2. Introduction
• MTC is a manufacturer of surgical devices based in Pennsylvania.
• The implementation of the Excise Tax (2.3%) is certainly a treat for
the industry that requires immediate attention from MTC.
• We will review a comprehensive proposal based on LOPS and other
key concepts learned through the Supply Chain Management
Specialization from Rutgers University and Coursera.
3. Objective
Create a cost saving plan to reduce SG&A and total cost
of goods sold in order to at least neutralize the effect of
the ACA Medical Device Excise Tax of 2.3%
4. Logistics & Operations
The Sterilization process is critical, so the fact that it
takes 5 days because it is handled by another
company makes it very inefficient. Developing
internal capabilities would allow MTC to save on
time and costs by eliminating product movement.
In order to eliminate waste, MTC should evaluate
the option of doing it in-house. This could take time
to develop, but it would certainly help to increase
efficiency, and reduce lead times & transportation
costs.
The current supply chain is built around distributors,
Third Party Logistics would allow MTC to have full
visibility and control over the processes up until the
product is delivered to the customer. 3PL´s could also
serve as a distribution center and manage inventories
effectively. 3PL´s could bring important advantages such
as tracking if implemented for sterilization and each step
of distribution
Inventory system is obsolete, expensive, and is not
helping MTC to fulfill their customer needs.
Trunk stock is a regular practice at MTC but should
be eliminated since it increases the inventory costs
and risks associated with having sales reps carrying
and managing inventory.
Kanban and JIT should be implemented. MTC
needs to simplify the processes.
Cost of selling is definitely high due to the commissions
that are being paid to sales reps. There is a need to
analyze a fixed salary scenario, or a hybrid model with
incentives that work out for the sales team but does not
hurt MTC´s financial performance.
Also, work on new job descriptions because sales rep
should not be in charge of activities such as maintaning
inventories. Focus should be have the best relationship
with customers.
5. Planning
• MTC needs to focus on demand, seasonality, and
determine the best forecasting method to match supply
with demand and optimize their inventories
• After graphing demand, we can conclude MTC is
forecasting based on seasonality.
• Considering 80% of the surgical kits are standard, MTC
should follow a more precise forecasting method. Also,
trunk stock must be eliminated.
• My proposal to reach stable and constant volume
production is exponential smoothing, or at the very least
moving average. This option will allow the company to
reduce inventory and costs, and at the same time avoid
fluctuations that may cause other issues affecting MTC´s
performance.
6. Sourcing
• MTC needs to transition from being considered a non-critical supplier to
becoming an strategic supplier.
• They must continue having close relationships with doctors, but most
importantly they need to work on the following attributes:
1) an enhanced value proposition to Hospitals: win-win solution
2) increase product knowledge
3) wider product offering.
4) guarantee the 12 "rights":
5) Have an in-house sterilization facility
6) Identify possible mergers and acquisitions (the competitions has already
done it)
7) Invest on R&D and tecnology implementation (RFID, smart kiosks, 3D
printing)
7. Executive Summary
• The Sterilization process should be done in house.
• Consider third party logistics and sign long term agreements.
• Technology implementation is key in several processes. For
example: smart kiosks, 3D printing, and the correct use of RFID.
• Improve inventory management: putting in place a better forecasting
method and eliminating trunk stock
• MTC´s sales reps should devote their time and energy to improve
the relationship with customers and increase sales.
