STRATEGIC

SUPPLY CHAIN OF
MTC
SIGNIFICANT COST REDUCTION OF SUPPLY CHAIN ENABLING
TO OVERCOME THE MEDICAL DEVICE EXCISE TAX
 ABOUT MYSELF

• Myself Mohammad Anayet Ullah Khan. I’m from Dhaka, Bangladesh. I’m a
pharmacy graduate and completed post graduation at Pharmacology and
clinical Pharmacy from North South University. Although my education
background indicates I have came from a healthcare discipline, but in my
professional life, I’m serving as a Senior Commercial & TSD Executive to a
Pharmaceutical Company since 2013. I’m passionate to learn the technical
issues of Supply Chain Management, which may makes me an ideal supply
chain personal. In this presentation I will show you about what could be
the possible approach of MTC to overcome the Medical Device Excise Tax.
 CASE STUDY IN BRIEF

• You all know that, Chris Evert, Chief Supply Chain Officer of MTC has
been asked to implement a possible way to overcome the Medical Device
Excise Tax (2.3%) from revenue. The only way to do this is to change
something in their supply chain. The supply chain of MTC consist of a
model of manufacturing of surgical devices followed by off-site sterilization
process. This off-site sterilization takes total of 72 hours to enable the
product to be shipped after manufacturing. Than the product distributed
either by a Medical Surgical Distributor (MSD) or by using their own 3PL.
Both process have some advantage or disadvantages, If it is by MSD, than
they don’t need to manage inventory and can earn quick revenue. On the
other hand in 3PL..
 CASE STUDY CONTINUE…

• Inventory can be managed by MTC on their own and they have a control on
demand and forecast. The way of 3PL is that, they have to distribute the
product in Central distribution center to Regional distribution center and that
carry way to hospitals by a sales team. Sales team are promoting their product
to the physicians and often carry away trunk stock. The average sales
representatives salary is $300,000. Hospital Group Purchasing Organization
(GPO’S) responsible to control the purchase and use of the surgical devices.
They are there to minimize the purchase cost. To overcome the situation
lobbying at gov. offices is an way to have legislative change. But that is
uncertain issue. Evert understand she has to do something with Supply Chain
Management.
 EXECUTIVE SUMMARY

• Here I will summarized about the strategy of Supply Chain that should
follow by MTC to overcome the Medical Device Excise Tax (MDET)
1. Blocking the loop of cost: First MTC have to find out the loopholes where
extra cost is associated. Net earning should be maintain in a fixed ratio
and for that cost of goods should be deducted. Again cost is also
associated in other factors like, Gape of supply planning based on
forecast and port demurrage.
2. Logistic network: One of the most vital factor. Logistic design should be
as follows for MTC;
  Manufacturer
 In-house sterilization
 Distribution

Distributo 3PL System

r
Central Distribution
Distribution Channel

Regional Distribution Trunk Stock

Hospital Hospital
Groups Groups
Physicians
 Minimize

ME MAPE MSE

MTC
-635 115% 102,587,493

Cumulative Mean
190 168% 176,487,950

The model will allow them Moving Average

295 193% 223,382,114

cost saving due to the reason Exponential Smoothing

4,540 136% 627,531,770

that, it allows them to do in- Alpha 0.001

My Forecast

house sterilization and also Actual MTC Forecast Cumulative-Mean Moving-Average Exponential Smoothing

reduce the delivery lead time. Year

2013
Month

January
Actual
Demand
26,203
MTC
Forecast

31,258
Error

-5,055
Abs % Error

19%
Square Error

25,553,025
Forecast Error Abs % Error Square Error Forecast Error Abs % Error Square Error Forecast

25,000
Error

1,203
Abs % Error

5%
Square Error

625,000,000

Product positioning will be 2013 February

33,738
28,281 5,457 16% 29,778,849 25,001 8,737 26% 625,050,001

2013 March 18,977 31,258 -12,281 65% 150,822,961 29,971 -10,994 58% 120,868,036 25,010 -6,033 32% 625,500,100

more easier to get more sale. 2013

2013
April

May
40,057

33,429
32,747

32,240
7,310

1,189
18%

4%
53,436,100

1,413,721
26,306

29,744
13,751

3,685
34%

11%
189,090,001

13,579,225
26,306

30,924
13,751

2,505
34%

7%
189,090,001

6,275,025
25,004

25,019
15,053

8,410
38%

25%
625,200,016

625,950,361

2013 June 18,070 29,770 -11,700 65% 136,890,000 30,481 -12,411 69% 154,032,921 30,821 -12,751 71% 162,588,001 25,027 -6,957 39% 626,350,729
47,283

3. Planning: MTC should

2013 July 32,747 14,536 31% 211,295,296 28,412 18,871 40% 356,114,641 30,519 16,764 35% 281,031,696 25,020 22,263 47% 626,000,400

2013 August 1,852 22,327 -20,475 1106% 419,225,625 31,108 -29,256 1580% 855,913,536 32,927 -31,075 1678% 965,655,625 25,042 -23,190 1252% 627,101,764

42,170

follow below planning 2013

2013
September

October 30,419
29,770

32,747
12,400

-2,328
29%

8%
153,760,000

5,419,584
27,451

29,087
14,719

1,332
35%

4%
216,648,961

1,774,224
22,402

30,435
19,768

-16
47%

0%
390,773,824

256
25,019

25,036
17,151

5,383
41%

18%
625,950,361

626,801,296

solution;
32,223
2013 November 28,281 3,942 12% 15,539,364 29,220 3,003 9% 9,018,009 24,814 7,409 23% 54,893,281 25,041 7,182 22% 627,051,681

