Medical Technological Corporation strategic supply chain solution,

MTC SCM project

1. Atabak khalafi, 10.2024
MTC Strategic SCM
Supply chain solution

2. About myself
•MynameisAtabakKhalafi,andIworkasaprocurementspecialistinthe
renewableenergysector,focusingonsolarfarmprojects.WithanEMBA
backgroundandexperienceintraditionalsupplychainsystems,Iamcurrently
basedinGermany.Iampassionateaboutdeepeningmyunderstandingofthe
technicalaspectsofsupplychainmanagement,withaparticularinterestinthe
artofplanningandforecasting.Inthispresentation,Iwilloutlineapotential
approachforMTCtonavigatethechallengesposedbytheMedicalDevice
ExciseTax,offeringstrategicsolutionstomitigateitsimpact.

3. Case Study
•ChrisEvert,ChiefSupplyChainOfficeratMTC,hasbeentaskedwith
addressingthe2.3%MedicalDeviceExciseTaxbyoptimizingthesupply
chain.Currently,MTCmanufacturessurgicaldevicesandusesanoff-site
sterilizationprocessthattakes72hoursbeforeproductscanbeshipped.
•DistributionishandledeitherthroughaMedicalSurgicalDistributor(MSD),
whichoffersquickerrevenuebutlessinventorycontrol,orthroughtheirown
third-partylogistics(3PL)system,providingmorecontrolbuthigherinventory
demands.Eachoptionpresentstrade-offsthatMTCmustconsidertomitigate
thetaximpact.

4. Case Study
•MTChasthecapabilitytomanageitsowninventory,givingthemcontrolover
demandandforecasting.Incontrast,a3PLmodelrequiresdistributing
productsfromacentraldistributioncentertoregionaldistributioncenters,with
finaldeliveriestohospitalstypicallyhandledbythesalesteam.Sales
representatives,whoseaveragesalaryis$300,000,alsopromoteproducts
directlytophysiciansandoftencarrytrunkstock.HospitalGroupPurchasing
Organizations(GPOs)overseethepurchasingandusageofsurgicaldevices,
aimingtominimizeprocurementcosts.Whilelobbyingforlegislativechanges
atgovernmentofficesisanoptiontoaddressthissituation,itremainsan
uncertainstrategy.Evertunderstandstheneedtotakeactionbyimproving
SupplyChainManagement.

5. Executive Summary
• This summary outlines the recommended supply chain strategy MTC should
adopt to mitigate the impact of the Medical Device Excise Tax (MDET).
•1. Cost Control Strategy: MTC must first identify and eliminate any inefficiencies
where additional costs are incurred. To maintain profitability, the net earnings
should be sustained at a fixed ratio, requiring a reduction in the cost of goods
sold. Cost reductions should also address other factors, such as gaps in supply
planning due to inaccurate forecasting and expenses from port demurrage.
•2. Logistics Network Optimization: An optimized logistics network is critical for
MTC’s success. The logistics design for MTC should focus on... [Continue with
specific recommendations on logistics design].

6. Manufacturer
Distribution Channels
In-house sterilization
Regional
Distribution
Central
Distribution
3PL System
Distribution
Channels
Distributor
Trunck
Stack
Hospital
Group
Hospital
Group

8. Executive Summary
4. Becoming a Strategic Supplier:
By adopting the proposed supply chain model, MTC can position itself as a
strategic supplier for hospital groups. Being recognized as a key supplier
offers significant advantages, including increased orders and the potential for
long-term, mutually beneficial business relationships.
5. Enhanced Customer Service:
Providing exceptional service is crucial to becoming a preferred supplier. If
MTC can offer reliable services such as timely deliveries and immediate
response to customer needs, hospital groups will gain confidence in their
capabilities and may consider MTC a trusted, go-to supplier for surgical
devices.

9. Areas of Improvment
• Source raw materials more efficiently.
• Implement in-house sterilization.
• Redesign the logistics network for greater efficiency.
• Improve accuracy in planning and forecasting.
• Enhance customer support services.
• Utilize a direct supply channel for streamlined distribution.

10. Resource Needs for Improvement
1. Sourcing: There is significant potential for improving sourcing and supplier
development. MTC should focus on establishing more alternative vendors for
surgical devices to ensure a more reliable and uninterrupted supply chain.
2. Sterilization Process: In-house sterilization offers advantages over outsourcing,
such as reducing delivery lead times. MTC should invest in developing an internal
quality control team to ensure higher standards and more efficient processing.
3. Planning: Resource allocation for planning needs enhancement, particularly in
demand forecasting, as there are frequent discrepancies between forecasted
demand and actual requirements. Better planning will lead to more accurate
projections and improved inventory management.

11. Possible Risk
1. Sterilization Process: The sterilization process is vulnerable to disruptions if
issues arise with the sterilizer machine or if key quality personnel make errors,
which could negatively impact product safety and readiness.
2. Sourcing: While having multiple alternative vendors can provide flexibility, it
may also increase the risk of inconsistent service or supply issues if not
carefully managed.
3.Forecasting:The forecasting method I propose may lead to potential supply
gaps during periods of high emergency demand, as it could deplete
conventional stock and cause shortages when unexpected requirements arise.

12. Contingencies to Mitigate Risk
- Sterilization Process:
To ensure a smooth production line, MTC should have a backup sterilizer
machine in place to prevent disruptions. Additionally, having a team of skilled
quality personnel is crucial. Regular skill development training should be
implemented to minimize errors and maintain high standards.
- Sourcing:
Sourcing is critical in supply chain management. While having multiple suppliers
can sometimes cause challenges, prioritizing orders with Leverage or Strategic
Suppliers is essential. To mitigate risks, it's important to maintain relationships
with other suppliers by placing occasional orders (e.g., 1-2 orders per year) to
keep these partnerships active and ensure alternative sources remain viable
when needed.

13. Forecasting Method:
No single forecasting method can guarantee perfect accuracy. To mitigate
the risk of supply shortages, it is essential to maintain a safety stock. This
buffer will help support the sales team during periods of unexpected demand
and is a proven strategy for preventing supply disruptions.

14. In conclusion, my presentation provides a comprehensive set of inputs for
designing and operating the MTC supply chain model. I am confident that my
proposal will enable MTC to successfully navigate the 2.3% Medical Devices
Excise Tax.
I have worked diligently to design a strategic supply chain that positions MTC as
a competitive vendor for hospital groups, ensuring resilience and cost-
effectiveness. If there are any areas that need improvement, I welcome your
constructive feedback and suggestions for refinement.