lillebaelt academy of higher professional education

APRIL 2016
Word count: 6759

Table of Contents
Contents
Introduction................................................................................................................ 2
Value Chain Analysis................................................................................................... 3
Support activities....................................................................................................... 3
Primary activities........................................................................................................ 6
Logistics efficiency................................................................................................... 10
Porters five forces.................................................................................................... 12
S.W.O.T..................................................................................................................... 14
Transport law............................................................................................................ 16
Problems of Medico Electronics................................................................................ 17
Solutions................................................................................................................... 19
Conclusion................................................................................................................ 19
Bibliography............................................................................................................. 19
References................................................................................................................ 20

Introduction
Medico Electronics A/S is a company stated in Denmark, which specializes in developing and
producing a variety of equipment for medical purposes. The medical equipment that Medico
Electronics produce include a sort of stimulation devices, which are used to examine a patient for
brain disorders such as depression or muscle diseases, to add they also produce medical systems
for skin treatment and diagnose of urinary tract disorders. The company Medico Electronics was
founded back in the year of 1991 in a 60m2 former green grocery store in the Copenhagen district
of Frederiksberg. The founder of ME, Henrik Carlsen, who is currently the Research &
Development manager of the company says, that despite the fact that his newly-found company
had only 60m2 of space to spare, there was plenty of room for creativity. The first product that
had entered the market was a magnetic simulator, which appeared in 1992, a year later after the
company had been founded. As the companys growth was inevitable, in 1994 the company
Medical Electronics had moved to Farum, which is stated north of Copenhagen, and their 60m2
green grocers store was changed to premises which were covering 600 m2. Now that the
companys grounds have increased by a tenfold, there was enough room for continued growth,
which is what the company was focusing on and doing from the start. In 1998, the company was
ISO 900-1 certified, which indicates that Medical Electronics had implemented Quality
Management System requirements for all areas of the business, including facilities, people,
training, services and equipment. Today Medico Electronics has an EN 13485 certificate and is
entitled to CE-mark its products and to add they also have UL certification. As Medico
Electronics is constantly expanding and improving, the space that they need for their activities
gradually increases, so 6 years later, in 2000, the company had moved again, choosing to stay in
the same city of Farum, but seeking out larger premises. Since moving in into the new grounds,
Medico Electronics gradually took over the whole building, and the current space they have to
spare increased yet again, from 600m2 to 1860m2, a little bit over threefold. Throughout the
years, Medico Electronics made much of the fact that being able to control all relevant processes
of the company is highly sought after, which is why product development, production,
distribution and purchasing are managed in-house. Although the idea was to manage these things
in-house, a variety of parts of production have been outsourced to Poland, i.e. the manufacture of
cables, circuit boards and mechanical parts, which are supplied as semi-manufactured goods.

Value Chain Analysis

Support activities
Firm infrastructure
Vision Gradually improve in the production of medical equipment.
Goal Become a threatening competitor and wrestle down their main competitor, USA.
Strategies The logistics manager of the company is always searching for cheap carriers.
Getting a few of their main products FDA approved results in increased shares in the USA
market.
Organization principles The company has a main department with a 100% owned subsidiary.
Management is not strict, as employees are expected to contribute to the company not with their
physical work, but with prepositions and solutions as well.
Procedures For outbound transport, the logistics manager, Poul Kjoller is in charge. All orders
are also sent to Poul, as he has a good overview for delivery options. Production planning is
worked out on an excel spreadsheet. Each quarter of year, the production planner of the company
receives a spreadsheet with forecast numbers needed for the upcoming months. The sheet is
made by the general manager, Stig Andresen. After a production order is initiated, a warehouse
employee goes through the warehouse with a list and fills up a carton with goods. Purchasing
assistant Pia Olsen has the responsibility to order standard goods, both direct and indirect ones.
Sharing of knowledge Sharing of knowledge inside the company must be rather poor, seeing
into the problem where Kjoller was disappointed that he had not heard about the delayed goods
for Frankfurt, Germany.
Physical locations Formerly Copenhagen district of Frederiksberg, later on in the years
relocated to Farum, Denmark.
Legal set-up Medico Electronics attained ISO 900-1 certification in 1998. Today, the company
has an EN 13485 certificate and is entitled to CE-mark its products and also has obtained UL
certification. Medico Electronics have been recently contacted by the US authorities, saying that
MEs application for FDA approval has been accepted for 2 of their most important products.

