Medical Technologies Corporation is facing challenges from the Affordable Care Act's medical device tax. To offset this, Beth Ross proposes analyzing cost savings within the supply chain. Short-term proposals include bringing sterilization in-house to reduce transportation costs, eliminating trunk stock and loaner offices, and refocusing sales reps' roles. Mid-term proposals are implementing smart kiosks for inventory control and using RFID tracking more effectively. Long-term, Ross proposes a lean system with inventory aligned to demand and potentially switching to an FSL/GPO distribution model to reduce transportation costs. The goals are to improve lead times, reduce costs, boost sales and earnings to offset the medical device tax's financial impacts.

1. Medical Technologies Corporation
Supply Chain Strategy
Beth Ross

2. Challenges and
Goals
Challenge: ACA Medical Device Tax 2.3% of
Revenue affecting Operating Income and
Net Profit
Goals: Offset this tax by analyzing possible
Cost Savings within Supply Chain

3.  Financial Analysis
steady growth in
revenue thru 2012
continued growth but
slower from 2013-2014
SG&A expenses-
significant increases
Negative growth of
Operating Income
0
1000
2000
3000
4000
5000
6000
7000
2010 2011 2012 2013 2014
MTC Financial
Revenue Cost of Goods Gross Profit SG & A Operating Income Net Earnings

4. Inventory
Management
• 78% of MTC Inventory in 2013 and 2014 is in
Finished Goods
• Serious analysis of Forecast
• Reduce the amount of locations Inventory is
currently stored
• Working with a Lean system to measure and
manage certain new procedures
• Evaluate and Improve Automation to aid
with Inventory management
• Elimination of Trunk Stock

5. Product Flow- Key
areas to Analyse
 Off-site Sterilization
 Loaner and Branch Offices within the
distribution channel
 Salesmen duties and Trunk Stock
 Overall transportation of products

6. Executive Summary Short-term proposals
• Analyse Sales Reps Roles and
responsibilities
• High Commissions are adding cost to
product
• Examine Trunk Stock affecting
Inventory status and management
• Analysis of Supply Chain to improve
Logistics and Cost
• Bring Off-site Sterilisation to In-house
with a benefit of saving on
transportation and over-all lead-time
• Eliminate Branch or Loaner office to
save on transportation and decrease
the amount of touch points

7. While making Decisions, things to consider..
Sustaining solutions for
long term benefits
Carrying out proposals for
a seamless roll-out
Ensure the proposals will
achieve the cost savings
required
To ensure the solutions
will meet company
objectives

8. Benefits, Risks, Mitigation- Short term goals
Benefits
• In-house sterilisation will shorten the lead-time
of this procedure by eliminating the
transportation to and from and ultimately save
on cost
• MTC will be paid quicker
• Eliminating Off-site will remove unnecessary
touch points
• MTC QC can remain in house and not have to
travel to off-site
• Aiding with Inventory management by
producing and sterilising as needed
• The elimination of either Branch office or
Loaner office resulting in savings in
transportation
Risks and Mitigation
• In-house sterilization not currently in house, can
be managed by Implementation of changes
within their organization including detailed
planning and infrastructure
• Setting up a “clean” room for sterilisation and
obtaining FDA/audit
• Training personnel
• The additional costs to make changes can be re-
couped with savings in transportation and
obtaining payment quicker from hospitals due to
shortened lead-time

9. Additional Benefits, Risks, Mitigation
Sales staff roles/Trunk Stock
• Re-align responsibilities of certain
sales staff by removing Trunk stock,
which will help with inventory
management and ultimately
reduce high commissions
Risk and Mitigation
• Risk of losing sales Rep/Surgeon
relationship, which can be
managed by allowing certain reps
to spend more time focusing on
sales and aiding surgeons in O.R as
needed.
• Reduced visibility in the field can
be offset by the implementation of
Smart Kiosks Inventory
management, increasing revenue

10. Product Flow- Short Term
Improvements
 Elimination of Off-site sterilization
 Transportation savings
 Inventory costs controlled within the Supply Chain by
reducing/eliminating Sales Rep Trunk stock
 Sales Reps focus more on their relationships with
Surgeons/Hospitals, increasing sales
 Elimination of either the Loaner or Branch office
allowing for additional transportation savings, and less
inventory within the Supply Chain
 Ultimately reducing the cost of SG&A which will
increase revenue

11. Executive Summary Mid-Term Proposals
• Implement a Smart Kiosk System
around Hospitals
• This will help with Inventory Control,
and reduce the need for hospitals to
carry inventory, which is not always
up to date
• A Smart kiosk will allow MTC to have
visibility thru the entire supply chain
including last mile and less handling
of product
• Use RFID tracking system more
effectively
• Help to keep better track of inventory
by ensuring this system is
implemented throughout the supply
chain at all locations

12. Smart Kiosks- Mid
Term Proposal
• Enable better management
of Inventory Control allowing
MTC to have complete visibility
of their product throughout
supply chain
• Quick adjustments in
planning towards LUM Lean
system
• Eliminate need for Hospitals
to keep physical count of
Inventory
• Frees up Sales Reps to re-
align their focus towards
doctor/surgeon relationship

13. RFID- Effective
Use- Mid Term
Proposal
• Use current RFID tracking system
more effectively
• Real time Inventory, with
identification of Item and
procedure
• Keep better track of inventory by
ensuring this system is
implemented throughout the
supply chain at all locations
• Reducing Inventory
management costs
This Photo by Unknown Author is licensed under CC BYSA-NC

14. Executive Summary Long-Term Proposal
• Consider implementing LUM (Low
unit of measure) Lean system
between distributors and hospitals by
having inventory expenses more in
line with clinical demand
• Consider the possibility of switching
from Distribution model to FSL and
GPO system allowing products to be
closer to end customer and reducing
transportation costs
• This could also eliminate the need for
Trunk stock

15. Summary- The Decisions
make sense to achieve the
Goals
 The Short-term proposals should bring about quick
financial benefits aiding with the 2.3% ACA Medical tax
 The Mid-term proposals will help with sustainability and
improved Inventory management adding to financial
benefits
 The Long-term proposals aim to achieve a smoother, more
cost effective Supply Chain
 Improved Lead times
 Reduced SG&A costs
 Improved Sales
 Improved Inventory Management
 Increase in Net earnings and Operating Income

16. Thank you
Beth Ross