As is known to all, most successful medical equipment manufacturing companies like GE Healthcare satisfy customers’ need as possible as they can and they are still on the way to improve their supply chains to attract more customers and make themselves more competitive. From this, we can see that customer value which can be defined as “the customer’s overall assessment of the utility of a product based on perceptions of what is received and what is given” (Zeithaml, 1988, p. 14) plays a very important role in supply chain. In order to analyze the role of customer value and how this puts pressure on the supply chain, this paper will use GE Healthcare as an instance to specifically illustrate the market segment it targets, the nature of customer value, its market qualifiers and order winners and current pressures on the supply chain.
GE Healthcare whose general headquarters in the United Kingdom is a $17 billion unit of General Electric Company. GE Healthcare with about 46,000 employees is committed to serving healthcare professionals and its patients in more than 100 countries and it is always looking for innovations to cut down costs, increase access and enhance quality around the world. (GE Healthcare, 2012)
GE Healthcare’s market target is roughly divided into two parts, namely medical products and service. This paper will mainly focus on its product market. GE Healthcare produces a wide range of products which can be specifically set off four primary parts. These are Diagnostic & Clinical Equipment, Information Technology, Life Sciences and Medical Diagnostics. Furthermore, each primary product is divided into several different kinds of functional products. For instance, Diagnostic & Clinical includes diagnostic imaging, clinical products and home health. The diagram below shows the other three primary parts of its product market. (Dineen, 2010)
As we can see from the diagram, with different kinds of medical products GE Healthcare targets on not only the high-end market but also the low-end market. Therefore, it is able to take up more market share than its competitors.
GE Healthcare is a medical equipment manufacturer, so its customer is more likely to be medical retailers rather than individual consumers. Customer value is related to quality, service, cost and lead time, so medical retailers want high-quality products, good service, low cost and short lead time. GE Healthcare improves its quality by reducing medical errors, enhancing diagnostic and remote monitoring and its quality level raised 15% from 2008 to 2010. (Dineen, 2010) Its products have been widely praised by medical retailers.
Besides, “According to the 2010 ServiceTrak Imaging survey for PET systems, GE Healthcare has received a No.1 ranking in overall service performance in IMV’s annual ServiceTrak survey.” (GE Healthcare, 2010) This shows that GE Healthcare provides excellent service to its customers. In addition, the base cost of GE Healthcare decreased by 7% from 2008 which is $5.7 billion to 2009 which is $5.3 billion. (Dineen, 2010) The company is able to reduce its costs while maintaining profit. Thus, medical retailers get price reduction from GE Healthcare. For the purpose of shorting lead time, GE Healthcare optimizes its manufacturing supply chain constantly and keeps efficiency at a high level. So retailers receive products from GE more shortly than before.
Among many medical equipment manufacturers, GE Healthcare’s main competitors are Johnson&Johnson, Siemens Medical Solutions and Philips Medical System. After looking for their common qualifiers, I find that these companies all possess strong financial support, advanced production lines, successful manufacturing supply chains, talent pools and mature innovation teams. For example, “in May 2009, General Electric announced that over the next six years it would spend $3 billion to create at least 100 health-care innovations that would substantially lower costs, increase access, and improve quality.” (Immelt etal, 2009, p.3) So we can regard these factors as market qualifiers in the medical equipment manufacturing field.
Compared to other companies, GE Healthcare has its own unique ways to win business—order winners. The GE company has an in-depth understanding of end-user requirements and can also respond them efficiently. Besides, it optimizes its production line by means of leveraging products with the different prices and feature points required by the market. The GE company enhances its supply chain by optimizing packing, delivery, manufacturing and other value-added services. (GE Healthcare, 2008) It also invests in growth geographies and innovates disruptive technologies. These beneficial ways make a great contribution for GE Healthcare to winning business.
GE Healthcare manufacturing supply chain consists of several processes. First of all, the company selects high quality raw materials around world. Secondly, before being used in biomedical applications, raw materials which are altered need a synthesis process. Thirdly, many individual components of different medical equipments are produced by using raw materials. This process requires specialized skills and procedures. Fourthly, components are shipped to different functional assembly point and finished products are ready to go here. Finally, after being packaged and sterilized, medical equipments are shipped to distributions or consumers. (Gevaert, 2009, p.5)
Though GE Healthcare holds a successful manufacturing supply chain, it is still facing pressures. As consumers prefer to buy high-quality medical devices with less money, GE Healthcare has to cut down costs in supply chain while producing high-quality products. When GE buys raw materials, it takes much more time to look for cheap ones with high quality and purity than before. This results in increasing lead time directly. In order to enhance quality to meet consumers’ needs, GE has to use more specialized and skilled workers or more advanced machines in manufacturing. But this conflicts with its purpose of reducing costs. Besides, in the competition with other companies, GE has to make its supply chain more efficient and faster continuously and this is very difficult to achieve.
Dineen,J.(2010). Healthymagination Investor Update. Lecture presented as part of GE Healthcare meeting,24/06/2010.
GE Healthcare.(2008). 2008 European Cardiology Information Systems Product Line Leadership of the Year Award Recipient.
GE Healthcare.(2010). You can’t put a number on trust. But IMV can.
GE Healthcare.(2012). About GE Healthcare[online] Available at: http://www.gehealthcare.com/eueu/msabout/msabout.html [Accessed 13/11/12]
Gevaert,M.(2009). Upstate South California’s Medical Device Cluster. New California, p.5.
Immelt,J,R.Govindarajan,V. and Trimble,C.(2009). Harvard Business Review. How GE Is Disrupting Itself, p.3.
Zeithaml, V.A.(1988). Consumer perceptions of price, quality, and value: A means-end model and synthesis of evidence. Journal of Marketing 52, p.14.
University/College: University of Chicago
Type of paper: Thesis/Dissertation Chapter
Date: 13 January 2017
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