22,894
2013 December 20,839 2,055 9% 4,223,025 29,493 -6,599 29% 43,546,801 34,937 -12,043 53% 145,033,849 25,048 -2,154 9% 627,402,304

2014 January 27,135 32,763 -5,628 21% 31,674,384 28,943 -1,808 7% 3,268,864 28,512 -1,377 5% 1,896,129 25,046 2,089 8% 627,302,116

According to this it can 2014 February

34,962
29,642 5,320 15% 28,302,400 28,804 6,158 18% 37,920,964 27,417 7,545 22% 56,927,025 25,048 9,914 28% 627,402,304
19,637

reduce the error in their

2014 March 32,763 -13,126 67% 172,291,876 29,244 -9,607 49% 92,294,449 28,330 -8,693 44% 75,568,249 25,058 -5,421 28% 627,903,364

2014 April 41,514 34,323 7,191 17% 51,710,481 28,603 12,911 31% 166,693,921 27,245 14,269 34% 203,604,361 25,053 16,461 40% 627,652,809

2014 May 34,581 32,763 1,818 5% 3,305,124 29,410 5,171 15% 26,739,241 32,038 2,543 7% 6,466,849 25,069 9,512 28% 628,454,761

planning and maximize the 2014 June 18,685 32,763 -14,078 75% 198,190,084 29,714 -11,029 59% 121,638,841 31,911 -13,226 71% 174,927,076 25,079 -6,394 34% 628,956,241
48,953
2014 July 34,323 14,630 30% 214,036,900 29,102 19,851 41% 394,062,201 31,593 17,360 35% 301,369,600 25,073 23,880 49% 628,655,329

2014 August 1,838 21,842 -20,004 1088% 400,160,016 30,146 -28,308 1540% 801,342,864 34,073 -32,235 1754% 1,039,095,225 25,097 -23,259 1265% 629,859,409

profit. 2014 September

43,675
32,763 10,912 25% 119,071,744 28,731 14,944 34% 223,323,136 23,159 20,516 47% 420,906,256 25,074 18,601 43% 628,705,476

2014 October 31,457 34,323 -2,866 9% 8,213,956 29,443 2,014 6% 4,056,196 31,489 -32 0% 1,024 25,093 6,364 20% 629,658,649

33,346
2014 November 28,082 5,264 16% 27,709,696 29,534 3,812 11% 14,531,344 25,657 7,689 23% 59,120,721 25,099 8,247 25% 629,959,801

23,677
2014 December 23,402 275 1% 75,625 29,700 -6,023 25% 36,276,529 36,159 -12,482 53% 155,800,324 25,107 -1,430 6% 630,361,449
 EXECUTIVE SUMMARY CONTINUE…

• 4. To be an Strategic Supplier: By maintaining my proposed supply

chaneel MTC could be a strategic supplier for hospitals group. There is a
huge benefit to be a strategic supplier of Hospital groups. They can get
more orders and can be on a win-win situation in business.
• 5. Service support to customer: Service is another important issue for being
a potential supplier. If MTC can provide a great deal a service and support
like, smooth delivery, Immediate response, etc. By providing such service,
Hospital groups could have faith on them and consider them as the key
supplier for surgical devices.
 AREAS OF IMPORVEMENT

1. In sourcing of raw material

2. Have to do in-house sterilization
3. Logistic network should be re-design
4. Planning and Forecasting could be more accurate
5. Customer support service could have better
6. Can use direct supply channel
 RESOURCE NEEDS FOR IMPROVEMENT

1. Sourcing: There is a scope of improvement in sourcing and source

development. More alternative vendor for surgical devices could have
developed by MTC to have smooth supply.
2. Sterilization process: In-house sterilization could be more better in
contrast of outsourcing. It will minimize the delivery lead time. Inhouse
quality control team should be developed.
3. Planning: Planning resources could be more rich as there is lot of errors
in their forecasting versus demand.
 POSSIBLE RISK

1. Sterilization process: Sterilization process could be impacted if there is

any problem found in sterilizer machine. Or even the key Quality
personal might do some error which will impact on product.
2. Sourcing: Sometimes if there is more alternative vendor in your hand,
there is a possibility to have poor service or supply issues.
3. The Forecasting method that I have preferred may create a possible
supply gap if there is huge requirement of emergency supply, because on
that time it can create huge shortage on conventional stock.
CONTINGENCIES TO MITIGATE THAT RISK
• Sterilization process: There should be a backup of sterilizer machine to
keep smooth production line. There should be skilled Quality people to
support the process. Skill development training should be conducted.
• Sourcing: Sourcing is a very key point in supply chain management. If you
have a potential source than it will be an added advantage for Supply
chain. But when if you have multiple sources, sometimes it can create
problem. Your prior concern is to give order to Leverage/Strategic
Suppliers. So to overcome this issue, you have to maintain relation with
other catagories supplier, if you can’t give order to all of them, at least place
1 or 2 order per year to maintain the relation.
CONTINGENCIES TO MITIGATE THAT RISK

• Forecasting Method: A specific forecasting method can’t always provide

accurate and desired result. So to mitigate the risk you have to keep a
safety stock in your hand to support the sales team. This obviously a great
practice to overcome any supply shortage.
 CONCLUSION

• So this is all about my presentation where I have provided all the inputs
for designing, operating the MTC supply chain model. I’m confident enough
that, my proposal will surely enable MTC to overcome the 2.3% Medical
Devices Excise Tax.
• I have tried my level best to design the supply chain in a strategic manner
to overcome this situation and be a competitive vendor for Hospital groups.
Although if there any mistakes there in my presentation would like to hear
your positive reply to overcome that.