Human Resource Management

Closed / Open organization Seeing as Medico Electronics avoid using any sorts of
advertisements for their production and the information about the companys feature is held
inside the company provides us an image that it is a possibly closed organization.
Motivation There are no apparent arguments between the workers inside the company, aside
the disagreement of some ideas, which allows us to believe that the workers are motivated.
Employees qualification Although there was zero to none information provided about the
qualifications of employees, this is a company that produces highly complex devices for medical
purposes, which provides is with an answer that they are highly qualified. Although, high
qualifications are not needed for warehouse employees.
Reward system and processes In the medical field, people always need to progress with their
work towards a better future, there is no apparent reward system currently in the company, but
rewarding people for their contribution would prove to be great, reward systems also boost
motivation.
Managing of education There was no such information provided in the case about Medico
Electronics, but we can safely assume that there must be some kind of education, as in the
medical field, employees need to be constantly trained how to properly act with the equipment to
both safely and effectively reach sought out results, as the medical field is constantly improving.
Management style In this company it is apparent that the management style is Democratic,
since when it comes down to decision making, everyone can pitch in their opinion and options
for the company are considered as a whole, the decision is not made by only one person.

Technology development
ERP (enterprise resource planning) There is no real ERP system as such in Medical
Electronics, they are using a rather old version of Navision. The system had been adjusted a few
times to match the requirements of the company, but the system is difficult to maintain or convert

to a new version of, for example, Microsoft Dynamics. As a result, the company is still stuck
with many paper-based systems which are developed through Excel by individual employees.
CRM (customer relationship management) All sales are managed by a subsidiary, in which
the staff either visit their customers directly and make certain agreements with them, or work
through partnerships with wholesalers which are within the medical sector.
Production control The production process is manual, most often characterized as the
assembly of parts. Other processes, such as material processing and finishing are restricted to
semi-manufactured. Due to this, the goods are carried out by the companys sub-suppliers. When
producing individual devices, it is done by one specific employee, who from here on out is
responsible for the entire device. Production is based on paper which has a drawing of the device
on it, which has been drawn up and approved by the Research and Development and Quality
Control departments.
B2B/B2C Technology Medical Electronics is using business to customer technology.

Procurement
Supplier search Poul Kjller had been recently contacted by several cables and
printed circuit boards suppliers from China.

Supplier selection There are 3 things that have an impact on supplier selection for Medical
Electronics, which are price, quality and delivery time. There had been a business proposal by a
Chinese supplier, as they were offering competitive prices for several products, but having
suppliers in China would mean an even longer delivery time, which is a current problem for ME,
also the quality of said products from China are highly questionable and too risky.
Purchase contracts Pia Olsen, who is the purchasing assistant of Medico Electronics, is
responsible for purchasing standard goods, both direct and indirect ones. Typically, during her
work day, she prints out demand lists from their IT system Navision, after which P. Olsen begins
ordering goods from Medico Electronics usual suppliers. Usually P. Olsen sends off an order to
the supplier she believes offers the lowest price.
Supplier evaluation Supplier evaluation is based on 3 main components, which are 1. Time of
delivery. 2. Price. 3. Quality

Purchase prognosis We can assume that Medico Electronics purchases are made based on
their previous years. To add, as seeing that two of their main products had been FDA approved,
they made a statement that their sales could double.

