This document discusses strategies for Medical Technologies Corporation's (MTC) supply chain to address a new 2.3% excise tax on medical devices. Short term solutions include improving forecasting methods, reducing inventory, and removing salesperson trunk stock. Long term solutions propose returning sterilization in-house, decreasing lead times through third-party logistics and removing distributors. Connecting supply bins to hospital, MTC and 3PL systems in real-time would reduce costs and lead times, positioning MTC as a strategic partner. Improved forecasting and sourcing through increased order sizes and an online catalog can further these goals.

1. MEDICAL
TECHNOLOGIES
CORPORATION (MTC)
SUPPLY CHAIN MANAGEMENT
SPECIALIZATION CAPSTONE
INSTRUCTOR: MR. RUDOLF LEUSCHNER, PH.D.
PRESENTER: JONATHON D. PRICE, MBA

2. TABLE OF CONTENTS
• Supply Chain Strategy
• MTC Logistics
• MTC Operations
• MTC Planning
• MTC Sourcing

3. SUPPLY CHAIN STRATEGY
• Problem
• A 2.3% Excise Tax has been instituted on all Medical Devices.
• MTC Board of Directors has requested an indepth look at MTC’s Supply Chain for
possible ways to reduce costs and make up for the 2.3% Tax.

4. SUPPLY CHAIN STRATEGY
• Short Term Solutions
• Improve Forecasting Methods
• Reduce amount of stock on hand
• Remove Salesperson Trunk Stock
• Improved Inventory Control
• Reduced Inventory Costs
• Long Term Solutions
• Return Sterilization Process back in-
house
• Decrease costs
• Decrease lead time for orders
• Use Third Party Logistics(3PL)
• Removes distributors
• Decreases lead time for orders

5. SUPPLY CHAIN STRATEGY (MTC’S DATA)

6. SUPPLY CHAIN STRATEGY
• Net Revenue can be achieved by increasing Revenue and/or decreasing operating
costs.
• Improved forecasting can help achieve this goal due to the reduced amount of
supply that would have to be kept on hand at all time.

7. SUPPLY CHAIN STRATEGY
• My idea of reducing gaps within MCI’s supply chain lies in the ‘Last Mile”
• This change would require installing Supply Bins that are connected to Hospital’s
Supply System, MCI’s Supply System and the 3PL’s System.
• This goal would reduce the inventory storage costs and reduce lead time.
Ultimately working towards becoming a Strategic Partner for the Hospitals.

8. MTC LOGISTICS

9. MTC LOGISTICS
• As previously mentioned, the ‘Last Mile’ of the Supply Chain needs to be
revamped.
• Supply Bins connected to the network would allow nurses to get supplies at the
same time the Hospital, Distributor, and MTC all know that the supplies were
used.
• Again, this would reduce the amount of backup inventory the hospital and MTC
needs to keep on hand while reducing the lead time for resupply.

10. MTC LOGISTICS
• Safety Stock would be almost, but not quite eliminated. It would still be needed
for failures in production or forecasting.
• With real-time usage data, the 3PL would have access to what was utilized in the
hospitals and what is waiting for shipment to the hospitals.

11. MTC OPERATIONS – SALESPERSON TRUNK
STORAGE
• Pros
• Quick Replenishment for Surgeons
• Small amount of storage on hand
• Lower chance of shortage
• “Emergency” Stock stored by
salesperson rather than in hospital
inventory
• Quicker response time
• No waiting for new shipments
• Inventory Expiration
• Increased chance of not selling item
due to improper forecasting of
demand
• Higher Inventory cost
• Even if the company isn’t paying for
storage, the cost of holding it is
higher than selling it.
Recommend MTC cease all Salesperson personal storage. With the addition
of Networked Storage Bins, appropriate levels of stock will be on hand when
needed.

12. MTC PLANNING
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10,000
20,000
30,000
40,000
50,000
60,000
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
New Forecast
Demand Forecast
-
10,000
20,000
30,000
40,000
50,000
60,000
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
Original Forecast
Demand Production

13. MTC PLANNING
• From the charts on the previous page, you can see that the new forecast has
more noise in it than the original.
• However, the new forecast has a Mean Error of -24.3 compared to the original
forecast’s -442.9.
• The new forecast’s Mean Absolute Percentage Error was 1.22 whereas the
originals was 1.19.

14. MTC PLANNING
• Overall, the new forecast will enable the company to have a better understanding
of how much product was needed on hand any given month.
• An accurate forecast will help prevent over producing or keeping too much extra
stock on hand.

15. MTC SOURCING
• Sourcing utilized by MTC needs to include several different avenues.
• By utilizing Third Party Logistics (3PL) it will reduce cost through maintenance and
upkeep to get the devices to where they need to be.
• Sales personnel are still needed, even if they are not storing devices for their own
usage. These individual will use hospital stock to help the surgeons.

16. MTC SOURCING
• Strategic partners need to work towards not only MTC’s goals and objectives but also the
hospital systems goals and objectives.
• MTC needs to strive to put itself into a position where it can meet these goals
before the hospital system asks for it.

17. MTC SOURCING
• Hospital needs in Strategic Partners
• The hospitals want their supplies when they need them, not after they are already needed.
• Proactive rather than reactive
• They need to continue to receive the best pricing in order to keep the cost of their services
low.
• Access
• If there is a new procedure that is going to be offered, the hospital needs to be able to get the new
supplies on hand quickly.

18. MTC SOURCING
• MTC Actions to gain Strategic Partner Status
• Pricing
• This can be accomplished by increasing the order sizes in order to provide lower costs per
item.
• Proactive.
• Real time demand signals.
• Updated supply lockers that are connected to MTC’s database would help this along.
• Access
• Online catalog of all current supplies would help when any new procedures are being
looked at.

19. OVERVIEW
• Supply Chain Strategy
• MTC Logistics
• MTC Operations
• MTC Planning
• MTC Sourcing