Coursera Supply Chain Management Strategy course case study capstone - MTC

1. Crafting a Persuasive
Strategy Presentation:
MTC Case Study
Coursera Supply Chain Management Strategy
Shih-yu Chiu

2. The Case
The Company
Medical Technologies
Corporation (MTC) is a
medical device
manufacturer based in the
US. Its product portfolio
includes high-tech medical
surgical kits used in critical
care surgeries by surgeons
in various hospitals across
the country.
The Problem
● ACA medical device
tax of 2.3% of
company’s revenue
will be imposed on all
medical device
manufacturers. This
tax will translate to a
10% reduction in
MTC’s profits.
● We need to come up
with a cost savings
plan so that the 2.3%
tax burden is
mitigated.
Major stakeholders
● MTC - board,
management, sales
rep
● MTC product
distributors
● Third-party
logistics (3PL)
● GPOs
● Surgeons
● Hospital
administrators

3. Executive Summary

4. Plan Proposals
● In-house sterilization
○ Reduction in transportation cost
○ Direct control over key manufacturing process
● Elimination or limitation of sales representatives
○ Costs to sales rep which contributes an average of $300k per year can be
reduced
○ Sales rep is to focus only on their core responsibilities rather than
maintaining inventory
● Limitation of branch offices and elimination of trunk stock
○ Reduction of inventory costs and direct costs to the final product
○ Streamlining can save a major portion of the SG&A costs, which was 45%
of revenue in 2014

5. Plan Proposals
● Change in forecasting method
○ Establishment of stable or constant volume production
● Technology implementation - RFID, Smart kiosks, 3D manufacturing
○ Smart kiosk system integrated with RFID tag would enable manufacturer
to have complete visibility into the end bit of the supply chain - inventory
control
○ 3D manufacturing helps with reducing production time
● Adaptation of lean techniques and evolve as a strategic supplier
○ Just in time, kanban system helps with reducing inventory costs
○ Establish long-term relationships and win-win situation with customers

6. Product Flow

7. Areas of Improvement

8. In-house
sterilization
Forecasting
method
Sales
representatives
Technology
Branch office and
trunk stock
Strategic
partnership

9. In-house sterilization
● Elimination of products movement to and from off-site sterilization
locations, as this saves transport time of approx 96 hours/4 days
● Have direct control over sterilisation process, and can help "just in time"
sterilizations
● Immediate access and control to emergency demands
● Financial benefits:
○ save transport costs
○ control on contract services costs

10. Forecasting method
A graph is plotted between product quantity and period of months containing Actual
Demand (sales) and Forecasted Demand (production) for 2013 and 2014 based on current
data of MTC.
From the chart, it is evident that MTC follows seasonal forecast method.

11. Forecasting method
The following forecasting techniques are also considered and different to MTC's forecasting:
● Naive forecast
● Cumulative mean
● moving average (N=9)
● exponential smoothing (alpha=0.009)
Based on the calculations of these tested forecasts, results are plotted below:

12. Forecasting method
From the obtained results and accuracy measures, it is evident that MTC's actual forecast is actually better
than other tested forecasting techniques (the MSE is lowest). This is because each year actual demand is
found to follow certain pattern and this seasonal pattern repeats each year based on the actual forecast
demand values. It is therefore clear that MTC's forecast is based on seasonal forecast.
However, the actual demand and the actual forecasted demand found to be more fluctuating over the period.
Since MTC has their own starting stock to be higher than the actual demand for each period, the fluctuation in
the forecasted demand can be reduced by considering constant production over periods. So in this case we
need to decide better forecasting technique based on stable values (low fluctuation) rather than selecting low
accuracy measures of the forecasting technique.
Based on the above constraint, it is evident that exponential smoothing (alpha=0.009) has more stable values
(remains constant) over the period of time. Considering the long run, cumulative mean and moving average
(N=9) also found to have stable forecasted demand values.

13. Sales representatives
● Sales reps cannot be completely eliminated, but they can be improved
to focus on their core duty as maintaining relationships with
hospitals/surgeons instead of inventory control
● Financial benefits:
○ cost control to sales rep
○ reduction in direct cost to final product
○ may achieve increase in revenue from focused sales activities
○ achieve overall final net earnings

14. Technology
● RFID
○ enables tracking and monitoring of products
○ accurate inventory records in real time
○ eliminates manual counting, stock-outs, inventory wastes and
expired items
● Smart kiosks
○ surgical kits can be stored in smart kiosks at hospitals to
effectively conduct inventory control
○ manufacturer will have visibility to end of supply chain
● 3D manufacturing
○ helps with rapid manufacturing of products
○ used as key element in just in time productions

15. Branch office and trunk stock
● Reduction of stock quantity in branch office
● Elimination of trunk stock
○ reduction in moving stock inventory
○ damage and missing items can be avoided
○ manufacturer and distributor will have full control of stock
● Financial benefits
○ reduction of inventory costs
○ can save a major portion of SG&A costs, which is 45% of 2014
revenue

16. Strategic partnership
MTC as a strategic partner of hospitals:
● Make business contracts with hospitals by assuring lower per unit costs
to hospitals in exchange for higher volume business to MTC.
● MTC's R&D team to work closely with top surgeons to check their
needs and develop new or improve products that brings hospitals
benefits.
● Develop a win-win situation with major hospital groups and aim for
building long-term relationships with them by providing better pricing,
supply model and providing wider product variety based on customer
demands.

17. Resources

18. Resources for Improvement
Initial Investment Cost
● In-house sterilization
● Smart kiosk system
integrated with RFID
tag
● Outsourcing for 3D
manufacturing or
contract labors
High-skilled Labors Land Resources
● In-house sterilization
● Sales reps for PPI
● Lean implementation
● New manufacturing
plant/facility for in-
house sterilization

19. Risks and Contingencies

20. Risks and contingencies

21. Thank you