Page 7 - CIMA MCS Workbook November 2018 - Day 2 Suggested Solutions

SUGGESTED SOLUTIONS

CHAPTER NINE

TASK 1‐ INTERNAL REVIEW

Suggested solution

Briefing note:

From: Finance Manager
To: FD
Date: Today
Subject: Internal review

The Value Chain model can be used to understand the internal position of a company and how
the various activities can add value in the customer’s view. It can also be used to develop a
competitive strategy of either cost reduction or differentiation and decide on whether or not to
retain or outsource activities depending in whether they “fit” with an organisation’s distinctive
capabilities. The assumption from the draft accounts is that costs have been kept under control
but on closer examination, this may not be the case.
Within the value chain these activities are broken down into primary and support.

Primary Activities ‐ those directly concerned with creating and delivering the product or service,
i.e. sourcing the key aspects of the product and providing that product to the customer.

For GRAPPLE these would be the activities involved in the process:

Inbound Logistics – involves the receipt and distribution of inputs to the process. This include for
example, receipt of, materials, manufacturing equipment parts and assemblies for maintenance,
cleaning, etc. This is obviously a key area for GRAPPLE. It is vital to always have the raw material
available to ensure that there are no hiccups in the production. Given the variety of product and
the differing demands of customers, the use of on‐site stores may add to the efficiency of the
inventory held. Clearly the key element in drinks production (water) is already held in tanks on
site but with the increasingly complex ingredients in soft drinks production (pectins; aspartame
etc.)

Operations – would involve the preparation of the products themselves, which is complex given
the different and changing consumer needs. New technology is always on the horizon and with,
for example, the advent of “sugar free energy drinks”. We need to be sure that any new processes
do not disrupt our key activities but at the same time be up to date to differentiate GRAPPLE from
the other competitors.

Outbound logistics ‐ would involve getting the goods to the final customer. In this respect
GRAPPLE has its own fleet of vehicles for transportation of products to customers. (NB in the
absence of any comments to the contrary, this has been assumed to be the case from the pre‐
seen information provided). Ensuring that we provide a customer‐centred experience underpins
the need to have our own well maintained fleet. However it may be the case that some of these
vehicles and their drivers may be idle for periods of time and be a drain on profits. This will need
further investigation as, although we strive to provide a unique customer experience it may have
an impact on the profitability of GRAPPLE.

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