Optimizing Supply Chain – Sayontan Ray

May 2020
 Agenda

 Introductions 2
 Executive Summary & Plan 3
 As Is Current Process 4
 Areas of Improvement
o Logistics 5
o Operation 6
o Planning 7
o Sourcing 8
 Timeline 9
 Resources needed 10
 Risk, Contingency Plan and P&L 11

Phoenix Consulting is a fictitious company for completion of this case study report – relevant to the Supply Chain Specialization 2
© 2020 Deloitte Southeast Asia Ltd
course – Sayontan Ray
 Introductions

Phoenix Consulting –
Recognized supply chain consultants working across AMER since 2005.

Sayontan Ray –
Sayontan has proficiency in architecture and development of Forecasting, Depletion Management,
Incentive Compensation Management, Financial Modelling, Supply Chain and Territory-Quota
Management solutions for clients across US and SEA geographies. With about 7 yrs of Anaplan
project experience and about 8 yrs of consulting experience, he is part of Emerging ERP Solutions
team which focuses on Analytics, Planning, Forecasting, Scenario based Simulation for APAC
domain.

Case in Point – Medical Technologies Corporation

Medical equipment manufacturer Located in Phoenixtown

• About 60 hospitals as customer base in immediate locality
• Govt introduced Excise Tax – 2.3% on Revenue
• 10% Reduction in Profits
• Analyze cost saving opportunities to overcome the ACA tax
• Optimize Supply chain process and streamline to cut costs, maintaining quality

Sayontan Ray – Phoenix Consulting

© 2020 Deloitte Southeast Asia Ltd 3
 Executive Summary & Plan

• Revenue Growth-
Average growth rate from 2010 till 2012
Saturated growth rate from 2012
• SG&A high compared to other expenses
Attributed to high selling cost

Possible Scenarios Simulations-

• To maintain same Net Earnings increase
Revenue by 12% (Scenario 1)
• To maintain same Net Earning reduce
Selling Cost by 5% (Scenario2)
• Apply both changes together to achieve
Net Earning growth by 23% (Scenario 3)
Scenario 3 is achievable with Optimization
of Supply Chain

Sayontan Ray – Phoenix Consulting

© 2020 Deloitte Southeast Asia Ltd 4
 As Is Current Process
Assembly / Sterilization / Receiving

Offsite
GPO Center

MTC Vendors Sales Desk Hospital

Surgery
Room

• Off site Sterilization & reroute to MTC

3rdparty • 2 distribution Channels- Distributor, 3PL
Sayontan Ray – Phoenix Consulting
© 2020 Deloitte Southeast Asia Ltd
Logistics • 6 lanes of transportation
5
 Areas of Improvement - Logistics

• Use distributors for last mile delivery to hospitals and rooms. One distributor to handle
everything will reduce touch points and speed up process. Streamline process, speed better,
lesser touchpoints, everything management by strategic distributor - more savings as lesser
party involved
• No responsibility of inventory with MTC and we can reduce inventory outstanding. We can
preposition inventory near hospitals. Reduce inventory stored needed and holding cost would
decrease with distributor model.
• Streamline Inventory and automate logistics with RFID tags. Computerized process increases
accountability and tracking
• Shift to on-demand mode of transfer for lesser inventory movement. This can be directed by
statistical forecast based demand pull prediction
• Positive financial gains as sterilization and irrelevant transportation can be reduced with
sterilization capabilities at local distribution centers. Allow distribution centers to re-sterilize
and ship to other hospitals
• Distributor should be a Strategic partner in this entire value chain
• Smart kiosks can be deployed near to hospital location to hold ready inventory for direct
delivery to surgery rooms

Sayontan
© 2020 DeloitteRay
2019 Deloitte –AsiaPte
Consulting
Southeast
Phoenix
Ltd
Ltd
Consulting 6
 Areas of Improvement - Operation

• Sales Reps and relevant Trunk inventory means larger safety stocks across all reps. This also
means securing of inventory, loss of accountability, cumulative higher holding costs with
Sales Reps. Sales reps have to keep one weeks worth inventory each, and they are not ready
to tackle spike in demands with limited individual quantity in “mini warehouses”
• Sales reps enable faster quicker delivery and offer higher service level, however there is need
to react to changes in demand fast and calculate inventory movement accurately
• Regional sales office and operation costs can be reduced. The sales reps can be repurposed
to boost business on more marketing activities and establish strategic relationships with
hospital accounts.
• Hospitals need to have strategic relation with MTC. Incentives like long term contracts to
drive down price can be focused with hospitals while continuing to deliver high quality
products. This can also help us have access to hospital demand data (scheduled operations)
which can assist us with shipment plans
• As relationship managers, Sales Reps should co-invent with surgeons new SKUs by
repackaging relevant equipment for targeted specific surgeries. Also understanding surgeon
needs will help R&D to come up with new products

