2. INTRODUCTION:
MTC, a prominent surgical device
manufacturer located in Pennsylvania,
finds itself facing a significant industry
challenge with the implementation of
Excise Tax 2 3. This development
demands our immediate attention.
In response to this critical issue, we
will present a comprehensive proposal
informed by principles gleaned from
the Supply Chain Management
Specialization offered by Rutgers
University and Coursera, with a
particular focus on LOPS (Last One
Percent Savings) and other key
concepts.
3. Objective
Develop a cost-saving strategy
aimed at either reducing SG&A
expenses or cutting the total cost
of goods sold to effectively offset
the impact of the 2.3% ACA
Medical Device Excise Tax.
Areas of improvement:
Logistics Operations Planning
Sourcing
4. Logistics and Operations
The sterilization process holds paramount importance, but
the current duration of 5 days, managed by an external
entity, presents significant inefficiencies. Building internal
capabilities offers a solution that can trim both time and
expenses by eliminating unnecessary product transfers. To
eliminate wasteful practices, MTC should seriously consider
the prospect of in-house sterilization. While this may entail a
development period, it promises improved efficiency,
shorter lead times, and reduced transportation costs in the
long run.
The current supply chain revolves around distributors,
limiting visibility and control for MTC. Transitioning to Third-
Party Logistics (3PL) providers offers the opportunity to
regain full oversight of processes, from production to
customer delivery. Furthermore, 3PLs can double as
distribution centers, streamlining inventory management.
Implementing 3PLs brings substantial benefits, including
enhanced tracking capabilities, especially when applied to
sterilization and every stage of distribution.
The current inventory system is outdated, costly, and fails to meet customer demands
effectively. MTC's routine use of trunk stock, though common, should be phased out due
to its heightened inventory expenses and the risks tied to sales reps handling and
overseeing inventory.
To streamline operations and improve efficiency, the adoption of Kanban and Just-In-
Time (JIT) methodologies is essential. Simplifying processes through these approaches
will enable MTC to better align with customer needs while reducing unnecessary
inventory burdens and associated costs.
The cost of sales is undeniably high, primarily driven by the commissions paid to our
sales representatives. It's imperative to conduct a thorough analysis, considering
alternatives like a fixed salary structure or a hybrid model that provides incentives to
the sales team while safeguarding MTC's financial performance.
Additionally, there's a need to redefine job descriptions, as sales reps should not be
burdened with tasks like inventory management. The primary focus should be on
cultivating strong customer relationships to enhance our market position and service
quality.
5. Planning
Proposal:
Replace the existing manufacturing system, which relies
on predetermined production quantities, with a seasonal
naive forecast approach.
Expected Outcome:
This shift is anticipated to lead to cost reductions by
eliminating unnecessary production runs.
Risk:
The main risk associated with this change is potential
resistance from hospital stakeholders who may not be
familiar with the concept of lean inventory. To mitigate
this risk, the implementation of smart kiosks within
hospitals can be introduced. These kiosks will display the
availability of safety stock when needed, reassuring
hospital parties of product availability and contributing to
a smoother transition to the new system.
6. Sourcing
Proposal:
Initiate strategic partnerships with hospitals and Group
Purchasing Organizations (GPOs), fostering mutually
beneficial relationships based on top-tier service and long-
term advantages.
Expected Outcomes:
The potential for early revenue planning.
The opportunity to secure long-term contracts with
substantial product volumes.
Risk:
The primary risk associated with this approach is the initially
high costs for hospitals and GPOs. However, the advantages
for these partners over the long term include early access to
new technologies and educational workshops on their
utilization. These benefits are designed to cater to physicians'
needs regarding surgical kits, ultimately creating a win-win
scenario in the long run.
7. Executive
Summary
IN-HOUSE STERILIZATION:
CONSIDER BRINGING THE
STERILIZATION PROCESS IN-
HOUSE FOR GREATER
CONTROL AND EFFICIENCY.
THIRD-PARTY LOGISTICS
(3PL): EXPLORE LONG-TERM
AGREEMENTS WITH 3PL
PROVIDERS TO ENHANCE
SUPPLY CHAIN
MANAGEMENT.
TECHNOLOGY
INTEGRATION: IMPLEMENT
CUTTING-EDGE
TECHNOLOGIES LIKE SMART
KIOSKS, 3D PRINTING, AND
RFID FOR PROCESS
IMPROVEMENT.
INVENTORY MANAGEMENT:
ENHANCE INVENTORY
CONTROL BY ADOPTING
BETTER FORECASTING
METHODS AND PHASING
OUT TRUNK STOCK.
SALES REP FOCUS:
REDIRECT THE EFFORTS OF
MTC'S SALES
REPRESENTATIVES TOWARD
BUILDING CUSTOMER
RELATIONSHIPS AND
BOOSTING SALES.
