Page 9 - CIMA MCS Workbook November 2018 - Day 2 Suggested Solutions

SUGGESTED SOLUTIONS

ensures that the most up to date processes are available for production and marketing
maintenance and cleaning, Procurement can then ensure that we purchase the correct quantities
at the right price and quality, perhaps by the introduction of a just in time system. GRAPPLE does
not appear to currently operate a “just in time” system and this may be contributing to an
unnecessary build‐up of inventories.

Outsourcing:

The Value Chain can be used by GRAPPLE 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 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. distribution which external providers could do as well, if not
better), then GRAPPLE may outsource that part of the process, gaining access to expert
knowledge and potentially saving money at least in the short term.

There are certain key activities which we consider we could perform 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 GRAPPLE would include e.g. research and
development

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 IT technological development for website
or social media development to specialist providers (e.g. consultants) this would result in a cost
saving (at least in the short term) as it would mean that we would no longer have to invest
substantial sums to employ those who work there and currently manage the function. We could
outsource this activity as required to a specialist third party company. The outsourcing partner
would be experts in this field and would have access to the latest technologies.

Additional ongoing savings are therefore likely as we 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 GRAPPLE.

Technology, for example, will become a key driver for success and GRAPPLE has already invested
in automation of the fruit juice production line so that it can measure the effects in improvements

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