MEDICAL TECHNOLOGIES

CORPORATION(MTC)
Case Study

1
PRESENTED BY-AYUSH RAJ

BY AYUSH RAJ
2 MEDICAL TECHNOLOGIES
CORPORATION
 Location:
- Collegeville Pennsylvania
-80 Hospitals in and around the Collegeville.
 Challenges Ahead:
-New affordable care act or the CA-Medical excise tax of 2.3%
of revenue.
 Impact:
-10% reduction in net profit.
 Goal:
-Identify cost savings to offset new ACA medical device tax
of 2.3% on the revenue to save our profits for economic growth.

BY AYUSH RAJ
3 KEY FINANCIAL POINTS: (source/credits-
R pubs)
 Revenue growth is initially strong but showing slowdown
-12% annual average from 2010 to 2012 –strong growth.
-4% annual average from 2012-2014-Slow down steadily.
 SG&A was 37.28% revenue in 2010 grew to 45.07% of revenue in 2014.
 Operating income progress erratic with negative growth
-Grew 3.07 % from 2010 to 2012 annually.
-Reversal to -12.3% negative growth from 2012-2014
annually.
 Inventory highlights:
-Extremely high accounts receivable and finished goods
-Accounts receivable at $1017 million at the end of 2014 at 28% of the
current assets up from 25% in 2013.
-Finished goods at 78% of the total inventory at $743.7 million at the end of 2014,
similar to 78% at end of 2013

BY AYUSH RAJ
4 EXPENSES RISING, REVENUE DROPPING

BY AYUSH RAJ
5 OUTBOUND FLOW AND WORKFLOW
ISSUES
ISSUES:
1.Offsite sterilization unit ,
increased holding and
carrying costs.

2.Sales representatives
play a larger role in
inventory movement with
trunk stock.

3.Chain of loaner and

branch offices in
distribution logistics

BY AYUSH RAJ 4.Grround Transportation

6 IMPROVEMENTS:

SHORT TERM

LONG TERM

SHORT TERM
BY AYUSH RAJ
SHORT
7
TERM
 Remove sales representatives entirely or limit it to ppI device requests only
1.Streamlining can save a major of the SG&A costs, which was 45% of revenue in 29014
2.Realingn 10% of the sales representatives to other roles.
3.Reduce amount of inventory in the supply chain significantly by not allowing sales representatives to
hold trunk stock.

 Supply chain Optimization: Sterilization to be brought inhouse along with 50% branch
office reduction
1.Save transportation cost by eliminating movement of products to and from the offsite sterilization
centres and by reducing stock transfer to and from branch offices.
2.Save 4 days of turn around time in production by two way transportation from the sterilization offsite
sterilization centres.
3.Reduction of order to delivery cycle time speeding up cash flow.

BY AYUSH RAJ
8 MID TERM

 Establish smart kiosks at hospitals for effective inventory control

1.Enable them to effectively control the inventory.
2.Reduces the need for the inventory themselves.
3.Enable the manufacturer to have complete visibility int the last mile of the supply chain.

 Make more effective use of RFID in collaboration with smart kiosks

1.Enable RFID tracking of each storage location rather than only the first or second tier
distribution points.
2.Proper RFID usage can save time and effort that tracking system requires while
maintaining the risk of inconsistent and unreliable data.
3.Greater transparency and single source of inventory information

BY AYUSH RAJ
9 LONG TERMS:

 Migrating to a shared supply chain Model and collaborate towards lean

1.Enable manufacturers to compete based on their product , rather than on the final
mile delivery and also improve supply chain
2.Enable greater collaboration among all trading partners in the devices supply chain
manufacturers , their customers and the third party logistics providers that support
them.

 Transition from distribution model to forward stocking locations(FSL)

1.Keeps the inventory closer to the end customer i.e. hospital.
2.Eliminates the challenges of traditional trunk stock management or lack thereof
3.Reduces cost of transportation further.

BY AYUSH RAJ
10 KEY PERFORMANCE INDICATORS AND
DEVICIVE METRICS DEVICIVE METRICS:

1.Increasing in net earnings

2.Increase in operating margin

3.Control on SG&A and COGS

4.Inventory Turnover

5.Days Inventory on hold.

6.Finished Goods to inventory.

7.On time delivery.

8.Products in compliance
BY AYUSH RAJ
 SHORT TERM BENEFITS( Inhouse sterilization
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and branch office reduction) TIME:
1.Allow just in time sterilization
2.Significant inventory reduction
3.Immediate access to emergency
needs

COST CONTROL:
1.Signifant savings in
transportation costs.
2.Significantly control on resultant
cost of contract services

QUALITY CONTROL:
1.Robust and direct control over a
key manufacturing process.
2.Suprior quality is a key to the
success and strategic direction.

BY AYUSH RAJ
12 SHORT TERM BENEFITS( Inhouse sterilization
and branch office reduction)
 Additional benefits
1.Better adherence to regulatory compliance-Ability to address a fair amount of ambiguity of their nature of
having to be applied to differently designed facilities.
2.Need to expedite-Easily accomplished in case of emergencies as there is virtually no transportation delay.
Motivating quality assurance personnel from one part to another is similar.
3.In house expertise-Inhouse experts or consultants who know the process should be performed and improved.
Calculated investments can be done in that process through better technology to make it more efficient.
 Risks and mitigations
1.New process not currently performed inhouse-Mitigate through detailed planning, infrastructure and
personnel development.
2.High initial cost of investment: Mitigate by quicker delivery to customers by saving on transportation and
better quality of sterilization. . Generate additional revenue through higher sales and achieve lower costs due to
elimination of continuous transportation costs. Achieve lower costs due to elimination of continuous
transportation costs.
3.Direct Regulatory impact on sterilization-Mitigation by staying of all requirements from regulators like US
department of health and human services. Having periodic self assessment and the independent audits.

