A Strategic Supply Chain Proposal for MTC

A Strategic Supply Chain Proposal for MTC

1. MEDICAL TECHNOLGIES CORPORATION A Strategic Supply Chain Proposal for MT C By: Prachi Misra

2. Agenda Introduction & Challenge (2014 baseline) Executive Summary Current vs Future Supply Chain Improvement Areas with financial impact Risks & Mitigations Roadmap 2015–2017 Strategic Alignment & Outcomes Call to Action

3. MTC target is to reduce net income by $137 M based on 2.3 % levied tax

4. Executive Summary Offset excise tax through operational excellence Annual savings potential: ~$770M+ by exercising below initiatives : Sterilization (Savings: $23 M) SG&A ( Savings: $595 M) Inventory (Savings: $35 M) Hybrid 3PL (Savings: $120 M) Technology (Enabler) Anticipate potential risks and mitigation actions for successful execution Design implementation roadmap to capture quick wins & have buy in from all responsible parties Ensure strategic alignment between ACA ,MTC & Hospital Value to expedite rollout and capture savings 1 2 3 4 5

5. Current supply chain has delays; future is simplified and faster Manufacturer Off-site Sterilization Distributor Hospital Manufacturer + In-house Sterilization Hybrid 3PL Hospital Kiosk O perating R oom Hybrid 3PL Current Target Touchpoints to be removed for higher efficiency 1

6. Current 3-day sterilization process will be reduced to 1-day. Savings potential : $12 M to $23 M Manufacturer Sterilization ( 1 day ) Manufacture + In-house Sterilization Transport to Sterilization centre and back ( 2 days) Current Target Outsourced to third party 1

7. SG&A % of Revenue MTC at 45% vs peers ~20–25%. Reduction by 10% saves ~$595M 2 1. Data has been taken from Exhibit D : Medical Technologies Corporation Financials .

8. Reduce MTC inventory by 133 K resulting in freed working capital of $344 M & carrying cost savings of $35 M Total Production 2014 is ~370 k and Total Projected Production 2015 is ~237 k so net reduction is 133 K (36% reduction). 3 1. Data has been taken from Exhibit C : Surgical Kits Inventory & Shipments and Table 3: Medical Technologies Corporation balance Sheet .

9. Moving share from Distributor to 3 PL amounts to Saving of $120 M 4 Manufacturer Distributor Hospital O perating R oom Current Manufacturer 3 PL Hospital kiosks O perating R oom Target Touchpoints which will change for higher efficiency

10. Technology Enablers directly enable cost savings and competitive advantage 5 RFID Tracking Enables Real-time visibility & fewer lost kits Smart Kiosks Enables Automated stocking & higher compliance Lean / JIT Enables Lower working capital & faster turns 3D Printing (Future) Enables On-demand parts ( less waste, innovation )

11. Following risks have to be mitigated for successful implementation 1 Resistance from Sales Team 2 Hospital pushback 3 Regulatory delays 4 Execution delays Design phased roll out of changes and align incentives to market to circumvent Sales resignations Co-design pilots and align to hospitals operational and financial objectives Encourage early FDA/CMA engagement to circumvent potential impediments to implementation plan Introduce dedicated PMO and KPIs to monitor progress

12. Design Implementation Roadmap to capture quick wins & have buy in from all responsible parties for successful completion Phase 1: 0–6 months (2015) Phase 2: 6–12 months (2015–2016) Phase 3: 12–24 months (2016–2017) Activities : Insource Sterilization Pilot RFID technologies to set up hospital kiosks Initiate reduction in inventory Savings : ~$50M (early wins) Responsible : Hospital Op eration s & Supply Chain , IT, Finance MTC Operations Activities : Continue insourcing sterilization Expand set up technology enablers Accelerate & ramp up inventory reduction programs Launch SG&A reduction programs including new Sales approach Move loads to 3 PL providers Savings : ~$ 10 0M Responsible : Hospital Op eration s & Supply Chain , IT, Finance MTC Operations & Sales team 3 PL providers Activities : Ramp up all programs with clear end dates Savings : ~$ 60 0M (early wins) Responsible : Hospital Op eration s & Supply Chain , IT, Finance MTC Operations & Sales team 3 PL providers

13. Ensure Strategic Alignment between ACA , MTC & Hospital Value to expedite rollout and capture savings ACA: Value-based Care MTC Strategy: Efficiency + Innovation Hospital Value: Lower Cost, Better Outcomes Introduced the 2.3% Medical Device Excise Tax (effective 2013). Shifted U.S. healthcare toward value-based care : hospitals and providers are rewarded for outcomes and efficiency, not just volume. Creates pressure on suppliers (like MTC) to: Reduce costs, Improve supply chain efficiency, Support hospitals in lowering total procedure costs. Reduce cost to serve hospitals SG&A optimization Hybrid 3PL & Kiosks Lean JIT/inventory Improve reliability & transparency RFID enabled kits Smart kiosks in hospitals Standardized sterilization turnaround Support hospital value-based metrics Lower total procedure cost Higher compliance with contracts Better patient outcome Innovate for future ACA environment 3D printing Data analytics Introduce partnership models SG&A optimization Lower device prices & more predictable contracting Fewer pass-through costs Hybrid 3 PL + Smart Kisoks On demand access to kits Higher compliance Lower in-house admin costs Inventory Optimization Fewer stockouts Sterilization improvement Faster kit turnaround Lower risk of using loaner kit RFID tracking Real time visibility of kits Stronger chain of custody reduces loss/shrinkage Data improves compliance

14. KPIs should be introduced to track progress $7 70 M+ Savings 12%+ Operating Margin improvement -3 days Turnaround reduction 90% On-contract procurement

15. Following next steps can be considered to launch the required program Approve P ilots : sterilization, kiosks, RFID, 3PL Authorize capital and PMO Set board oversight cadence

16. Q&A Thank you for your time. Open for discussion.