Primary activities
Inbound logistics
Optimum purchase size Although there is not much provided about the purchase quantity of
goods for this company, we can safely assume that it must be rather big. In attachment 4, it is
shown how many components are needed for just one product, a brain scanner, and how many
parts for each component are needed annually. For these products both raw materials and semimanufactured goods are needed.
Inbound transport In the case provided, approximately 75% of all purchases are mainly made
in Eastern Europe, primarily in Poland, and these orders are brought to Farum, Denmark by the
suppliers. Poul Kjller believes, that the transport of goods should be made by Medico
Electronics itself, rather than the suppliers, through the use of Ex Works incoterm, as they would
be in charge of the transport, they would know exactly when the goods would arrive.
Goods receipt After the goods have been delivered to Farum, Denmark by the suppliers, the
delivery note is taken and carefully compared with the actual goods that are loaded on the trucks.
Any mistakes that are made are marked on the delivery note and a remark is later on entered
manually in Navision.
Quality control The production process of the goods is mostly manual. Other actions such as
material processing and finishing are viable only towards semi-manufactured goods, and these so
called actions are carried out by the companys sub-suppliers. When producing individual
devices, it is done so by only one specific employee, whom from here on out, is responsible for
the entirety of the device. Production is proceeded through a sheet of paper with a drawing of the
device, which has been drawn up and approved by the research and development group and the
quality control department as well.

Goods storing When the ordered goods arrive, they are moved to the warehouse, which
mainly contains raw materials and semi-manufactured goods. Henrik Carlsen said, that they only
produce goods to order, as in the medical industry, where product development is rapid, stocking
up shelves is not a good idea.

Operation
Operation control No information provided.
Operation philosophy No information provided, we can assume it is quality and price.
Bill of materials The company is using a really old version of Navision.
Productions processes Main production is being held in Farum, Denmark. Semi-manufactured
goods such as cables, circuit boards and mechanical parts are outsourced to Poland.
Production strategy The company is using MRP.
Production layout (Production line / Continuous flow / Job shop / Batch production / Fixed
position) In this company, the type of production layout that is used is both job shop and fixed
position. Job shops handle custom or semi-custom manufacturing processes such as small to
medium-size customer orders or batch jobs. Information taken from a Wikipedia article.
Fixed position assembly refers to an assembly system or situation in which the product does not
move while being assembled. Information taken from a Wikipedia article.
Customization point (ETO, ATO, MTO, MTS) the customization point that this company is
using is MTO (make to order) and ATO (assemble to order), once they receive an order, a
warehouse employee traverses through the warehouse and collects necessary parts for the
product.

Outbound Logistics
Stock size The amount of finished goods inside the warehouse is limited, as they only produce
goods to order and tying up the companys money in finished devices could be risky, as product
development in medical industry is constant and rapid. A problem had arisen, as The Stig and

Kjoller pointed out, that only about 50% of the products are customized, and that increasing the
stock size of finished goods could possibly solve some problems related to long delivery times.
Stock mix Medico Electronics products include brain stimulation devices as well as systems
for skin treatment. Approximately half of the goods produced by the company are unique, with
customer specific modifications in design and even function. The remaining goods are standard
ones.
Goods storing Medico Electronics warehouse mainly contains raw materials and semimanufactured goods. When the ordered goods arrive from the suppliers, the delivery note is
taken and carefully examined to determine whether the arrived goods match what is shown on
the delivery note. Any surfaced problems are marked on the delivery note, and later on a remark
is entered manually into Navision.
Outbound transport Finished goods are sent directly from the warehouse stated in Farum,
Denmark to customer all over the globe. Orders that are meant to be delivered to customers in
Europe are usually sent by truck, but shipments that are supposed to go overseas end up being
sent by airfreight, due to time considerations, as the company is already facing problems with
long delivery times. Medico Electronics possess no contractual delivery companies, as Kjoller
insists on finding as low transport prices as possible, due to this, the company uses many
different carriers.
Transport papers No information provided regarding transport papers.
Pick and pack Once a production order has been initiated, a warehouse employee walks
through the warehouse with a picking list in his hands and fills up a carton with the goods needed
for production. As Medico outsources a part of its production to their collaboration partners in
Poland, there are situations where certain parts shouldve been on stock in Farum, are instead in
Poland, which results in unavoidable production delays.
Customer service per segment No information provided.

