CUHK MEDICAL CENTRE: ESTABLISHING A LOGISTICS SERVICES
SYSTEM CASE STUDY SOLUTION
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SYNOPSIS
Dr. Hong Fung, the chief executive officer of the soon-to-be-completed CUHK Medical Centre Ltd.
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(CUMC) in Hong Kong, was preparing to meet with the hospital’s tender board in June 2019. Fung had to
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recommend whether the logistics services needed by CUMC should be provided internally or by a third-
party logistics (3PL) provider. If Fung recommended retaining a 3PL provider, he needed to advise which
provider should be awarded the business.
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The Case Solution Starts From page 5
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ASSIGNMENT QUESTIONS
1. What are the mission and vision of CUMC? How do they affect Fung’s decision?
2. Why did CUMC go out to tender for its 3PL in medical consumables and pharmaceuticals?
3. Is Fung’s plan for the logistics service system innovative?
4. What difficulties did Fung encounter in the process of calling for and analyzing the tenders?
5. Analyze the relative attractiveness of each of the four bidders and their six bids.
6. Should the logistics services for CUMC’s pharmaceuticals or medical supplies be provided internally
or by a 3PL supplier and, if the latter, which 3PL provider should be awarded the business?
The Case Solution Starts From page 5
,ANALYSIS
1. What are the mission and vision of CUMC? How do they affect Fung’s decision?
CUMC’s mission is “to bring quality, affordable, and price-transparent, private health care to the Hong
Kong citizens.” In fulfilling this mission, CUMC envisions being the first smart hospital in Hong Kong
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with an electronic and paperless medical record system; mobile information and communication technology
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with real-time data would support patient journeys, and the management system would be fully integrated
with the Internet of Things (IoT).
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Its 3PL tender specifications partly reflected this vision. Real-time traceability in the storage, transportation,
and delivery of pharmaceutical supplies and medical consumables were anticipated to be achieved by
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warehouse management systems (WMSs) integrated into CUMC’s enterprise resource planning (ERP)
system (see Exhibit TN-5). But the future course of IoT logistics developments were not fully expressible
either by CUMC management or the bidders. By 2019, although digitalization and cloud computing were
widely predicted to give real-time data to supply chain members, enhancing their efficiency, predictability
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of supply and demand, and safety, the future had not arrived.2
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The lack of clarity meant that the vision could not be explicitly stated as tender specifications and therefore had
to be implemented flexibly. This requirement for flexibility was contrary to the idea of fixed price bids on fully
specified tender specifications. The vison’s lack of clarity led bidders to increase their prices and variances to
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The Case Solution Starts From page 5
, EXHIBIT -1: LOGISTICS WORKFLOW FOR THE HONG KONG HOSPITAL AUTHORITY
POINT-TO-POINT DELIVERIES FROM SUPPLIERS AND DISTRIBUTORS
Hospital Authority Purchase Order
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Supplier
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Nursing Stations
Supplier
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Hospital n
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.
. .
.
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Distributor
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tio Distributor
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Point-to-Point Delivery
Nursing Stations
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Hospital 1
The Case Solution Starts From page 5
SYSTEM CASE STUDY SOLUTION
e
pl
m
Sa
SYNOPSIS
Dr. Hong Fung, the chief executive officer of the soon-to-be-completed CUHK Medical Centre Ltd.
n
(CUMC) in Hong Kong, was preparing to meet with the hospital’s tender board in June 2019. Fung had to
tio
recommend whether the logistics services needed by CUMC should be provided internally or by a third-
party logistics (3PL) provider. If Fung recommended retaining a 3PL provider, he needed to advise which
provider should be awarded the business.
lu
So
The Case Solution Starts From page 5
, e
pl
m
Sa
n
tio
lu
So
ASSIGNMENT QUESTIONS
1. What are the mission and vision of CUMC? How do they affect Fung’s decision?
2. Why did CUMC go out to tender for its 3PL in medical consumables and pharmaceuticals?
3. Is Fung’s plan for the logistics service system innovative?
4. What difficulties did Fung encounter in the process of calling for and analyzing the tenders?
5. Analyze the relative attractiveness of each of the four bidders and their six bids.
6. Should the logistics services for CUMC’s pharmaceuticals or medical supplies be provided internally
or by a 3PL supplier and, if the latter, which 3PL provider should be awarded the business?
The Case Solution Starts From page 5
,ANALYSIS
1. What are the mission and vision of CUMC? How do they affect Fung’s decision?
CUMC’s mission is “to bring quality, affordable, and price-transparent, private health care to the Hong
Kong citizens.” In fulfilling this mission, CUMC envisions being the first smart hospital in Hong Kong
e
with an electronic and paperless medical record system; mobile information and communication technology
pl
with real-time data would support patient journeys, and the management system would be fully integrated
with the Internet of Things (IoT).
m
Its 3PL tender specifications partly reflected this vision. Real-time traceability in the storage, transportation,
and delivery of pharmaceutical supplies and medical consumables were anticipated to be achieved by
Sa
warehouse management systems (WMSs) integrated into CUMC’s enterprise resource planning (ERP)
system (see Exhibit TN-5). But the future course of IoT logistics developments were not fully expressible
either by CUMC management or the bidders. By 2019, although digitalization and cloud computing were
widely predicted to give real-time data to supply chain members, enhancing their efficiency, predictability
n
of supply and demand, and safety, the future had not arrived.2
tio
The lack of clarity meant that the vision could not be explicitly stated as tender specifications and therefore had
to be implemented flexibly. This requirement for flexibility was contrary to the idea of fixed price bids on fully
specified tender specifications. The vison’s lack of clarity led bidders to increase their prices and variances to
lu
So
The Case Solution Starts From page 5
, EXHIBIT -1: LOGISTICS WORKFLOW FOR THE HONG KONG HOSPITAL AUTHORITY
POINT-TO-POINT DELIVERIES FROM SUPPLIERS AND DISTRIBUTORS
Hospital Authority Purchase Order
e
Supplier
pl
Nursing Stations
Supplier
m
Hospital n
.
Sa
.
. .
.
.
Distributor
n
tio Distributor
lu
Point-to-Point Delivery
Nursing Stations
So
Hospital 1
The Case Solution Starts From page 5
