Page 14 - CIMA MCS Workbook February 2019 - Day 2 Suggested Solutions

CIMA FEBRUARY 2019 – MANAGEMENT CASE STUDY

the correct quantities at the right price and quality, perhaps by the introduction of supply from
dental service organisations (DSOs). They do receive better pricing (because it costs less to do
business with a larger group i.e. basic benefits of scale), the reality is they have a better
understanding of supply chains, have excellent inventory control systems in place, which
economically, can be just as significant as a discount on supplies.

Outsourcing:

The Value Chain can be used by Crowncare to analyse the different value adding activities that are
the basis of its strategic capability, and assist us in understanding our internal strengths and
weaknesses. It is also one way of identifying which activities are best undertaken internally and
which are best provided by others ("out sourced").

Using value chain analysis in outsourcing or insourcing decisions:

Value chain analysis involves critically assessing each activity to establish how much value it adds
to the overall product. By looking at activities in this way it is possible to identify activities which
could effectively be ‘ring‐fenced’ and those that could be considered for outsourcing.

Where activities are identified e.g. IT support delivery services, which external providers could do
as well, if not better, then Crowncare may outsource that part of the process, gaining access to
expert knowledge and potentially save money at least in the short term.

There are certain key activities which we consider we could better in‐house either because of the
specialist knowledge we have or because they are confidential in nature. These are generally the
activities which we feel give us competitive advantage over our competitors. These activities
would continue to be done in‐house and for Crowncare would include e.g. dental treatment,
managing client’s records, sourcing new suppliers and working with clients throughout each stage
of the treatment.

In terms of the value chain it is always important to ensure that there are no weak links so if
outsourcing is going to be considered it must be ensured that the activity can be carried out to the
standard required (or better) so that it does not reduce but enhances the service.

For example, if it was decided to outsource aspects of technology procurement to specialist
providers this may result in a cost saving (at least in the short term) as it would mean that we
would no longer rely on the existing clinical team to invest substantial time in in considering this
function and provide the additional benefit of having these clinicians freed up to carry out more
work with patients, thereby increasing revenue. The outsourcing partner would be experts in this
field and would have access to the latest technologies and procurement agreements.

Additional ongoing savings are therefore likely as would no longer have to incur the costs of
ensuring our team are trained in the latest techniques, buy the latest technology or have the cost
of investment in and maintenance of our in‐house function.

The problem with this is that we would have to ensure that the outsourcing partner was able to
deliver exactly what we required, to the standard specified within the given timescale. If this does
not happen then it could affect the overall success of Crowncare. Technology remains as the key
driver for success in our industry and provides us with the means to meet our patient’s exact
specification and on time. Falling behind is not an option, resulting in potentially a significant loss
of revenue, additional costs and damage to profitability and brand.

104 KAPLAN PUBLISHING