BY AYUSH RAJ
SHORT TERM BENEFITS( Realign sales representatives
and
13 relationships) COST OF INVENTORY COSTS:
1.Eliminate trunk stock carried by sales reps
in their company provided vehicles.
2.Reduce the amount of inventory in the
supply chain significantly.

CONTROL ON REVENUE NOT

RECOGNIZED:
1.Eliminate the inventory just sitting with the
sales reps waiting for a relationship sale.
2.Cost of purchasing the inventory incurred
recovered by the immediate revenue
generation.

FALL IN SG&A AND RISE IN REVENUE:

1.Reduce direct cost to the final product
2.Achieve increase in revenue due to more
sales activities from the sales.
3.Achieve overall final Net earnings.
BY AYUSH RAJ
14 SHORT TERM BENEFITS( Realign sales
representatives and relationships)
 Additional benefits
 1.Improve sales Productivity-Remove trunk stock that creates poor sales productivity. Eliminate
chances of the sales representative dedicating nearly 40 percent of their time on non sales activity.
 2.Proper Inventory Accounting-Mitigating risk of losing track on exactly how much inventory sales
reps have on hand. Ensure these assets are included in quarterly statements or other inventory
tracking systems.

 Risks and Mitigation

 1.Impact on relationship with surgeons-Mitigate by realigning role of sales representatives to
liaising with surgeons around the 20% physician preference items (PPI) requirements.
 2.Loss of highly trained individuals: Mitigate by allowing sales representatives to spend requisite in
time by operating rooms assisting the surgeons during cases as much required until surgeons
becomes comfortable with the PPI.
 3.Reduced feasibility in the field and chance of downtime: Mitigate by working in a phased manner
to initiate smart kiosks and using forward stocking locations.

BY AYUSH RAJ
 FINANCIAL BENEFIT OF MID TERM MEASURES(Source-
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Based on analysis by Dr. Sen Gupta)

BASED ON THIS FINANCIAL RESULTS ,IT CAN BE CONCLUDED:

1.Total short term cost savings is $289.68 making the short term cost savings to be 6.23%.
2.Part of supply chain optimization is to eliminate transportation to and fro from the current offsite
sterilization centresBYand
AYUSH RAJ
reduce the number of branches by 50% to streamline stock movement
and reduce holding and carrying costs to compensate for the new tax on the revenue.
16 MID TERM BENEFITS (Implementing RFID and
Inventory management with smart kiosks)

BENEFITS:
1.Eliminates manual counting
2.Produces accurate inventory records
in real time.
3.Provides immediate identification of
procedure and item
4.Support consignment inventory
management
5Eliminates inventory waste and
expired items
6.Reduces management cost, inventory
is accurate and losses decrease
substantially.

BY AYUSH RAJ
17 MID TERM BENEFITS (Implementing RFID and
Inventory management with smart kiosks)

Smart KIOSKS
 Benefits to Hospitals
1.The surgical kits could be stored in smart kiosks at the hospital locations, which
would enable them to effectively control the inventory and it would reduce the
need for the hospital to carry the inventory system.
 Benefits to manufacturer
1.Kiosk distribution world enable the manufacturer to have complete visibility into
the last mile of the supply chain.
2.Sales representatives would be only required to maintain the relationship with
the surgeons and worry less about inventory control.

BY AYUSH RAJ
18 APPLICATION OF KIOSK IN THE MEDICAL
DEVICE INDUSTRY(Source google)
 Automated delivery of devices , medication to maximize staff’s time for patient care
and improve efficiency and response.
 Identification of connecting components on medical Ventilators.
 Reader Module with integrated , eight channel antenna multiplexer embedded into
the system.

BY AYUSH RAJ
19 BENEFITS OF LONG TERM(FORWARD
STOCKING LOCATIONS)
 Reduced cost:
-Reduction in costs of inventory management by
eliminating over or under stocking.
 Increase Visibility:
-Increased visibility into spare parts inventory through a
vested interest in keeping a stringent account of spare parts
availability, reducing errors in purchase orders.
 Decreased Theft:
-Only allowing access to authorised professionals and keeping
spare parts safe.
 Less risk to climate sensitive parts:
-Keeps most inventory in a climate controlled , secure environments safeguarding against
extreme temperature changes and humidity.

BY AYUSH RAJ
BENEFITS
20 OF LONG TERM(3 PLs COLLABORATIVE
LEAN) SHARED SUPPLY CHAIN MODEL
BBENEFITS:
1.Enable manufacturers to compete based on
heir product rather than on final delivery and
also improve the supply chain.

2.Enable greater collaboration among all

trading partners in the devices supply chain-
manufacturers ,their customers and the third
party logistics providers that support them

COLLABORATION IMPROVING SUPPLY

CHAIN:
1.Create demand visibility to customers
2.Increase collaboration with trading partners.
3.Improve forecast accuracy
4.Improve the effectiveness of the S&OP
process
BY AYUSH RAJ
5.Increase collaboration with internal functions.
21 SUMMARY

 GOAL: 2.3 percent cost savings to overcome the ACA medical service excise tax of revenue.

 Improvement strategy:

1.Short term-Realignment of sales representative functions ,supply chain optimization through inhouse
sterilization and office reduction
2.Mid term-Introduce RFID methodology for inventory management with smart kiosks
3.Long Term-Migrating to a shared supply chain model with collaboration towards a lean and forward
stocking locations(FSL).

 Financial Benefits(Courtesy-Study by Dr. Sen Gupta)-Sales representatives realignment:15% of

SG&A; Supply chain optimization:4.5% of COGS; Weighted average savings:6.2%

BY AYUSH RAJ
22

BY AYUSH RAJ