MTC Supply Optimization

Editor's Notes

• #4: The company is located in Pennsylvania and has about 80 hospitals in the region. The aim is to find a solution to the 2.3% exercise tax that is being placed on the company’s medical device revenue which equates to almost 10% of company’s profit and to determine the cost saving opportunities to offset this new ACA tax
• #5: There are short term, mid range and long term objective
• #6: There are four key performance indicators that can ne looked upon when making our decision criteria for the solutions.  The first being sustainability.  The second, whether it is feasible or not.  The third, whether it matches the company's objectives, and the stakeholders.  And lastly, does it achieve the cost savings that we want.
• #7: Presently, the finished goods are coming into MTC's assembly plant and from the assembly plant, 3PL is transporting the products to an offsite sterilization site.  Once the product gets sterilized at the suppliers, the product gets rerouted back to MTC's assembly plant. Once it gets back to our assembly plant, there are multiple avenues that that product can get distributed to the hospitals. One is through a distributor so that the distributors purchase the products from the company and then it gets distributed right to the hospital. Another option is for 3PL to transport the product right to our loaner offices where then it gets distributed and then sent to the hospital. So there are two downstream distribution channels, 3PL and Distribution and five lanes of transportation. Recommendations- Reduction in transportation time and distance, gain better visibility to product movement, and most importantly, become more eco-friendly.
• #8: First step is partnering with the sterilization supplier with the purpose of moving the order picking, staging, and shipping operations into their location as opposed to having the sterilized kits shipped back to MTC's manufacturing plant, and then sent downstream in the supply chain. It would benefit by reducing 1 of the 48 hour transportation legs. Second-phasing out the direct sales to hospitals.This would eliminate 3PL transportation costs from the manufacturing plant to all of MTC's direct clients. It would cater to the the hospital clients that are participating in group purchasing organization who prefer to buy from distributors. It would increase revenue faster by offloading inventory to the distributors and the smart kiosk systems
• #9: The mobile app is a way to maintain communication and collaboration with medical professionals
• #10: They will be the long range approach to cost savings. It will completely revolutionize reverse logistics. All the devices have RFID tags on them, the devices in the kits that are unused will be sent back to manufacturing before sterilization. With the smart kiosk in place, they would be placed in the smart kiosk, registered immediately as works in process. With that all the production planning would be based on actuals. So instead of producing things that are already in the system,  we would be accounting for that. This would decrease raw materials, manufacturing, excess inventory and even logistics. 
• #11: The total financial impact of everything combined-the streamline logistics is roughly 4.5% of cost savings. The sales reps will effectively save about 3%, and the acquisition will net 19 million in profit. Streamlining logistics is the lower risk. The sales rep is also low but the acquisition is medium, depending on a variety of different factors involved. 
• #12: Moving away from distributor network entails risk of longer revenue realisation and inventory offloading.
• #13: Lean management will reduce wastage in the entire process reducing expenditure.JIT system will reduce inventory hence mitigate the requirement to offload inventory to Distributor. Inventory expense will align with clinical demand. Moving to 3PL model will render MTC to sell its product at retail price instead of wholesale price it has to sell to distributor hence will mitigate loss of revenue to a large extent. However MTC have to take responsibility for the activities that the distributor was once performing. This will optimize the supply chain. To enter into strategic alliance MTC would need to convince the powerful hospital group purchasing organizations (GPOs) to add their products directly to their catalogue.