MTC faces a 2.3% excise tax that reduces profits by over 10%. To address this, MTC plans to improve operations, planning, sourcing, logistics, and reduce risks. Key changes include bringing sterilization in-house, using smart hospital kiosks, outsourcing to 3PL instead of distributors, repositioning with GPOs, and more effective forecasting to reduce inventory and costs.
MTC faces a 2.3% excise tax that reduces profits by over 10%. To address this, MTC plans to improve operations, planning, sourcing, logistics, and reduce risks. Key changes include bringing sterilization in-house, using smart hospital kiosks, outsourcing to 3PL instead of distributors, repositioning with GPOs, and more effective forecasting to reduce inventory and costs.
MTC faces a 2.3% excise tax that reduces profits by over 10%. To address this, MTC plans to improve operations, planning, sourcing, logistics, and reduce risks. Key changes include bringing sterilization in-house, using smart hospital kiosks, outsourcing to 3PL instead of distributors, repositioning with GPOs, and more effective forecasting to reduce inventory and costs.
MTC faces a 2.3% excise tax that reduces profits by over 10%. To address this, MTC plans to improve operations, planning, sourcing, logistics, and reduce risks. Key changes include bringing sterilization in-house, using smart hospital kiosks, outsourcing to 3PL instead of distributors, repositioning with GPOs, and more effective forecasting to reduce inventory and costs.
(MTC) Supply Chain Strategy Excise Tax 2.3%, over 10% reduction in profit MTC’s situation
1. Excise taxes are taking 135.96 million USD (2.3% of revenue in 2014) Saving costs This kind of tax has a more significant impact on profit margin of manufacturers than ever. Because income tax is only imposed on profit while excise tax is applied to revenue
2. Originally, MTC has low margins because they have distributors (which decrease the revenue which they can actually receive) and GPOs has a huge bargaining power
3. Safety regulations are more strict
Excise Tax 2.3%, over 10% reduction in profit Executive summary of what tasks MTC to do
1. Sterilization should be made inhouse
2. Smart kiosk in hospitals should be utilized 3. More effective forecasts should be used 4. MTC products must be distinctive, holding both quality and high technology 5. Sales rep may create more effective communications with surgeons/hospitals 6. Sales rep shouldn’t hand inventory (diminish trunk stock) 7. Diminish distributors and use transportation service provided by 3PL 8. Re-positioning MTC in the view of GPOs (a group of hospitals) Excise Tax 2.3%, over 10% reduction in profit Area of improvements - Logistics
1. Outsourcing sterilization - Waste time and cost when transporting FGs to 3rd party location and then deliver it back to MTC’s facility for examination prior to shipments (96 hours of two-way transit time + 24 hours of sterilization process) - Complexity in management 2. Trunk stock => re-considering sales commission - Sales rep is stocked inventory in their trunk of vehicles provided by company => high risk for quality of products and may increase costs when we want sales rep be an expert or thoroughly understand how to store medical devices - Increase inventory in case of trunk stock - It seems to be redundancy when MTC has already had distributors 3. Distributor - Diminish to maximize profit margins - Sales rep has already been familiar with communicating with end-consumer - Can use 3PL instead Excise Tax 2.3%, over 10% reduction in profit Area of improvements - Operations
1. Inventory - Easy to notice that inventory being held is much larger than the actual demand (around 120,000 inventory each month in comparison with around 20,000-30,000 units in demand) => cash flow is not utilized and increase inventory costs - Trunk stock (as per mentioned before) 2. Waiting - Wait for products to be done sterilization (5 days => waste) Excise Tax 2.3%, over 10% reduction in profit Area of improvements - Planning
1. Notice seasonal factors
2. Deseasonalized demands => forecast 3. Adding seasonal factors into forecast 4. Final forecast to use Excise Tax 2.3%, over 10% reduction in profit Area of improvements - Sourcing 1. GPO’s position - Hospitals are grouped into a large buyer organizations (GPOs) => bargaining power is much higher than manufacturer 2. MTC view GPOs as Core customer (category) - MTC may view GPOs as Core Customers category because MTC view that GPO’s level of attractiveness is high and spending value that GPOs spent on MTC is high (due to their purchasing represents the whole group of hospitals) 3. GPOs view MTC as Leverage or Routine supplier (category) - With GPOs, MTC may not be a strategic partner, they may view MTC as Leverage or Routine category as they see that they can purchase items from many other suppliers, they have purchasing power (supply risk is low and spending value GPOs spent on MTC may high or low There is a need to repositioning MTC and approach win-win situation - Provide GPOs with wide range of medical devices together with high technology and quality, on-time delivery, aftersales services => one-stop provider - Take advantage of kiosks in hospitals to storage key devices => minimize separate shipments with no economies of scale => Increase bargaining power of MTC Excise Tax 2.3%, over 10% reduction in profit Risk
1. Inhouse sterilization - No experience with investment at the beginning stage - In a long-term run, it benefits a lot 2. Changing distribution networks - Quality partner provided 3. Reduce sales commission to a more reasonable range - Employee downmood but we also reduce their workload with diminishing trunk stock
