Coursers Supply Chain Management Strategy Project

1. Medical Technology
Corporation (MTC)
SUPPLY CHAIN MANAGEMENT STRATEGY DESIGN
Presented by:
Yu Wang

2. EXECUTIVE SUMMARY
Short-term Improvement Plans (within 1 year)
➔ Upgrade our forecasting method
◆ Inventory and associated costs are reduced
considerably
➔ Realign the sales representatives’ job
description
◆ Eliminates “trunk costs” which are
unrealized revenue
◆ Improves inventory management
◆ Strengthens our relationships with our
customers
Mid-term Improvement Plans (within 3-5 years)
➔ Insource the sterilization of our products
◆ Faster processing and delivery of our products
◆ Reduced costs
◆ Greater quality management and control
➔ Implement lean/just-in-time (JIT) production
◆ Increases production and distribution efficiency
◆ No more unnecessary expenses
➔ Let’s do away the distributors and directly sell
to the GPOs
◆ Improves our relationships with our
customers
◆ Products can be sold at retail price
➔ Partner with 3PLs and use RFID
◆ Streamlines distribution
◆ Greater product visibility

3. EXECUTIVE SUMMARY
Long-term Improvement Plans (5-7 years and beyond)
➔ Focus on research and development to create new and
innovative products
◆ Creates more value to our customers
◆ Improves our long-term relationships with them
◆ Enhances our revenue streams

5. MTC’S MARKET SEGMENTATION
Medical Technologies Corporation (MTC)
● Headquartered in Collegeville, PA
● Manufactures and supplies essential medical devices
like surgical kits to hospitals and other markets
Eyport
37%
Hospitals 35%
Specialist &
Alternate care
16%
Distributors 12%

6. KEY FINANCIAL INSIGHTS
• Revenue
● Growing strongly by 11% from 2010 to 2012
● Slowed down to 4% after then
• Cost of Goods Sold
● Steady growth; average annual growth rate is 8%
• Selling, general and administrative expenses
● Constitutes more than 45% of revenue in 2014, from 37% in 2010; average annual growth is 13%
• Research, development and engineering expenses
● Just 6% of 2014 revenue
• Net earnings
● Grew from 2010 to 2012 by 10%
● Contracted after then, falling by 14%

7. KEY SUPPLY CHAIN INSIGHTS
Network can be
optimized

8. NEW MEDICAL DEVICE EXCISE T
AX
▶ Recently, the federal government has enforced the Affordable Care Act
(ACA) which includes a Medical Device Excise T
ax of 2.3% of revenue
▶ This translates into a reduction of 10% in our profits
▶ We need to optimize our supply chain to save up and offset this tax

9. IMPROVEMENT PLANS
Short-term: Realign the sales representatives’ job description
● According to Medreps.com, the average total
compensation of medical device sales
representatives $180,146
● Our sales reps’ $300,000 average pay is 67% higher
SG&A Expenses (2014) $2,683.56
Total Sales Compensations $1,610.14
40% Cut $644.05
Total SG&A Cost Savings $644.05
Total SG&A Cost Savings (%) 24.00%
Benefits
● Elimination of “trunk stocks”
● Better inventory management
● Reduction in SG&A costs
● More focused supplier-customer
relationships
Risks
● Employee resistance, which can be
overcome by ensuring that the transition
process will be collaborative and careful

10. IMPROVEMENT PLANS
Mid-term: Insource the sterilization of our products
Benefits
● Simpler operations
● Considerable reduction in transportation costs
● Less handling and touch points
● Increased control over processing and quality
● Improved lead time by 4 days
● More responsive to customer demand
Risks
● Not currently performed, which can be mitigated by
detailed planning
● Requires high capital investment, which can be
redeemed through the lower transportation costs,
better quality of our products, and by increasing
sales

11. IMPROVEMENT PLANS
MID-TERM: IMPLEMENT LEAN/JUST-IN-TIME (JIT) PRODUCTION
Benefits
By producing what we only need, we can…
 Eliminate waste
 save space
 improve our inventory management
 avoid excessive units
 align our spending with the demand
Risks
● Disruption due to external risks, which
can be mitigated by having an effective
Kanban system in place

12. IMPROVEMENT PLANS
MID-TERM: DO AWAY WITH THE DISTRIBUTORS AND DIRECTLY SELL TO THE GPOS
Benefits
● Increase our revenues since we could sell at
retail versus wholesale
● More direct customer relationship
● Improved customer service
Risks
● Need to convince the GPOs to add our
products directly to their catalog without going
through a distributor

13. IMPROVEMENT PLANS
Mid-term: Partner with 3PLs and use RFID
Benefits
● More efficient logistics network
● Better control of distribution
● Greater visibility because of RFIDs
● Automated and real-time inventory
management
● Improves production
● No stock-outs
● Reduces costs
Risks
● Requires capital investment, which can
be easily recoup in this set-up

14. IMPROVEMENT PLANS
MID-TERM: PARTNER WITH 3PLS AND USE RFID
Benefits
● More efficient logistics network
● Better control of distribution
● Greater visibility because of RFIDs
● Automated and real-time inventory
management
● Improves production
● No stock-outs
● Reduces costs
Risks
● Requires capital investment, which
can be easily recoup in this set-up

15. IMPROVEMENT PLANS
LONG-TERM: FOCUS ON R&D TO CREATE NEW AND INNOVATIVE PRODUCTS
Benefits
 Better customer service
 Stronger supplier-customer relationship
 Enhances our revenue streams
 Diversification of operations and offerings
 Possible tax inversion
Risks
 Products may be more costly or
time-consuming to develop than
anticipated
 Unsuccessful or unworkable
product

16. THANK YOU!
Yu Wang