Sayontan
© 2020 DeloitteRay
2019 Deloitte –AsiaPte
Consulting
Southeast
Phoenix
Ltd
Ltd
Consulting 7
 Areas of Improvement - Planning

• Fulfillment plans is based on statistical

forecast Exponential smoothing which
will churn indicative month for next
month. The demand for last 2 years
seemed seasonal, so maybe a
seasonal forecast would have worked
better (ex- winter's holts method).
• Kanban method is followed for
inventory, so when we ship out for a
month, we are holding 2 months
worth of inventory in stock to
accommodate for a demand surge.
Production is little relaxed (26650) in
order to bring down inventory levels,
but once we reach threshold of 60K
end of Month Inventory, we would Unstable product, COV =0.42
need to ramp up to 33000. Average Monthly Consumption =29449
• We should reduce inventory level and Forecasting with Exponential Smoothing (alpha =0.01)
holding costs. Kanban based inventory = 2Bins = 58900

Sayontan
© 2020 DeloitteRay
2019 Deloitte –AsiaPte
Consulting
Southeast
Phoenix
Ltd
Ltd
Consulting 8
 Areas of Improvement - Sourcing

• Sterilization is a key issue for high costs and the sterilization offsite partner needs to be
strategic. They can focus on core strengths and we don’t need to reinvent and restart a
process with QA, while we focus on our core products
• Sterilization partner should be given an opportunity to establish a local capability at our
distribution center managed by their operators. This would help in close working, quick
sterilization and improved service levels with quick turnaround time. Alternatively we can try
to acquire this partner
• Distribution vans can carry back unused equipment from hospital to distribution centers
during return journey- for sterilization and repacking. This would be quick and would largely
reduce costs by reducing transportation lanes.
• As long term – MTC can explore to get production done at cheaper offshore labor
alternatives- however this would need extensive QA
• Planning & Sourcing can be greatly improved with implementation of WMS, and integrated
Supply Chain Control tower which is always available realtime and transparent system. Based
on real sales data this can help to recalculate forecasts, help different teams reach consensus
plans and help aligning with corporate financial plans

Sayontan
© 2020 DeloitteRay
2019 Deloitte –AsiaPte
Consulting
Southeast
Phoenix
Ltd
Ltd
Consulting 9
 Solution Timeline

We are planning to achieve optimization in a phased sequential way, tackling critical issues first
and laying groundwork before moving to next stages

Short Term Mid Term Long Term

Optimization Tasks Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Page

Sterilization Supplier- Strategic 9

Lower Inventory in Stock 8

New SKUs and Co-Invention with Surgeons 7

Sterilization Unit at Central Distribution Centers 9

Hospitals & MTC relation - Strategic 7

Distributor only Sales Model 6

Reduce Sales Office and Repurpose Sales Reps 7

Smart Kiosk Deployment 6

Planning & Control Tower Solution 8, 9

Sayontan Ray – Phoenix Consulting

© 2020 Deloitte Southeast Asia Ltd 10
 Resources Needed

Hospitals (as
Strategic Accounts)
Partnerships Distribution Partner
Sterilization Partner

Forecasting Model
Relationship Managers
Tracking of Inventory with Hospitals
Supply Chain Control with WMS
Co-Invention with Sales Reps
Tower & WMS Consensus Plan for Surgeons
Production, Shipping
Supply Chain Account Management
Optimization

Sterilization
Distribution Partner
Managed by
Lower MTC Inventory
Sterilization Partner
Sterilization and holding cost Distribution
At local Distribution
Deploy smart Kiosks
centers
RFID tags
Sayontan Ray – Phoenix Consulting
© 2020 Deloitte Southeast Asia Ltd 11

* Cost Investments have not been calculated at this stage

 Risk, Contingency Plan & Planned P&L
Risk
• Hospitals not shifting to buy from MTC
distributors
• Sterilization partner does not accept
proposal of strategic partnership, local
operations
• Distributor not aggressively selling MTC
products
• Sales Reps not aligned with new roles
focusing as relationship managers
Sayontan Ray – Phoenix Consulting
© 2020 Deloitte Southeast Asia Ltd
Contingency Plans
• Sales Reps need to build the relation
and focus on co-inventions. Provide
deals to sweeten for long term
contracts
• Sterilization partner can be acquired
after proper consultations with M&A
experts
• Some commission and incentive has to
be built in for strategic distributors
focusing on long term win-win
scenarios
• Sales reps need retraining and
reallocation. In long term they are
driving up sales and stressing less
about distribution and inventory
12