Sales and Marketing

Sales budgets In the given excel sheet, we can see that the companys sales are increasing
every year, and with the FDA approval on 2 of their main products, the company is expecting an
increase of double the profits.
Customer segmentation (ABC) Medico Electronics most profitable areas and main
customers are, as follows: Scandinavia, USA and Germany. These 3 countries amount to 69% of
total sales made by this company.
Targeting (undifferentiated / differentiated / concentrated / micromarketing): The company has
undifferentiated marketing.
Differentiation and positioning the company aspires to produce goods with a high quality
level and flexible deliveries.
Sales and marketing activities No information provided.
Market surveillance No information provided.
Customer relationship management Although no information is provided in this manner, we
can assume that it should be good, since all orders are made through employees going directly to
the buyer or companies and write up deals.
Time to market No information provided.

Service
Handling of claims and returns In the medical industry, there is no room for mistakes as the
quality of the produce should be of top level, so we can assume that there is hardly any claims
and returns from the companys customers.

Logistics efficiency
Delivery time

Administrative order handling We can assume it is short, since the staff either visit customers
directly and make agreements with them, or work through partnerships with wholesalers within
the medical sector.
Technical order handling We can assume it is quite short.
Purchasing delivery time 75% of materials are received from Eastern Europe, mainly Poland,
and it was mentioned that it takes 8-10 days more to receive the products than getting them from
Danish suppliers, so we can assume that it is rather long in this situation.
Production delivery time Orders are being sent to the logistics manager of the company Poul
Kjoller, who adds a date of delivery to the order and then he sends it further to the production
planner. All production planning is worked out on an excel sheet. The production process of the
goods in this company is manual, mainly assembly of parts. Other processes such as material
processing and finishing are carried out by the companys sub-suppliers. Production of the
individual device is typically done by a specific employee. So we can make an assumption that
this step is rather long as well.
Distribution delivery time Inside Europe, Medico Electronics is using trucks for deliveries, but
for most overseas buyers, orders are being sent through air freight due to time considerations. As
Medico Electronics is facing delivery time problems, we can assume that distribution delivery
time is not short as well.
Stock service
The percentage of products that are being delivered directly from stocks is 100%.
Delivery observance
Although it is not said much, ME has to use air freight for overseas deliveries, so we can assume
that most of their deliveries reach its buyers on time.
Delivery flexibility
Product flexibility Medico Electronics only produce brain scanners and skin treatment systems,
they are not currently adding any new products to their assortments, only outsourcing a part of
their semi-manufactured goods to Poland.

Functional flexibility The company is only focused on medical technology.

Volume flexibility The usual order only weighs between 25 600 kg.
Distribution flexibility Medico Electronics is using a number of different transporting
companies for European deliveries through trucks, and is using air freight for overseas deliveries.
Delivery information
Medico Electronics have no contractual companies that would do the deliveries, as Poul Kjoller
is always trying to find the cheapest company for delivery.

Logistic cost
Warehouse cost
Operation Although no information is provided about the costs of operation, Medico
Electronics facilities are located in Farum, Denmark, so we can assume that operation costs are
quite high.
Damaged goods / Waste As Medico Electronics is a make to order based company, their
shelves are not overstocked and they do not have products that have stayed on the shelves for too
long, so there is no accumulated waste that they need to spend money on to take care of.
Unsaleable There is no unsaleable products inside the warehouse.
Interest on stock value No information provided.
Transport cost
Inbound 75% of materials are bought from the suppliers in Eastern Europe, where transport
costs are not as costly as it is in Denmark, so we can assume that it should rather be low.
Internal There is no internal transport happening in this company.
Outbound Prices are really low, since Poul Kjoller always tries his best to find a delivery
company for as cheap as possible.
Handling and packing cost

Placing No information provided, but since these steps are happening in Denmark, we can
assume that it should be rather costly.
Picking -..Packing -..Administrative cost
Aside the purchasing assistant, who is getting paid 38.000 DKK monthly, spent 17 million DKK
in the year of 2015 to pay out all the salaries and wages. Aside this, the companys IT systems
are not top grade, so we can assume that money spent on the IT part is not so high, but the
combined costs tells us that the administrative costs of this company is rather big.
Shortage cost
Cost arising from customers buying at another supplier Although there is no such information
provided, we can safely assume that such costs are not a big problem to Medico Electronics, as
they deliver what they promise on time, aside a few mistakes with their German buyers.
Cost arising from a production stop caused by a supplier No such information provided, but it
was mentioned that some materials that should be on stock in Farum, is not and rather the said
items are located in Poland, where Medico Electronics outsources a part of their semimanufactured goods. Due to this, unnecessary deliveries should be made which results in more
money spent by the company.

