Recommended
More Related Content
Similar to MTC CASE OF STUDY-show.ppsx
Similar to MTC CASE OF STUDY-show.ppsx (20)
Recently uploaded
Recently uploaded (20)
MTC CASE OF STUDY-show.ppsx
- 1. MTC CASE A SUPPLY CHAIN MANAGEMENT STRATEGY Oğuzhan June, 2022
- 2. TAX EXCISE 2.3% of Sales ~15% of Profit ????????? What can be done in order to maintain same profit values by overcoming this situtation? Is it an obstacle or an opportunity for MTC? Why is the burden on the soulders of Chief Supply Chain Officer of MTC? What will be the formula he/she come up with?
- 3. MTC TREND $- $1,000.00 $2,000.00 $3,000.00 $4,000.00 $5,000.00 $6,000.00 $7,000.00 2010 2011 2012 2013 2014 2015 Income Statement Gross Profit Net Earnings 40% SG&A 33% COGS
- 6. Short term • Cooperate with 3PLs • Acquired by a company abroad • Facilitate Sales Rep. more efficient Mid Term • Invest in 3D tech. • Be active on developing markets Long Term
- 7. 0 20 40 60 1 2 3 4 5 6 7 8 9 10 11 12 SHIPMENT(demand) TREND 2013 2014 Guidingmetrics.c om Service level Safety Stock 99,99% 102,687 29,077 28% 155.067.641,00 $ 99% 64,234 67,531 105% 360.142.823,00 $ 98% 56,707 75,058 132% 400.284.314,00 $ 97% 51,931 79,833 154% 425.749.389,00 $ 96% 48,339 83,426 173% 444.910.858,00 $ 95% 45,417 86,348 190% 460.493.884,00 $ Overall Excessive Inventory 89.5%
- 8. 99.99% 99% 98% 97% 96% 95% Picking/Packing Cost $366,426.00 $850,946.40 $945,786.60 $1,005,951.60 $1,051,223.40 $1,088,040.60 Shipping Cost $10,467,720.00 $24,311,160.00 $27,020,880.00 $28,739,880.00 $30,033,360.00 $31,085,280.00 Inventory Cost $14,033,621.51 $32,592,925.48 $36,225,730.42 $38,530,319.70 $40,264,432.65 $41,674,696.50 Total Cost $24,867,767.51 $57,755,031.88 $64,192,397.02 $68,276,151.30 $71,349,016.05 $73,848,017.10 $20,000,000 $30,000,000 $40,000,000 $50,000,000 $60,000,000 $70,000,000 $80,000,000 $20,000,000 $30,000,000 $40,000,000 $50,000,000 $60,000,000 $70,000,000 $80,000,000 SERVICE LEVEL COST SAVINGS
- 11. %8 of sales and 11% improvement translated into $53M savings =$480 M Weekly Quantity Based Market Size Amount of Shipment+Safety Stock Inventory Carrying Cost Pick/Packing Cost Shipping Cost TOTAL COST Regular 68% 6.812 $ 412.206,19 $ 7.153,77 $ 204.369,23 $ 623.729,19 Express 20% 1.973 $ 119.388,99 $ 2.072,58 $ 295.961,54 $ 417.423,11 Distributor 12% 1.080 $ - $ 379,55 $ 32.400,00 $ 32.779,55 Total Cost of 3PL Annual 100% 513.000 $ 27.642.949,13 $ 499.507,00 $ 27.702.000,00 $ 55.844.456,13
- 12. Shenzen, China U.S.A With Exemp. Without Exemp. With Exemp. Without Exemp. 12% 15% 24% 35% Differen ce =12% ~ $40Msaving 0.67 0.28 0.15 0.65 0.34 0.29 GROSS MARGIN OPERATING MARGIN NET MARGIN KPI COMPARISON MTC MINDRAY
- 13. Distributors 12% Exports 37% Hospitals 35% Specialists&Alternate- care Providers… Expected Market Segmentation In 2015 $48B $46B $21B $16B Exports $48B MTC’s Market Share 5% Import Market MTC Mindray Difference S,G&A Expenses / Total Revenue % 40% %32 %8 S,G&A Expenses $ $940M $750M $190M
- 14. • Reduction of footprint • Reduction of labor force • The increase of cash flow • New investment opportunities • Total control of the Supply Chain • Inventory visibility • Point of sales info • Elimination of the trunk stock • Negotiation power • Faster billing • Enable Salesperson more efficient • Diversification of products • Close to fast growing market • Exploitation of export • Growth • Deployment of QA teams • Search for 3PL • Receivable days • Compliance with the MTC standards GAINS RISK S
- 15. ACTIONS EARNINGS RESOURC ES TIMELINE Inventory Management $74M - Establishment of a 3PL Network $53M $56M Tax Inversion $40M $18M Growth by expanding and exploiting $190M - 1 2 3 4 5 1 2 3 4 5 1 2 3 4 5 1 2 3 4 $56,000,000 $-3,000,000 $19,000,000 $204,000,000 EXPECTED ADDITIONAL PROFITS 2018 2017
- 16. THANK YOU
Editor's Notes
- Hello everyone, My name is Oğuzhan. I am here to arrest my case about MTC’s struggle with the new excise tax.
- In this case, new tax has arose for the medical device manufacturers which is 2.3% of sales equals to 15% of profit. The questions are:
- Lets start with the general Picture of the company. As it can be seen in the graph, there are two major elements that cut the profits. I’d like to underline the Sales, General and Administrative expenses. I applied forecast for 2015, its increase rate is outweighs rest of the elements in the income statement. And that causes relatively less profit despite of increase of the revenue. A SCCO can think that salespersonal to be focused on in order to compensate the excise tax. That makes sense. But I think, it’s not the case that I’ll explain later.
