MEDICAL DEVICES

SUPPLY CHAIN –
STRATEGY
PRESENTATION
Presented by: Syed Ali Saboor Zaidi
Introduction
About Myself
■ My name is Syed Ali Saboor Zaidi. I’ll be presenting the case of Medical Technologies
Corporation (MTC) as part of my capstone project.
About the Case
■ The premise of the case is that due to the imposition of the novel Affordable Care Act
(ACA) Medical Device Excise Tax of 2.3% on revenue, Chris Evert, the chief Supply
Chain Officer at MTC has been summoned by the senior leadership to save costs to
compensate for the revenue lost due to the excise tax.
Executive Summary
Proposal
1. Bring sterilization in-house.
2. Sales representatives’ duties to
be restricted to advising
doctors; no inventory
management; no trunk stocks.
3. Change in production planning
and forecasting method.
4. Switch to third party logistics.
5. Just-in-time production.
6. Use of smart Kiosks
Intended Outcome
1. More control of the process;
reduction in transport cost;
supply chain integration
2. Reduce SG&A costs; with less
burden (no inventory
management) workers are more
efficient
3. Better forecasting and reduction
of inventory carrying cost.
4. Reduction of lead time
5. Stock reduction and inventory
cost reduction
6. Better response to customers
with smart Kiosks
Areas of Improvement
■ Sterilization Process
■ Distribution Network
■ Inventory System
■ Sales Commission
Resources Needed for Improvement
Reduction in costs due to insource Sterilization process
■ The current sterilization process is a bottleneck because it takes 5 combined days, including the time
to sterilize, to transport the kits to and from the sterilization facility.
Reduction in costs by switching to 3PL
■ Instead MTC should try its luck with the third-party logistics because not only 3PL is capable of
sterilizing and distributing the kits, through 3PL the manufacturer can precisely track its product all
the way to the final customer, the health care providers. Furthermore, by using 3PL distribution will
be less fragmented enabling sales personnel to focus more on their job.  

contd.
Resources Needed for Improvement

Reduction in cost due to finished goods stock reduction

■ Having a robust, yet fragmented distribution network adds to the inventory woes of the
manufacturer as the risk is not being pooled in. Moreover, it is difficult for the manufacturer to
track the workflow as there are so many distributors. A just in time (JIT) inventory system can be
used which eliminates the need for shipping inventory in bulk, rather only what is needed.  This
need can be fulfilled by investing in a smart Kiosk software.

Sales Representative commissions reduction

■ I think laying off Sales reps is not very feasible because e not only sales representatives facilitate
sales, they work closely with surgeons to get them accustomed to new kits. However, does it
warrant such high commissions? I think commissions should be negotiated and sales reps should
not keep trunk costs.
Risks to your proposal and contingencies to mitigate that risk

Inhouse Sterilization
■ Risk: Expensive
■ Contingency: Try to look for inexpensive suppliers who are located nearby to reduce lead times and are less

Sales Representative
■ Risk: Emergence of unions due to commission cuts
■ Contingency: Taking the sales representatives into confidence and making them understand the rationale for the decision and
what the objectives are.

Corporate Culture
■ Risk: Workers may resist the change in the corporate culture
■ Contingency: Intimating to the workers the important of a need for change. And how in the long run it will benefit everybody.
Risks to your proposal and contingencies
to mitigate that risk
Supply Chain
■ Risk: Hospitals not being accepting of 3PL as they prefer to work with distributors.
■ Contingency: Communicating to the hospitals the safety issues of supply chain being
controlled by multiple companies.
JIT
■ Risk: Inability to meet requirements of a massive and/or unexpected order.
■ Contingency: Source from multiple suppliers.