Operations Management at Baxter Corporations

This article discusses the operational issues faced by Baxter Corporations in operations management and suggests supply chain models to improve efficiency and customer satisfaction. The issues include complicated managerial procedures, forecast inaccuracy, improper marketing strategies, lack of coordination between departments, and lack of buffer stock. The suggested supply chain models include continuous flow model, fast supply chain model, agile supply chain model, custom configured model, and flexible supply chain model.

Operations management at Baxter corporations
Introduction
Several businesses use operations management as an avenue to achieve strategic fit and attain the
goals as well as the mission of the organization. Baxter for instance has positioned itself
strategically by differentiating itself through branding, proper location of stores and offering
variety of healthcare commodities. The success of the company is attributed to the focus of the
supply chain management hinged upon market demand and supply integration. As noted by
Webb (2017), White (2016) for an organization to succeed, its processes must provide the
possibilities to execute the desired plans. Studies by Morschett et al. (2015) showed that the roles
of the operations managers contribute significantly to the success of an organization. Despite a
steadfast effort by the organization to offer exemplary services to the clients, Baxter is facing
several challenges as far as operation management is concerned. The following are some of the
operational issues and threats affecting the wellbeing of the company;
Complicated managerial procedures: This problem as noted by Hu (2017), Yin, Stecke, and Li
(2018), is similar to the one noted in this company, for instance, the manger notes that, ”the
logistics was always a big challenge for Baxter MEA supply chain, as there are so many
constraints and challenges that they add more complexity to the operations management:”
Forecast inaccuracy; according to Vogel-Heuser (2015), Nunes, Vaccaro, and Júnior (2017), a
supply chain must ensure that the orders made to the firm are measurable. However, the
company acknowledged that there was considerable variance between the reported demand
estimates (relayed to the processing plant) and the actual orders received recorded from the local

and international purchase orders from the clients. This caused insufficient amount of stock at
the retail outlets raising complaints from several clients.
Improper marketing strategies: there seems to be lack of proper information about the
commodities being offered and the places where they are being offered on the side of the clients.
According to the report, the company received purchase orders with large quantities which were
not on offer in the points of sales where the orders were sent.
The company does not have a harmonization policy for determining the reordering point and
establishing the minimum threshold for the organization’s retail outlets. This is exhibited
when the retail outlets make orders but the manufacturing plant waits until the orders are
accumulated over a time waiting for demand to rise in order for the firm to reduce the cost of
production. An organization that does not a mechanism for responding to sudden surge in
demand may not win the war on developing customer loyalty (Gunasekaran, 2017, Pashaei &
Olhager, 2017, Snyder 2017).
The company has not established an effective coordination between the manufacturing
department and the transport department. When small orders are taken and manufactured, their
transportation increases t. he burden of production to the company. Firstly, when the container in
not fully filled up, items are easily damaged, secondly, the cost of insurance rise due to the
increase in risk potential.
The company does not have proper mechanism for protecting its commodities from adverse
weather conditions. As management notes, “most of Baxter products are temperature sensitive
and they have to be kept between (+15 to 25°C) throughout the shipment journey.” The
environment where the company sells its products is high and is reported as one of the
constraints and potential quality hazard that marketers have to face in the course of their voyage

with the products used in the healthcare industry. According to Fahimnia et al. (2015), there are
no cold storage devices for commodities being transported by air vessels resulting in huge losses
for firms distributing their commodities by air in the GGC regions. To worsen the situation, the
company does not have strategies for strengthening coordination with the customers and the
transport agents to speed up the clearing of goods upon arrival at the port. Items take
considerably longer time from the time thys arrive at the port and the time they are being
transferred to their final destination, resulting into further breakages or spoilage of commodities.
Lack of buffer stock to meet the demand arising from “sudden orders,” despite Baxter having
signed “a contract with all GCC customers and distributors that clearly states that the delivery
lead time is 120 days from the date of purchase order reception,” it is reported that the SCEs are
receiving urgent orders that the company cannot fulfill. The company is not able to meet these
tall orders due to many constraints, some of which are beyond the reach of the firm. Moreover,
they cause frustrations to the customers who eventually lose trust on the ability of the company
to produce quality services. The same complacency is transferred to the hospitals which use the
Baxter products. A case in point is when the SCE paid visit to the clients in their facilities to
ascertain the condition of their services with respect to inventory management. He realized that
most of the hospitals are poorly managed and in his own words, “those purchase planners and
store keepers aren’t coordinating properly and therefore, any out of stock situation is a logical
“result” of such poor inventory management system and practices.”

