MTC- How to go about ?

Case Synopsis by Sumit Jauhari

Case Introduction- Industry & Deliverables

Industry Backdrop:
• United States is the largest medical device market in the world:
• Size: $110 billion in 2014. Expected to reach $133 billion by 2016.
• More than 6,500 medical device manufacturers
• The sector employs almost half a million people directly & indirectly 2 million more
• Top 4 organizations cover $ 23 billion ( 24%)
• Industry under consolidation ( -0.6% YoY reduction in no. of manufacturers)
• Overall Growth 4.8% by 2020 for Industry – Specifically Growth of 7.6% in Medical device Distribution

Key Factors:
• Ageing Population in USA
• Increase in number of people coverage ( Due to Health Insurance Coverage Bill)
• Increasing of Process Innovation Requirements by Hospitals

Key Deliverables:
• Costs savings to cover Affordable Care Act (ACA) Medical Device Excise Tax of 2.3% of revenue
• Translates into over 10% reduction in MTC’s profits
Key Challenges
Key Challenges- MTC :

• Technological assistance in terms of Tracking & traceability

• Innovation in Supply chain management
• Innovative approach towards current Distribution Channels
• With Rationalized Costs
• Consolidation of channels

• Clarity on approach towards Focus Market Groups

• Regional Segmentation

• Management of Internal Dynamics

• Sales Agents’ Commission methodology
• Inventory Management
• Make-vs-Buy (Outsource) nodes in Supply Chain
Executive Summary – Proposals & Outcomes

Establish Long term

Operations -
Logistics
Manufacturing strategy
• Manufacture based on • Using Own 3 PL service
JIT ( Lean methodology) providers
• Inventory management • Utilize existing Hospital
( Bulk & Niche storage to keep basic
Manufacture) required Equipment-
Inventory
• In-house Sterilization
facility • RFID Tagging ( Use of
technology in tracking /
traceability) of
equipment
Sales & Marketing
partnership with Possible Inorganic Growth
Strategy
Identified Hospital Groups
• Establish Earnings vs • Provide Enhanced • MTC must look out for
Returns for Sales exposure to Surgeons to increase in Capacity &
Representatives varied facets of Medical Variety through-
• Rationalize Sales technology
Incentives- Keep • Merger & Acquisitions of
incentives limited to • Collaborate with other firms
New Product Sales hospitals in Research & • Leverage upon additional
• Provide Incentives for Development Volumes & Varieties to
Special Cases provide ROBUST Supplies
• Remaining all Products • Conduct trials and & ENTIRE DEMAND
to move through develop Innovative VARIETY
DIRECT Channel to Products in collaboration
Hospitals with Hospital users

• Reduced Blocked • Reduced Inventory in • Rationalize Sales • Build Strategic • Provide Entire
Capital entire Chain Commissions Partnerships Product Range
• Make to Order • INNOVATIVE
scenario • Enhanced Tracking • Establish Systemic Products • Arrive at better
• Reduction in Lead • Quicker Revenue Sales Channel (Not • Co-Creation of Value pricing & supply
times- 5 days realization people dependent) • Win-Win Solutions model
Areas of improvement • MTC needs to move from Non-Critical Supplier
position to STRATEGIC Supplier position
Supply Risk------> • For Identified Key Hospital Groups

High Profit Impact Areas for Improvement:

High Supply Risk
High Profit Impact
Strategic Suppliers
Low Supply Risk Offer Win-Win solutions to Hospital Groups
Leverage Suppliers
Very close relationships, • R&D facilities
Go for high bargain
Almost part of company • Product Knowledge
Profit Impact------->

Best Quality
Not only cost, • Wider Product base
Best Service
Innovative value products • Enhanced Capacity
Mitigate risks by Integration
Align Operations constraints
• Manage Inventory Turn-Overs to reduce blockage of
capital
Low Profit Impact • Make-Vs-Buy situations
Low Profit Impact • Lean Operations
Low Supply Risk
High Supply Risk • Technological applications
Non- Critical Suppliers
Bottleneck Suppliers
Not to spend more time Modify Sales model
Manage alternatives
Automate processes • Systemic Direct sales to be prioritized
Tight controls- Service lvl
Very limited trasactions • Rationalize commissions system
don’t waste time
Resources Required
Operations

• LEAN Manufacturing Consultancy

• Willingness from Top Management to drive Change
• Employee Orientation

Strategy

• Identification of Target Hospital Segment

• Establishing Long term commitment Aspects:
• Co-Creation of Innovative Products
• Enhancing of Knowledge base of Surgeons
• Expenses on Research & development
• Consultants to Identify Key Mergers / Acquisitions
• Investment to install Inhouse Sterilization facility
 Risks & Mitigation
RISK:
Sales dip on account of
Bonus Rationalization
• MITIGATION
• Form Trained Specialist
Team(s)
• Identify critical & New
Equipment & Train
surgeons accordingly
• Keep Trained Specialist
Team on stand-by in case of
any emergency assistance
required by Surgeons
• New Equipment marketing
to be done by Specialist
Teams
RISK:
Boycott by Existing
Distributors
• MITIGATION
• Build rapport with
Identified Hospital Groups
• Enter into Long-term
contracts
• Pass on Quantity & Long-
term Discounts to identified
strategic partners
RISK:
Inability to operate Inhouse-
Sterilization Unit
• MITIGATION
• Training of employees
• Hiring of trained employees
RISK:
Non-Fulfilment of Hospital
demands on-time due to
reduced Inventory
• MITIGATION
• Utilize Hospital Inventory to
keep Key stocks
• Scientifically Assess
Inventory levels to be
maintained
• Keep Adequate Safety Stock
for Identified Critical Kits
Wishing MTC all the Luck !!!

ALL THE BEST !!!!!!!!!