- Medical Technology Corporation (MTC) is a medical device manufacturer located in Pennsylvania that produces and sells surgical devices. - They faced problems due to the Affordable Care Act's medical device excise tax of 2.3% of revenue, which led to a 10% reduction in net profits. - MTC proposed transforming their supply chain management strategy through implementing smart kiosks in hospitals, moving sterilization in-house, downsizing salesforce, and establishing online customer assistance to reduce costs by 14% and increase net profits by $38 million.

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

2. Summary
• They are a medical device manufacturer located in Pennsylvania.
• They are a Surgical Device Manufacturer and Seller.
• Problem Faced:
• Implementation of the Affordable Care Act (ACA) which is Medical Device
Excise.
• Tax is of 2.3% of Revenue.
• The newly introduced tax leads to a 10% reduction in Net Profits.

3. Finance Overview
• Revenue Growth:
• The revenue growth was strong from 2010 to 2012 which is 12% annual avg.
• There was a steady growth from 2012 to 2014: 4% annual avg.
• Spending on SG&A compared to revenue growth:
• SG&A was approx 37% of revenue in 2010 which them jumped to 45% of revenue in
2014.
• The jump was quite drastic for a time span of 4 years.
• Operating income erratic with negative growth:
• Grew approx. 3% from 2010 to 2012 annually.
• Reversal to -12.3% negative growth from 2012 to 2014 annually.

4. Old Process Map

5. Proposed Process
Map
• Less Transportation Time & Distance
• Reduce Lead time
• Can Control in Every steps
• Eco Friendly
• Reduce Stoppage

6. Planning
2014
Month/ Year Demand 2014 production 2014
Forecast
prediction 2014
January 27,135 32,763 26,203
February 34,962 29,642 33,738
March 19,637 32,763 18,977
April 41,514 34,323 40,057
May 34,581 32,763 33,429
June 18,685 32,763 18,070
July 48,953 34,323 47,283
August 1,838 21,842 1,852
September 43,675 32,763 42,170
October 31,457 34,323 30,419
November 33,346 28,082 32,223
December 23,677 23,402 22,894
• Based on demand data of
2013 we forecasted that
data on 2014 data it was
a perfect match based on
seasonal variation, now
for 2015 we can average
the previous data and add
a linear growth rate for
MTC sales.

7. Sourcing at MTC
• In this area it is very important to form a close relationship with the hospitals
(MTC is a strategic supplier).
• Below are some initiatives MTC should consider working with hospitals.
• Using a third-party logistics firm to distribute the products to the hospital,
instead of using the medical surgical distributor. This way MTC can increase its
revenue by selling at retail price and can give a discount to the hospital (lower
price than distributor).
• Installing "smart kiosks" at hospitals to store the surgical kits and control the
inventory in a better way. This benefits MTC because it enables them to predict
better the demand and hold less inventory therefore reducing costs. Also, this
benefits the hospital because MTC can provide them a lower price.
• Look for a way to eliminate or reduce the role of sales representatives. This can
reduce a huge cost for both MTC and hospitals.

8. Improvement Steps
• Create smart kiosk
• Create concierge style customer assistance.
• Move sterilization in-house
• Start activating smart kiosk using existing salesforce
• Displace salesforce by online assistance for surgeons and hospital staff

9. Supply chain KPIs
• Closure of 50% of offices simultaneous with salesforce downsize
• Kiosk feed and start operations while wind down the regional and local
warehousing
• Cost controlling and operations analysis weekly
• Schedule weekly calls to hospitals to ensure SLA does not decrease
• Inventory decrease: -8% costs
• Warehouse costs: -6%
• Transport costs: -2%
• Total of 14% cost saving, 110M dollars
• Less insurance costs, less automobile costs, less tax
• Higher flexibility, higher speed of service, NO trunk inventory.

10. CONSOLIDATED RESULTS OF
TRANSFORMATION
• 12% cost saving on replacing traditional salesforce with online advisory, adding
up to 89M Dollars YOY savings
• Operational model; supply chain; salesforce; online assistance; business model
• 26% combined savings generates 17.4% total cost savings (out of 100% minus
• margin)
• 38M dollars additional net profit.

11. Thank you