Porters five forces

Threat of new entrants
Power of a company is affected by the ability of other companies to enter the market. If there is
little time and/or money needed to enter a market and effectively compete for it, then new
competitors can quickly become a problem and weaken the position. Fortunately, in the matter of
medical technology production, entering its market is not an easy task to achieve. Medico
Electronics produce high-end medical technology such as brain scanners as well as systems for
skin treatment. Roughly 50% of these products are being customized as well to meet the needs of

their customers. Seeing as Medico electronics customers are medical institutions and a number
of large and respected universities all around the globe, customer loyalty plays a huge part in this
also.

Threat of substitution
Medico Electronics is not the only company that is producing high-end medical technologies.
Although the company is currently facing problems with one of their main buyers, Germany, due
to some transport mistakes, in the medical industry, substitutions are not an easy task to come
across or to bring into the market, as high quality is a must for this production. The company had
to refuse a supplier from China, solely because they are not sure whether they would be able to
provide the kind of quality goods they need for their production, despite the prices being roughly
10% lower than in Poland. To add, as Medico Electronics is facing problems with delivery time
from its suppliers of raw materials and semi-manufactured goods, they have to use air freight for
overseas delivery, which we can assume results in short delivery times despite it being rather
costly than using other transportation methods.

Competitive rivalry
Although there is not much mentioned about Medico Electronics competitors, its main one is
USA, in which the medical companies are many times larger. The companys shares in USA
amount to 22%, but since a few of the most important products have been FDA approved, ME is
expecting to pave the way for obtaining a much larger share of the American market in the near
future.

Buyer power
Medico Electronics have market shares all around the globe, as the institutions are governmental
(universities, pharmacies, hospitals and etc.). The main ones are Scandinavia, USA, Germany
and France. Currently, Medico Electronics is not upholding a good performance level with
Germany, as their order had been surrendered to a truck driver from Romania. After finding out
that the order had been lost and the hospital in Germany, Frankfurt had no intentions of paying
any money for the last cargo. Afterwards, the same shipment that had been sent to Frankfurt

again encountered another problem, in the matter of braking on the highway, some of the cargo
got damaged, resulting in a 100000dkk loss. Further mistakes might have a bad impact between
these two companies, and if Medico were to lose one of its main customers would be a huge
impact on their profits.

Supplier power
Within most of the areas, Medico Electronics had been using the same suppliers for many years,
of which one had been in cooperation with Medico from its start. However, in recent years many
of the suppliers in Denmark that Medico had been using became too expensive for the company,
and they had to turn their attention towards Eastern Europe, where the prices are approximately
15% lower than in Denmark. Now 75% of all purchase orders are being made in Eastern Europe,
and supplier in Denmark are being used only when there is an urgent order.

S.W.O.T
Strengths
One of the strengths that Medico Electronics possess is the geographical position. 3 of their main
buyers are Scandinavia, Germany and France, which geographically are close to Denmark,
resulting in short delivery times. Another possible strength is that Medico is a make to order
company, so they avoid having problems such as over-stock and they do not have shelves in their
warehouse filled with last years production, which might be a huge problem especially in the
medical industry, where improvements in the technology are constantly made.

Weaknesses
Currently there is a huge problem with delivery times inside the company. As Medico outsources
a part of their semi-manufactured goods to Poland, there have been cases where an employee of
the warehouse has to collect parts for an order, and on a regular basis, a printed circuit board or
any other components that were thought to be in stock are actually on stock in Poland, which
causes an unavoidable delay in production. This same delivery time problem has been one of the

factors on turning down suppliers from China, who offered 10% lower prices than in Poland, due
to questionable quality and long delivery times. Another huge weakness inside that company, is
that they possess no contracts with delivery companies, as Kjoller always tries to find the
cheapest one instead of forming connections with delivery companies, which in the long run,
would prove to be much more useful rather than trying to save money on delivery services.

