Page 7 - CIMA OCS August 2018 Day 2 Suggested Solutions

SUGGESTED SOLUTIONS

CHAPTER NINE

EXERCISE ONE (VALUE CHAIN)

Briefing Notes
Porter’s value chain

What is Porter’s value chain?
Value chain analysis focuses on analysing the internal activities of a business in an effort to
understand costs, locate the activities that add the most value and differentiate from the
competition. To develop an analysis, Porter’s model outlines primary business functions as the
basic areas and activities of inbound logistics, operations, outbound logistics, marketing and sales,
and after sales service.

The model also identifies tasks found in the important support activities of infrastructure, human
resources management, technology and procurement.

The overall goal of value chain analysis is to identify areas and activities that will benefit from
change in order to improve profitability and efficiency.
Thomas Fine Tea’s primary activities
Inbound logistics

Tea leaves are typically sold at auction and our buyers work with local tea dealers to procure
crops of tea leaves from the plantations. The tea leaves are then imported to Deeland via ship.
Once landed, each consignment of tea sacks is delivered, by an external logistics business, to our
factory on pallets, which are then moved into the ‘goods in’ warehouse using forklift trucks.
Consignments of tea leaves from different suppliers are stored in separate areas.
Within the factory there is a raw materials store. We have a separate warehouse area for the raw
materials inputs used in infusions.
The processes for inbound logistics appear to be running well with no issues highlighted.
Operations

Thomas Fine Tea operates from a single site in Hightown, Deeland.
On receipt, each consignment of tea is taste tested for quality and flavour characteristics so that
the Blending Department can start to create the blend recipe. Once devised, the recipe is
electronically sent to the ‘goods in’ warehouse where a batch requisition is raised which shows
the number of sacks of each different type of tea leaf required for a batch.

Prior to blending, the tea leaves requisitioned for each batch are checked against the recipe to
ensure the accuracy of picking. The sacks are then loaded onto a conveyor belt by a robot, the
contents loaded into a large funnel, passed through a sieve and into a hopper, which then feeds
the leaves into a gently rotating blending drum, mixing all the tea leaves together. At this stage,
a sample is taken to check that the blend is consistent with expectations. Tea bag production is
highly automated.

Our infusions are produced within their own production area in the same way as our tea bags.
The production line for infusions is relatively small.

The company’s products are sold to all major supermarkets chains in Deeland as well as two
wholesalers who sell our products on to convenience store chains. In addition, we also have four
corporate customers, including our national airline, DeeAir and the national government.

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