Melbourne Pathology, a subsidiary of Sonic Health Care, provided a comprehensive range of pathology services as an aid in the diagnosis and treatment of patients in Melbourne and Central Victoria. In a capped funding and highly regulated market such as the pathology service market in Australia, the only way in which the sales of a provider could grow was usually at the expense of another provider. To combat this situation, Melbourne Pathology opted to compete by providing higher quality service and faster turnaround time. The recent results of Melbourne Pathology, however, indicated that although the average turnaround time was within the promised targets, significant percentage of jobs in routine category and over 10% of jobs in the urgent category failed to meet the established targets. The case is primarily intended to illustrate the impact of demand distortions in a service setting that arise due to lack of coordination among various entities in the service value chain and a failure to have an integrated perspective that aligns all departments towards a common goal. This phenomenon is similar to the bullwhip effect in supply chains of manufactured products which has received considerable attention during the past decade. The case provides opportunities for students to develop corrective actions to mitigate this problem.
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