea.

The management convened a meeting to find the ideal solutions to the impending challenge. Different options are weighed as part of the recommendations to the solution. The option to transport the materials using flight is considered, even though it will be 9 to 10 times costly than sea transport. The company’s best recommendation is to look for wide film roll producers from other countries and enter into a temporary supply contract.

The option will be quite effective since it will save the organization of the high amount of capital they are likely to incur if they transport the materials using flight. Likewise, the option will ensure that the organization’s operations remain functional and meet customer needs, thereby cementing its future market instead of losing it considers the options of giving up on the supplies.

Problem Statement

The key problem in the case is seen in the difficulty of transporting the wide film rolls to Xiamen’s CHX operational facilities. CHX has built a good reputation over the years as the leader in the manufacturing and supply of medical x-ray equipment. The organization has attained supply chain efficiencies that have allowed it to hold little inventories at any time. The use of a lean supply chain is highlighted as having lowered CHX’s operational costs and meeting customer’s needs depending on demand.

The supply chain system is highlighted to extend to America, where the firm purchases its raw materials. CHX is depicted to account for 80% of the wide roll film production that occurs in America. However, it is the company’s tie to American suppliers that bring it a whole new challenge. The striking dockworkers have interrupted shipping activities.

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It, therefore, means that CHX is unlikely to get its wide film rolls supply on time. The fact that the organization has always relied on lean operations means that slight delays in the supply of raw materials will greatly impact its operations. CHX is used to keeping little inventory since they rely on their effective supply chain to have the materials to be always available on time.

Disruption of American sea transport means that the organization cannot rely on the low inventory they have, and a deficit is likely to be experienced soon. The supply disruption channel also threatens to interfere with CHX business in the future should the organization fail to find ideal solutions. The challenge is seen in CHX’s competitors filling in its demand gaps should the firm fail to supply its clients. CHX, therefore, has to find ideal solutions to address the supply challenge that it faces.

Case Analysis

CHX’s problem arises from the use of lean operations in its supply chain. Lean operations are a resource management approach that seeks lower operational wastage (Haddud & Khare, 2020). The wastage is depicted by organizations using many resources in their production activities. Lean production, therefore, enhances organizational effectiveness using the lowest amount of resources. Efficiency in lean operations is attained when the organization identifies and eliminates several aspects of conventional organization practices that do not add value.

Besides attaining operational efficiency and reduced costs, lean production also seeks to enhance customer value. Value is highlighted in customers getting products according to their specifications and time (Schniederjans et al. 2018). CHX’s lean operations have seen it contract United States subsidiaries with patented quality films as its suppliers. The move is meant to boost CHX’s value in terms of the quality of products they give to clients.

Another aspect of lean production is the company deciding to lower supply chain costs by reducing inventory levels (Tortorella et al. 2017). It is cheaper to maintain less inventory. The move to have low inventories has seen the organization request resources only when demand or orders have been identified (Qi et al. 2017). For instance, the Kanban system ensures that inventory is only replaced when the existing one has been utilized (Mojarro-Magaña et al. 2018).

Lean production requires effective coordination of communication and activities among the different stakeholders. The coordination in CHX’s case is highlighted by the organization constantly communicating with its American subsidiaries and wide roll film suppliers to arrange raw material shipments. Even though the organization has enjoyed the successes that come along with lean manufacturing, the production theory has now been put into practice.

One of the key disadvantages of lean operations is attributed to its reliance on coordination. The interrelated nature of events presents high chances for an organization’s activities to come to a halt should an error be encountered in a specific part of the chain (Merli & Mosconi, 2019). In this case, the error is highlighted in the supply side of CHX’s organization. The repercussion of the error is seen in the company’s production likely to stall should the issue not be addressed, thereby losing its market share to competitors.

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References

• Haddud, A., & Khare, A. (2020). Digitalizing supply chains’ potential benefits and impact on lean operations. International Journal of Lean Six Sigma.
• Merli, f., & Mosconi, L. (2019). Investigation on barriers hampering lean supply chain development: an interpretive study.
• Mojarro-Magaña, M., Olguín-Tiznado, J. E., García-Alcaraz, J. L., Camargo-Wilson, C., López-Barreras, J. A., & Pérez-López, R. J. (2018). Impact of the Planning from the Kanban System on the Company’s Operating Benefits. Sustainability, 10(7), 2506.
• Schniederjans, M. J., Schniederjans, D. G., Cao, R. Q., & Gu, V. C. (2018). Strategic Customer Value Focus In Lean Supply Chain Management. World Scientific Book Chapters, 129-155.
• Tortorella, G. L., Miorando, R., & Marodin, G. (2017). Lean supply chain management: Empirical research on practices, contexts, and performance. International Journal of Production Economics, 193, 98-112.
• Qi, Y., Huo, B., Wang, Z., & Yeung, H. Y. J. (2017). The impact of operations and supply chain strategies on integration and performance. International Journal of Production Economics, 185, 162-174.

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