MTC is facing challenges due to a 2.3% tax on revenue and needs to reduce costs. The logistics department proposes several solutions to improve efficiency and save money, including bringing sterilization in-house instead of outsourcing it, using 3PLs for distribution and inventory management, and implementing Kanban to better track inventory and reduce touch points. The operations have inefficiencies like wasted transportation time during sterilization, unnecessary motion transporting products, and high inventory levels across the supply chain. Planning needs to better address demand changes and seasonality to avoid overproduction.

1. Medical Technologies
Corporation Study Case
Zuhud Farhan
Supply Chain Management Strategy

2. About
MTC (Based at Collegeville,Pennsylvania)
has been imposed a tax of 2, 3% of revenue.
Taxes are taking 135,96 USD millions of
revenue for 2014, the industry seems to be very
sensitive, reason why, MTC is
Challenged to reduced costs. The logistics
department has to come up with saving cost
solutions

3. 2013 Highlights:High Initial Investment at
the Beginning of the Year: $120,000
(January)Production: Averaging 20,000 -
50,000 units per monthShipments:
Averaging 10,000 - 50,000 units per
monthPeak Profit: $130,000
(September)2014 Highlights:High Initial
Investment at the Beginning of the Year:
$130,000 (January)Production: Averaging
30,000 - 60,000 units per
monthShipments: Averaging 10,000 -
60,000 units per monthPeak Profit:
$150,000 (September)2013
Planning:"Naive Forecast" based on the
previous monthResult: Did not yield
maximum profit2014 Planning:"Cumulative
Forecast" with changes based on the
previous monthResult: Yielded better profit

5. LOGISTIC
Sales Commission SterilizationProcess

6. LOGISTIC
Current sterilization process is very inefficient. Having into
account that the process is made by another company and that it
takes 5 days (96 Hrs of transport + 12 Hr in the process), the
Medical Device Industry is wasting money. As possible solutions
they could do this process in-house
SterilizationProcess

7. LOGISTIC
Current supply chain is structured with distributors which can have some
advantages, but sterilization and distribution can be done by 3PLs. Using
3PL, the manufacturer will have a precise tracking of its products all the
way to the final costumer. 3Pls can serve as a distribution and inventory
center, which is an advantage for the sales department in which sales
representatives will dedicate themselves to sell. The Medical Device
Industry could save money with 3PL with consolidate shipments and
negotiation.

8. LOGISTIC
Current inventory system is obsolete and expensive, the work flow
is not even tracked as there are so many distributors where the
manufacturer lost its control over the product. Kanban could be a
great choice to solve the problem, re organizing the process of
supply chain. MTC needs to ensure less touch points to its
products.

9. LOGISTIC
Sales Commission

10. OPERA TIONS
Defects
Transport
ation
Inventory
Motion
Waiting

11. OPERA TIONS
Defects
Wrong storage could create damage on the products. At the
end of the day, it is not only a damage, but a defect of the
supply chain as a whole.

12. OPERA TIONS
There are 5 days of wait because of the
sterilization process. All this wait time is lost time
and does not add any value
Waiting

13. OPERA TIONS
Cars moving products from the company to the
Sterilization Company and then back. Then,
having sales representatives moving products
from Client A to Client B, then to Client C and then
back home. It is a waste of useful resources.
Motion

14. OPERA TIONS
The inventory hold by all the manufactures increases the
inventory level over all in the supply chain, which in the long
run will increase the inventory cost (capital cost, holding
cost, storage cost and risk cots) and would reduce
profitability
Inventory

15. OPERA TIONS
It is a waste when it is not required, and as we have observe all
throughout the case, the sterilisation process transport last 48
hours on each way, which means 96 hours (4 days) of wasted
transportation in the process. It is something that should be
improved immediately and MTC should do as other
manufacturers of medical devices and get this process done in-
house.
Transport
ation

16. PLANNING, SOURCHING & RISK
MTC needs to be able to copy with
demand changes quicker in order
to avoid over production which is a
problem besides the 2, 3% tax. Also
needs to take into account that they
are producing and selling seasonal
products. The production plan
needs to change in order to fulfill
the demand given in the exercise
Because of healthcare reforms,
hospital must control what they
purchase and the way they do it,
having this into account, MTC needs
to be a strategic supplier. Its
surgical kits need to ensure latest
technology mixed with higher
quality.
There are some risks, thinking
about them would give us tools to
anticipate them. MTC has never
done sterilization processes before.
At the very MTC would have to buy
machinery to do the process. On
one hand, this machinery may be
expensive; on the other hand, the
purchase will mean an entire
logistic process.
Effective communication system
should be in order. Mainly with
physicians and purchase
departments. Thus, MTC needs to
respond quickly to the needs and
requirements of the client
(hospitals/surgeons/patients)
regarding technical assistance,
guarantees, technical information,
procedures and possible training to
the medical staff.