Supply chain models
According to Chiu and Choi (2016), Wang (2015), Esmaeilikia (2016), supply chain can be
described as an integrated process where various organizational elements such as suppliers,
manufacturers, distributors and point of sale service providers join hands during planning,
coordination and control of the transportation of raw materials, spare-parts and finished
commodities. The movement of items can be observed in two styles, i.e. forward flow-where
materials are involved and backward flow- pitching the movement of information from the
clients to the firm. Choosing the most appropriate supply chain greatly affects the organizational
performance (Heckmann, Comes and Nickel, 2015, Osorio, Brailsford and Smith, 2015). This is
because effective supply chains normally incorporate best practice strategies upon which the
success of an organization depends and sets such companies apart from the rest of their
competitors. The desirable qualities of a good supply chain include; proactive data mining,
capabilities for effective inventory management, adaptability and faster ordering schemes, ability
to customize the organizational processes, optimal use of energy in the firm and ability to operate
within the industry as well as state regulations. Scholars such as Govindan and Soleimani (2017),
Eskandarpour (2015) also note that there is significant relationship between the survival of a
business venture and adoption of a sustainable supply chain.
According to Ravindran and Warsing Jr, (2016), Pashaei and Olhager, (2015), Fahimnia, Sarkis
and Davarzani, (2015), the supply chain connection of an organization has a direct bearing on the
viability of the firm as it influences; the cost of production, working capital requirements, market
perception of the product, distribution speed and other factors affecting the competitiveness of
the organization. Supply chain models are classified based on their orientation, that is,
orientation towards responsiveness and orientation towards efficiency. The supply chain models

which can be used by the Baxter Company related oriented towards efficiency to solve the
operational management issues discussed above include:
1. The “Continuous flow model”
According to Nguyen et al. (2018), Mohan (2016), this is the ideal model for organizations
dealing with commodities in high demand fluctuations. Adoption of this strategy will help Baxter
company to meet the demands for retail centers which have been experiencing steady demands
over the trading period. It will help in identifying the needs of the organization in terms of the
orders being placed by outlets that conduct proper marketing research. The outlets that are aware
of the annual demands can be served with stock consistently to avoid issues to do with customer
complaints resulting from unavailability of commodities in the stores. Properly managed
continuous flow model ensures a mechanism for constant stock replenishment system to
guarantee quality services and steady supply of commodities at the points of sale.
2. The “fast” supply chain model
This strategy is best suited for companies which produce goods for the current market
configuration (Kamalahmadi and Parast, 2016, Ribeiro, and Barbosa-Povoa, 2018). The
commodities must be delivered to the market as soon as the market research is completed to
eliminate instances of obsolescence. Baxter incorporations can adopt this strategy to reduce the
time between the reordering and restocking their retail outlets. The company should have a
mechanism for responding to the orders as soon as they are received from the points of sales.
There should be an effective channel of relaying information from the service providers as well
as feedback from clients and the manufacturers.

