This document outlines supply chain improvement strategies for Medical Technology Corporation to offset a new medical device excise tax. Short-term plans include upgrading forecasting and realigning sales representatives' roles to reduce costs. Mid-term plans are to insource sterilization, implement just-in-time production, eliminate distributors by selling directly to group purchasing organizations, and partner with third-party logistics providers using RFID to streamline distribution. Long-term plans focus on research and development to create new products and enhance revenue streams. The strategies aim to optimize operations and cut costs throughout the supply chain.

1. Medical Technology
Corporation (MTC)
SUPPLY CHAIN MANAGEMENT STRATEGY DESIGN

2. Presented by:
Muhammad G U Rone
Supply Chain Management approah to
overcome Excise Tax for Medical
Technology Corporation (MTC)

3. 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

4. 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

6. 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%

7. 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%

8. Key Supply Chain Insights
Network can be
optimized

9. New Medical Device Excise Tax
 Recently, the federal government has enforced the Affordable Care Act
(ACA) which includes a Medical Device Excise Tax 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

10. 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

11. 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

12. 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

13. 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

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
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

16. 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

17. Thank you
for
your Time