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MTC Supply Chain Strategy.pptx
- 1. MTC Supply Chain Strategy BY: JON MILAN
- 2. The Case Medical Technologies Corporation (MTC) a medical Device Manufacturer in Collegeville, PA needs to come up with costs savings large enough to cover the newly-imposed Affordable Care Act (ACA) Medical Device Excise Tax of 2.3% of revenue. The surgical devices that the firm sells puts them squarely into the focus of this tax, and after taxes, 2.3% of sales translated into over 10% reduction in MTC’s profits.
- 3. Executive Summary Reduce costs by at least 2.3% to account for the new ACA tax 2.3% revenue tax increase translates to 10% reduction in MTC’s profits Create supply chain network Include in house sterilization Use Smart Kiosks at hospitals Improve RFID tagging Use 3PLs to strategically store and position products Improve forecasting Reduce safety stock
- 4. Areas of Improvement Improve forecasting Reduce safety stock Reduce supply chain touch points Cut out third party sterilization Develop in house sterilization at manufacturing plant Build own supply chain network with 3PLs Allows for selling at market price rather than wholesale Cut out branch loaner offices for stock Dedicated Warehouses/DCs Reduce Sales involvement Cut out trunk inventory Replace with kiosks Utilize sales solely for relationship building and teaching of medical devices Capitalize on GPO’s
- 5. Risks High start up costs Capital costs Building/Renting of Warehouses/DC’s Operational costs Maintaining Warehouses/DC’s Hiring new personally to manage supply chain Lack of experience in creating a self sufficient supply chain Seasonal demand trends change Hospitals not on board to by direct from manufacturer • Increased sale profits • Greater product control through supply chain • Quality assurance • Better relationship with Hospitals • Lower transportation costs • Consistently accurate forecasting • Retail sales price instead of wholesale Benefits
- 6. Resources Needed Supply Chain network Warehouses/ DC’s Sterilization capabilities Supply Chain employees
- 7. Forecasting MTCs forecast has a mean square error of 102,587,493 and a mean absolute % error of 114.64% Using a Naïve forecast using the previous years demand for each month reduces the mean square error to 1,219,697 and the mean absolute % error to 3.17% This results in a leaner supply chain and reduces costs Using this new naïve method production could have been decreased production by 22,437 units
- 8. MTC Demand vs. Forecast 0 10,000 20,000 30,000 40,000 50,000 60,000 Demand/Forecast Month/Year MTC Demand vs. Forecast Shipped(Demand) Production (MTC Forecast) Naïve(Previous Year)
- 9. Current MTC Product Flow Many Touch points 5 day sterilization process Multiple storage arrangements Difficult to manage inventory
- 10. Manufacturer Sterilization Distribution Center Manufacturer Branch Office Loaner Office Central Receiving/ hospital Storage Operating Room Current MTC product Flow Chart
- 11. Proposed MTC Product Flow Less Touch points In house sterilization Cut out Loaner offices Cut out trunk storage Easier to manage inventory
- 12. Manufacturer Central Receiving/ hospital Storage Operating Room Manufacturer Warehousing/ Sterilization/ RFID tagging Distribution Center Proposed MTC Product Flow Chart
- 13. The Numbers Revenue in 2014 was $5,953.86 and cost of goods sold was $1964.82 New 2.3% tax on 2014 revenue equates to $136.94 in additional taxes Demand for 2014 was 359,460 New forecasting method forecasted 347,315 units in 2014 22,437 less than MTC produced Just by reducing production MTC could have saved $122.64 Starting stock in 2014 was 125,767 and ended with 136,058 New method would have an ending stock of 113,622 in 2014 By reducing safety stock by an additional 5000 units MTC can save an additional $27.33 in 2014 Average demand a month was 29955 in 2014 A safety stock of 108,622 still provides a 3 month safety blanket
- 14. Can MTC offset the ACA tax? Yes Just by improving forecasting and reducing production and safety stock MTC can offset the cost of the ACA tax $136.94 ACA Cost increase Improved Forecasting/Inventory savings of $149.97 MTC can reduce transportation costs by creating an in house supply chain network. MTC can increase sales prices with this network by servicing hospitals directly and selling their product at retail price
- 15. Thank You For Joining My Ted Talk