The supply chain models, which are oriented towards market responsiveness:
Rajeev (2017) recommends that companies operating in an industry characterized by high
demand uncertainty should adopt supply chain models oriented towards responsiveness. The
following are some of the supply chain models oriented towards responsiveness that can be used
by Baxter incorporations to retain its competitive advantage over its peers:
1. The “Agile” supply chain model
According to Heydari, Govindan and Jafari, (2017) agile supply chain model is the best strategy
for firms dealing with commodities that are tailored to the specifications of the clients. The
operational principle of this model is based on the make-to-order decoupling design where the
producer create commodity profile based on the received customers’ purchase order. This
strategy should be used by Baxter incorporations to avoid instances where several orders are
made to specific plants but the commodities being requested for are not being produced in the
countries where the orders are placed. This should be coupled with an effective channel of
communication to relay the actual requirements to the manufacturing plants which will respond
by producing commodities based on the specifications of the clients.
Another strength of this model is the fact that it triggers the managers to exploit their ability for
excess capacity to design the production process to realize optimal production quantities. The
managers will be able to determine the minimum threshold that can be manufactured based on
the customer demands without incurring production costs that firm will not be possible to cover.
The retail outlets that normally make small orders for the company products will be served
therefore without much delay so long as they meet the reordering points.
2. The “custom configured” model

According to Ravindran and Warsing Jr. (2016), Wang (2015) this model is designed for
companies that deal with commodities that require unlimited configuration based on the market
segment being served. Scholars such as Günther, Kannegiesser and Autenrieb, (2015), Stevens,
and Johnson, (2016), suggest that this strategy should be adopted with a lot of focus on the
relationship between the cost of production, that is, prices of inputs and the total cost of bringing
the commodity into the market. For this strategy to be successful there should be an effective
channel of communication to relay customer demands to the manufacturing plants. The assembly
unit acts on the information and tailors the items according to client’s demands. Many people
advocate for this supply chain model since it combines the desirable features of continuous flow
model and the strong features of the agile model. This is because it uses the continuous model
principle of prior identification of the customer demands before setting out to manufacture and
also adopting the agile policies at the downstream implementation phase.
3. Flexible supply chain model
Companies whose demand patterns are characterized by high marginal propensity of the
customers to purchase during peak seasons and significantly low propensity to purchase during
off-peak seasons should adopt flexible supply chain model Gunasekaran, Subramanian, and
Rahman, (2015), Carter, Rogers and Choi, (2015). According to Quarshie, Salmi, and Leuschner,
(2016), Fernie, and Sparks (2018), Behera, Mohanty, and Prakash, (2015). flexible supply chain
model is highly adaptive and can be used to realign the organizational plans to meet abrupt
consumer demands which had hither to been unsusceptible. Moreover, this model can enable
operational managers to reconfigure internal business operations to solve customer problems
affecting the organization at any given time. During the formulation stage of this strategy,

managers are advised to allocate ample time for the organization to respond to the problems
based on its technical strength and organizational principles.
Summary of models specification:
Strategies undertaken by companies operating in the international market are meant to ensure
end-to-end efficiency. As noted in this paper, the strategy that works is the adoption of model
mix-where a firm adopts more than one supply chain model. This is why the Baxter
incorporations’ mission is oriented to metrics such as efficient allocation of assets, reduced cost
of production and steadfast focus on the break-even condition. As noted by Mohammed (2017),
Scott, and Watson (2018), it more prudent to adopt a strategy that makes use of parallel supply
chain models within the same firm to solve different problems specific market segments
simultaneously.
The following measures can be taken by the stakeholders to ensure that the SC is supporting
the business growth not the opposite
Given the volatile nature of the market in which Baxter operates, as reflected in the instability of
consumer demands, the operational managers are required to design more efficient and customer
centric supply chains with more emphasis on innovation and improvement in quality of service
delivery. The following are some of the measures which can be put in place to enable business
growth from the activities of the supply chains.
1. Implementing a demand-driven planning strategy and designing a business operating model
focused on real-time ordering projections. The management should come up with effective
contingency planning tools which can give accurate projections in terms of shortage in
inputs, political instability in the region, and the impending incidences of natural calamities.