- These graph shows health care equipment providers profitability in 2015. Manufacturers’ profitibility is 20% whereas distributors’ is less than 2%percent. This is why MTC can not find a solution through their distributors. With these level of profit, MTC can not push them to make more money. Even if MTC can, it would be neither fair nor sustainable.
- Let’s examine monopolitic situtations of the industry. This graph shows the dominance of the market by 4-largest company for both segments. Competitiveness is stronger amongst manufacturers than amongst distributors. In other words, I presume that a manufacturer, in this case MTC, can not have a bargaining power against the 4-largest distributors which are dominating their segment.
- This is the road map that I can think of what should be done on timely basis.
- The overall stock per month of MTC were 130.000 units for the last two years. That is too much for a company which had very predictive demand for 2013 and 2014. The demand was almost the same, there was no outliers at all. The first thing to do is to calculate the safety stock level for different service levels. The bars at the bottom of the page indicates the overall monthly service level of the medical device companies in USA for 2015. Yearly, average service level is 89.5%. Once the demand is stable and easil predicted, it is not reasonable to hold such inventory than the service level of 95%. That strategy not only reduce cost of inventory, but also increase the cash flow of the company more than $400M.
- What I applied here which is shown on the graph, is the method that I have learned from Supply Chain Analytics course lectured by Dr. Yao Zhao, Rutgers Business School. If I decide on service level of 99.99%, the saving will be $25M 95%, the saving will be $74M. This is a one time saving which also means that it’ll be effective immediately.
- I established a more direct approach to hospital rather than through distributors. Hence, MTC can set a price between wholesale and retail. That’ll definitely increase the revenue. The reduction of the price will be paid more attention by both GPOs and hospital, which will end up increase in the demand also. These are the benefits. There is also disadvantage such as longer receivable days for MTC. At the new flow of goods, MTC will perform core functions like manufacturing, assembling and QA, meanwhile 3PL will deal with the rest.
- There are several 3PL companies in the market which provide end-to-end services and solutions for the manufacturers. Some of them have more than 20 years of experience, located in more than 34 stations across the country. The hardest thing was the choice of a 3PL company. All of them are similar but DHL’s global identity can be utilized especially when you consider the plan that MTC acquired by a foreign company. I think the most disregarded factor, X-factor, out of this relationship will be the fact that set the salesforce free. According to a survey, do you know how many hours sales personnel spend on inventory management at the hospital or the back of their vehicles? At least 20% of their precious time, instead of dealing with the inventory, by the way, 3PL deals with it from now on, they should be channeled to main functions to expand the market to get more revenue for the company. Therefore I chose to facilitate them more efficiently. Do you also know that 20% of the patents of the medical devices are gained through the contribution of a physician or there are several physician-owned distributors in the market? Physicians are still the key decision-makers and it looks this won’t change soon. Thus, the relationship between physicians and sales personnel is too delicate to interfere with. I don’t want to disrupt it
- Regarding Establish’s study which covers 2015-2020 implies the logistics costs / revenue ratio of the industries in US. Overall cost of logistics for the medical device company in US equals 8% of sales . When I adapt this approach to MTC’s revenue, the value comes up as $480M. Even though the 3PL companY generally offer a reduction of the supply chain costs 20%, the industry average is 11% .That saves $53M. Another method that I have learned from Supply Chain Analytics is applied, the annual cost of DHL will be $56M for MTC. So the outcome of this relationship costs almost nothing for MTC on the paper.
- Shenzhen Mindray Bio-Medical Electronics Co., Ltd. provides medical devices and solutions worldwide. The company offers patient monitoring and life support products,, as well as emergency care, peri-operative care, critical care, and IT solutions. It also provides in-vitro diagnostics products, as well as coagulation, urinalysis, and microbiology solutions; medical imaging systems comprising ultrasound and radiology products; and veterinary products. The company was founded in 1991 and is headquartered in Shenzhen, the People's Republic of China. %15 corporate income tax rate in Shenzen practically exemptions inc. 12% Exemptions inc. %24 for MTC for the last 5 years By this acquisition, MTC’s product range can be diversified also.
- Except the tax inversion, Mindray is close to second largest and the fastest growing market in the world where over 2.5B people lives in US exports 1/3 of its medical device products and imports 1/3 of demand . In 2016 Med. Device Market size in US is expected to reach $130B. That means $44Bof products exported regarding market segmentation. To meet the domestic demand in US same amount of products will be imported either that also means approximately $40B worth products entere the country when the money quits. Once combined forces of MTC and Mindray are set in order, there will be a huge opportunity to exploit external trade. This will enable more revenue around $190M for MTC-Mindray.
- The excise tax leads MTC to push its limits and to reconsider its business model from top to bottom. And the gains are not only quantititively, but also qualitatively. Most the things listed here makes MTC leaner to gain competitive advantage in highly competitive market throughout the World with the support of long-term global partners DHL and Mindray.
- When the outcome of the new business model translated into money, I plan to achieve $204M by the end of 2018. These figures I calculated roughly based on data that I have an access to. I strongly believe that there will be also indirect cost reductions and/or indirect increase of sales may occur according to the new business model, that I mentioned in the previous slight as the qualitative gains. These were not taken into account such as warehouse, rental office costs; inventory handling labor costs etc.
- Thank you for your time And I’d like to thank everyone I used their information to prepare this presentation as well.