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Medical Tecnologies Corporation (MTC)

  1. Medical Tecnologies Corporation (MTC) José Casares M.
  2. Introduction • MTC is a manufacturer of surgical devices based in Pennsylvania. • The implementation of the Excise Tax (2.3%) is certainly a treat for the industry that requires immediate attention from MTC. • We will review a comprehensive proposal based on LOPS and other key concepts learned through the Supply Chain Management Specialization from Rutgers University and Coursera.
  3. Objective Create a cost saving plan to reduce SG&A and total cost of goods sold in order to at least neutralize the effect of the ACA Medical Device Excise Tax of 2.3%
  4. Logistics & Operations The Sterilization process is critical, so the fact that it takes 5 days because it is handled by another company makes it very inefficient. Developing internal capabilities would allow MTC to save on time and costs by eliminating product movement. In order to eliminate waste, MTC should evaluate the option of doing it in-house. This could take time to develop, but it would certainly help to increase efficiency, and reduce lead times & transportation costs. The current supply chain is built around distributors, Third Party Logistics would allow MTC to have full visibility and control over the processes up until the product is delivered to the customer. 3PL´s could also serve as a distribution center and manage inventories effectively. 3PL´s could bring important advantages such as tracking if implemented for sterilization and each step of distribution Inventory system is obsolete, expensive, and is not helping MTC to fulfill their customer needs. Trunk stock is a regular practice at MTC but should be eliminated since it increases the inventory costs and risks associated with having sales reps carrying and managing inventory. Kanban and JIT should be implemented. MTC needs to simplify the processes. Cost of selling is definitely high due to the commissions that are being paid to sales reps. There is a need to analyze a fixed salary scenario, or a hybrid model with incentives that work out for the sales team but does not hurt MTC´s financial performance. Also, work on new job descriptions because sales rep should not be in charge of activities such as maintaning inventories. Focus should be have the best relationship with customers.
  5. Planning • MTC needs to focus on demand, seasonality, and determine the best forecasting method to match supply with demand and optimize their inventories • After graphing demand, we can conclude MTC is forecasting based on seasonality. • Considering 80% of the surgical kits are standard, MTC should follow a more precise forecasting method. Also, trunk stock must be eliminated. • My proposal to reach stable and constant volume production is exponential smoothing, or at the very least moving average. This option will allow the company to reduce inventory and costs, and at the same time avoid fluctuations that may cause other issues affecting MTC´s performance.
  6. Sourcing • MTC needs to transition from being considered a non-critical supplier to becoming an strategic supplier. • They must continue having close relationships with doctors, but most importantly they need to work on the following attributes: 1) an enhanced value proposition to Hospitals: win-win solution 2) increase product knowledge 3) wider product offering. 4) guarantee the 12 "rights": 5) Have an in-house sterilization facility 6) Identify possible mergers and acquisitions (the competitions has already done it) 7) Invest on R&D and tecnology implementation (RFID, smart kiosks, 3D printing)
  7. Executive Summary • The Sterilization process should be done in house. • Consider third party logistics and sign long term agreements. • Technology implementation is key in several processes. For example: smart kiosks, 3D printing, and the correct use of RFID. • Improve inventory management: putting in place a better forecasting method and eliminating trunk stock • MTC´s sales reps should devote their time and energy to improve the relationship with customers and increase sales.
  8. Thank you!