This will enable the company to move products quickly, hence minimizing customers
complaints like the ones recorded due to unavailability of items in the retail outlets.
Moreover, this strategy will ensure business growth since the firm is able scale up the
margins for high-demand commodities with minimum market supply. According to Karan,
Ulucan, and Özden (2018), this principle works by extrapolation through leveraging the
strength of the firm and mitigating the threats facing the organization.
2. The organization should inculcate an adaptive and agile supply chain model that can give the
managers the opportunity for rapid planning capabilities and integrated execution platform:
this strategy enables the stakeholders to gain an insight into the dynamics of the market
hence make adjustments to cater for the risks and uncertainties in market demand. The
company can therefore fine-tune its operations according to the sudden changes experienced
in the international market with an agile responsiveness to meet the ever-changing demand
(Noori, Pradhan, & Ajaj, 2019, Posthuma, 2017). As seen in the company profile, there are
inflexible production schedule that do not respond adequately to the reordering patterns. This
strategy will ensure a continuous and dynamic adjustment in the supply chain to respond to
the current situation in the market at any particular time. In accordance with Chatelard, and
Abulhawa, (2015), Russo (2017), opinion, an organization that uses this strategy exhibits
better visibility, and records improved collaboration across the supply chain. In other words,
an adaptive and agile response mechanism enables the company to attain predictability in
supply and production circles, dependable manufacturing patterns, effective transportation,
warehousing and faster decision-making process.
3. Tailoring products according to customers’ specifications and maintaining product supply
management for maximum profitability. This strategy calls for maximum investment in

innovation and inventiveness as that will guarantee the company a lead in the competitive
world. There is need for the items to be manufactured and distributed based on te market
demand to avoid instances whereby several orders are being made for commodities which are
not being offered in the plants in a given country. As Abdulwahab, Ismael, and Al-Nuaimi
(2018), suggests, manufacturing of commodities should be done with focus on the cost, place
and time. Design of the products is also dependent on optimization of supply,
manufacturability and the required supply chain operations. The company should therefore
make the right choices for the innovative technologies to be adopted in the production
process to ensure a competitive advantage in the market. For this strategy to be successful,
the organization should develop a proper feedback mechanism where the plans are
implemented and the reactions from the customers are received and reacted to by the
management in a timely fashion.
Conclusion
The survival of an organization does not just depend on its ability to produce and sell goods and
services in the market but its ability to produce commodities in line with the customers’ demands
and preferences. The operations managers are responsible for designing a mechanism for
creating and delivering the services as specified by the clients. However, decisions made in the
chain of production- from the planning phase to distribution phase can make or break the
product. An organization must design a platform for conducting end-to-end collaboration
between the players in the supply chain model for effective coordination of activities for growth.
The ideal strategy is designed from the analysis of the demand insight and market research to
solve the underlying concern in the market.

Solving the shipment problems in Iraq
Risk assessment
The economy is strictly dependent on the oil and gas sectors and does not embrace any element
of diversity. This renders the regional residence unemployed hence reduced incomes and
therefore low marginal propensity to consume (Szpytko, 2018). Secondly, the region witnesses
perennial tension between the citizens from Shiite community-commonly referred to as the
ruling class and the rest of the population who are poor. Thirdly, the autonomous natures of the
Kurdistan who are the major contributor in the gas sector generate a lot of tension in the region.
Another factor that poses challenge to trade in the region is limited access to finances (Hosseini,
2017). There is a weak financial sector in the region, making access to finance difficult.
Freight solutions implementation
The company should liaison with IMSAN Group that offers door-to-door services in all Iraqi
cities due to the security policies put in place by the association. Another strategy is to transport
the items via air transport (Al-Abadi and Al-Ali, 2018). This ensures little threats from criminals
who might want to snatch the commodities while on transit.
Freight cost evaluation
The company pays import duties based on the sum of the custom value, the value of insurance as
well as the cost of transporting the commodities. For health items, the country charges base
import duties at 20% of the cost of goods on transit. The government puts in place conditions
that must be met by the items before they get cleared at the ports. There are higher operational

costs for distributing commodities to this area making transport companies to increase
transportation costs.
Transit time
Weekends- Sunday and Saturdays are not the best times for transporting items to this area since
most currier service providers are out of reach. The same applies to national holidays when most
offices are closed and government agents are inaccessible to facilitate clearing of goods at the
entry points.

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