Page 13 - CIMA MCS Workbook August 2018 - Day 2 Tasks

Chapter 9

ORGANISATIONAL MANAGEMENT

(E1) PRACTICE TASKS

EXERCISE 1 (SUPPLIER STRATEGY)

TRIGGER
This morning you find the following note on your desk.

Note from Ethan Henson (Operations Director)

As you’ll be aware, GymFiT has exciting plans for growth, not only through the selective acquisition of
existing gym groups but also through the lease/ fit-out of new properties. To date, we’ve been able to
combine both our expertise and the close relationship we have with suppliers in order to reduce fit-
out and management costs. Going forwards, I know several of the directors are keen to further
reduce gym fit-out costs through the use of a competitive tender process, negotiating improved terms
with suppliers.

At yesterday’s board meeting, supplier strategy was once again a hot topic, just when we thought
we’d put it to bed at the end of our last meeting! It was raised again by Nicola Collette (CFO) who said
it had been on her mind since we met previously. She questioned the eagerness to go down the route
of a competitive tender process and suggested that we should explore the idea of single-sourcing,
rather than multi-sourcing, in terms of gym fit-out. By gym fit-out costs, we’re referring to things like
exercise equipment, flooring, signage, accessories e.g. foam rollers, yoga mats, tv screens, music
systems, computers etc.

When I think of single-sourcing, I immediately begin to question how we can be sure that we are
keeping the company competitive if there is only one source. Presumably there is another side to this
argument!

Bertram Durand (CEO) agreed we should explore the idea further in terms of which is better for us.
Ultimately, he remains uncertain whether to switch to just one supplier for each type of product,
continue with just a few trusted suppliers or to use more suppliers. We have plans to develop
between 15 and 20 properties per year and so, quite rightly, he is not taking the decision lightly. He
asked me to report back to him before the end of the week, and for this I will need your help.

At our next board meeting we will also be will also be discussing the possibility of implementing total
quality management (TQM) throughout the organisation.

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