Opportunities
Even though having no over-stock inside the warehouse is a strength, keeping larger stocks of
finished products inside the warehouse would prove to be a good benefit for the company, as it
could solve some of their issues regarding long delivery times.

Threats
As mentioned in the case, receiving materials from their supplier in Poland results in a delivery
times 8 to 10 days longer than from suppliers in Denmark. This is causing a lot of problems in
the delivery section. Another threat is that the company has no contractual delivery companies,
having to always find one in the case of a needed delivery. Medico Electronics faced problems
due to this, where they had a total loss of 500.000 dkk in just 2 shipments, one where the goods
were taken by an irrelevant driver (surrender of goods) and the other where a driver, due to a
braking accident, damaged the goods with a loss of 100.000 dkk.

Transport law
Issue no. 1
The first problem, that ME is facing with transport law is when a large hospital in Frankfurt,
Germany placed an order of several devices that were supposed to be delivered on three euro

pallets. Kjoller, as usual, was on the lookout for cheap transport, and as the volume of the order
was rather bigger than usual, he decided to use Timo Com. A delivery group by the name of
Nagel Group picked up the offer, as their price sounded reasonable for Kjoller. On the day of the
pick-up, a truck that had been registered in Romania showed up in Farum. It was hard to
converse with the driver, as his English was really poor, but he presented documents stating the
name Nagel Group and it had a sort of booking listed. The goods were loaded and the truck
drove off. Soon after, a truck with a Nagel Group trailer turned up to the warehouse. Papers were
presented and the driver stated, that he came for the three pallets that were due delivery to
Germany. He was informed, that the pallets had been already picked up and the driver left. After
a few days, Medico Electronics had been contacted by the hospital in Frankfurt, asking when
their products would will arrive. Kjoller, disappointed because he had been not informed about
the delay, contacted Nagel Group, and was told, that they did not transport the goods, as they
were told that Medico Electronics had sent the shipment with another carrier.
For transporting inside Europe you only need an invoice, packing list by choice, and a CMR
document. The contract was made between Medico and Nagel. The transport of the cargo was
according to CMR Convention, which means that this was a legal issue and must be solved
according to the Convention rules. The CMR document is one of the most important documents
for transport and acts as proof of the transport process. In this situation, the CMR document is to
be filled by the transport company, which is Nagel. In the CMR document there are paragraphs
22 (In the cases referred to in article 19, paragraph 1, and in article 20, the carrier may
immediately unload the goods for account of the person entitled to dispose of them. Thereupon
the carriage shall be deemed to be at an end, but the carrier shall hold the goods on behalf of the
person so entitled. He may, however, entrust the goods to a third party, and in that case he shall
not be under any liability except for the exercise of reasonable care in the choice of such third
party. The charges due under the consignment note and all other expenses shall remain
chargeable against the goods), 23(The carrier may sell the goods, without awaiting instructions
from the person entitled to dispose of them, if the goods are perishable or their condition
warrants such a course, or when the storage expenses would be out of proportion to the value of
the goods. He may also proceed to the sale of the goods in other cases if after the expiry of a
reasonable period he has not received from the person entitled to dispose of the goods
instructions to the contrary which he may reasonably be required to carry out. 2. Sale of goods

situated in this country must take place by public auction or by other reliable means. The carrier
must notify well in advance the person entitled to dispose of the goods about time and place of
the sale. Sale of goods outside the country shall be determined by the law or custom of the
country where the goods are situated. 3. The proceeds of the sale, after deduction of the charges
due under the consignment note and other expenses chargeable against the goods, shall be placed
at the disposal of the person entitled to dispose of the goods. If these charges exceed the proceeds
of sale, the carrier shall be entitled to the difference.)and 24 (The carrier shall be liable for loss of
the goods and for damage thereto occurring between the time when he takes over the goods and
the time of delivery, as well as for any delay in delivery. 2. The carrier shall, however, be
relieved of liability if the loss, damage or delay was caused by the wrongful act or neglect of the
claimant, by the instructions of the claimant given otherwise than as the result of a wrongful act
or neglect on the part of the carrier, by inherent vice of the goods or through circumstances
which the carrier could not avoid and the consequences of which he was unable to prevent. 3.
The carrier shall not be relieved of liability by reason of the defective condition of the vehicle
used by him in order to perform the carriage, or by reason of the wrongful act or neglect of the
person from whom he may have hired the vehicle or of the agents or servants of the latter.). The
transport process is only held completed once paragraph 24, is filled by the consignee of the
goods. Paragraph 22 is the consignor of the goods, which is Medico and paragraph 23 is the
transporter in which the name and signature of the driver are filled in following the stamp of the
transport company. The consignee of the goods, the transporter of the goods and the consignor of
the goods, all three have to put their stamps on the paragraphs and send a copy to each other for
proof of completion. Apart from these paragraphs, there are paragraphs 16, 25 and 26. In
paragraph 16 the information of the transport company is given. Paragraph 25 is for the truck and
trailer numbers. Paragraph 26 is for the type of the truck and trailer. These paragraphs are all
filled up by the carrier and the end result is that, Nagel has no authority and no win situation in
this case. But Medico according to the information might be liable for the loss of goods if they
havent checked and analysed the documents for any suspicious details. Medico should have
gotten a copy of the CMR from Nagel to put stamp and with, which the drivers documents could
be compared. The SDR ( Special drawing rights) must be calculated for value of goods 400,000
dkk for compensation.
Issue no. 2

The second problem surfaced as Medico Electronics prepared another order for Frankfurt,
Germany of the same products and chose a different carrier that goes by the name NL Transport
ApS to deliver the three new euro pallets with the devices, with a total weight of 715kg. During
transport, the truck driver had to suddenly press on the brakes, subjecting the devices to damages
totaling dkk 100.000.
For the carrier incident form Netherlands. As it is seen from the information, the goods were in
perfect condition when picked for transportation, and during transportation the goods were
damaged. It is not mentioned what agreement was made between both parties, but if it is
according to the CMR Convention, then it is without doubt that the carrier is liable for damage.
The SDR should be calculated on the value of the goods 100,000 dkk for compensation.
Although, the goods might have already been damaged before being picked up by the carrier, but
nothing can be proven, only if the carrier had spotted the damage before the goods were loaded
on the truck. It would be the consignors liability.

Problems of Medico Electronics

1. One of the main problems, which Medico Electronics is facing is how they use many
different carriers for shipping. Poul Kjoller, who is the logistics manager of the company,
takes pride in his ability to find the lowest possible transport price. He shops for good
offers from shipment to shipment. Even though he saves the company thousands of DKK,
Poul fails to realise that going on with this idea causes the company to encounter a
number of problems. Due to not having trustworthy shipping companies to back up
Medico Electronics, they had a total loss of 500.000 dkk when having to deliver an order
to Frankfurt, Germany. On the first delivery, Medico Electronics had Nagel Group to
deliver the order, but in the situation, Medico Electronics surrendered their goods to a
truck driver that was registered in Romania, who drove off with the goods and was never
seen again, and Navel Group refuse to provide any type of compensation, because they
denied using the truck in question, which resulted in a loss of 400.000 dkk. The same
shipment had been drawn up again and was supposed to be delivered to Frankfurt,
Germany by a different shipping company this time that goes by the name NL Transport
ApS. During delivery, a braking session came into action and due to this, some of the
devices were subjected to damages, which amounted to 100.000 dkk. Even though Poul

Kjoller saved a few thousand dkk by finding cheap shipping companies, everything went
to the bottom as just 2 shipments, where it was even supposed to be only one, the loss
that the company had was big. Having to constantly hire new shipping companies, you
can never expect how they are going to treat the delivery and how good are they at their
job. Trust is a key element in this part, especially when Medico Electronics goods are
valued rather high. Medico Electronics is in need of trustworthy shipping companies, as
they are as well facing delivery time problems.
2. Another problem that I would like to mention in my report is how Medico Electronics,
Henrik Carlsen to be exact, refuses to increase the stock size of some of their goods in the
warehouse, pointing out that We produce to order and do not wish to tie up our
money in finished devices which could risk becoming obsolete, as product
development is so rapid in this industry A cut of text taken out from the 3rd semester
interdisciplinary case of Medico Electronics. The Stig and Kjoller had a counter argument
to this, stating that only about fifty percent of what they produce is customized goods and
that increasing the stocks of their finished products could possibly help in solving their
already long delivery times. The argument was left at that point, with no further decision
being made on this matter. Seeing as Medico Electronics is already facing delivery
problems due to not having contractual carriers at their disposal, not having enough stock
enforces this problem even more. There had been cases, where a certain type of goods
was supposedly located on the shelves that should be picked up for delivery was not
there, and it would be found out that the said products are on the shelves in the warehouse
in Poland, where Medico electronics outsource a part of their semi-manufactured goods,
and it takes rather long to deliver the said goods from Poland to Denmark instinctively.
3. The IT sector of the company had not been given high priority before. Inside the
company, there is no real ERP (enterprise resource planning) system as such, as they are
using a rather old version of Navision. The system Navision had undergone a number of
adjustments to meet the requirements of the company, which is all done by a one-man
consultancy agency from Mon. It is rather difficult to maintain this old version of
Navision to keep up with the company, and converting the system to a new version
proves to be difficult as well. Due to the system being outdated, a large portion of paperbased systems still remain in the company, where they are developed through excel by
individual employees of the company.

4. Medico Electronics main armada of suppliers are located in Eastern Europe, specifically
Poland. They had to turn to the suppliers in Poland due to the prices being too high in
Denmark for the company to keep tabs on anymore. Having suppliers in Eastern Europe
results in long delivery time, and if a problem would occur where a batch would not
safely reach its destination, Medico Electronics would fall into delay of production and
possibly become unsatisfactory for their customers.

Solutions
2. For this problem, a good solution would be for the company to have a safety
stock. Safety stocks are held when there is uncertainty in demand, supply or
manufacturing yield; it serves as an insurance against stockouts. Basically, a safety
stock is an additional quantity of an item that is being held in the inventory, in
hopes of reducing the risk that the company would run out of that product. Safety
stock is used as a buffer stock in case the sales of the company are larger than
thought and if a supplier is incapable of performing a delivery of the missing units at
the expected time. Information taken from wikipedia articles. Having a hedge
inventory would also prove to be useful in the future in case of problems occurring
with suppliers. Inventory created to protect against a possible future event or
disruption in supply, such as a strike, major vendor shutdown, prospective trade or
government program change, or similar situation.
1. For the problem related to not having any contractual carriers, signing long term
partnerships with shipping companies would be a lot more beneficial than having to
hire new ones every time you need to make a delivery. With long term partnerships
also come long term relationships, and there is quite a few benefits that the
company would gain from this. They might have reduced costs, seeing as Medico
Electronics deliveries are not big (25 600kg) they ought to be rather constant, the
more deliveries you do, the more the carrier company shall provide favorable prices.
4. The mistake that Medico Electronics made, was how they disregarded their
Danish suppliers due to increased costs. Forming long term relationships would
result in : 1. Reduced costs. 2. Increased efficiency and communication. 6. Continual
improvement. Points 1 and 2 are especially good for Medico Electronics, as they are
keen on saving money where it is possible. Increased efficiency and communication
means shorter delivery times, which would prove to be extremely beneficial for the
company.

Conclusion
To sum up my report, I would like to say, that if the company wants to further expand its
business, they should tend to their problems as soon as possible. Currently, the problems are of

no huge threat to the company, but solving these problems would help them improve in the near
future and possibly be on the same level as their main competitors in America.

Bibliography
Thesaurus
Various wikipedia articles
Businessdictionary
CMR convention
Materials used from fronter

References
Wikipedia