...Zumwald AG is a German company producing and selling medical and biomedical equipment. It has a highly decentralized management system with a divisional structure where manager of each division has autonomy and freedom of sourcing. They are compensated based on ROIC and sales growth. A dispute arose among three divisions: ISD, Heidelberg, and ECD, based on whether ISD should outsource to lower cost for higher margins or ISD should cooperate with Heidelberg, to produce products despite of higher cost. Since the organizational goal is to make the best decision for Zumwald, I will analyze based on which scenario could maximize the profitability of Zumwald as a whole. In this case fixed cost is not considered since it is irrelevant and could be overlapped. Outsourcing scenario | ISD/Zumwald(in ‘000) | | Insourcing (Zumwald Total) | ISD | Heidelberg | ECD | Price | €340 | | €340 | €340 | €140 | €21.6 | Variable Cost | 26.3+72=€98.3 | | 98.3+(50-21.6)*+9€135.7 | €98.3 | €50 | €9 | Fixed Cost | €117.7 | | €181.7 | €117.7 | €55 | €9 | Contribution (P-source-VC) | 340-100.5-98.3=€141.2 | | 101.7+90+12.6=€204.3 | 340-140-98.3=€101.7 | €90 | €12.6 | *The variable cost of Heidelberg includes ECD’s price of the supplied parts, so it is deducted to avoid double counting We can see that insourcing with Heidelberg gives a higher contribution margin of €204,300 which outweighs outsourcing to Display Technology PLC (DT) by €63,100. Therefore, we can conclude that cooperate with...
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...Zumwald AG Zumwald AG adalah perusahaan yang memproduksi dan menjual sistem pencitraan diagnostik medis dan peralatan test biomedical dan instrumen-instrumen lainnya. Perusahaan yang terdiri dari 6 divisi operasi ini memiliki total pendapatan pertahun sedikitnya lebih dari € 3 miliyar. Zumwald dijalankan dengan dasar desentralisasi yang sangat kuat, setiap manajer memiliki wewenang yang kuat. Manejer dari setiap divisinya diberikan kewenangan jika performance mereka sesuai dengan perencanaan. Kinerja mereka dievaluasi dan bonus manajemen diberikan atas dasar pencapaian setiap masing-masing divisi dari budgeted target untuk return on invested capital (ROIC) dan pertumbuhan penjualan. Meskipun sebagian perusahaan terintegrasi secara vertikal, manajer divisi diperolehkan untuk menyediakan komponen mereka dari supplier luar. Permasalahan terjadi di 3 divisi perusahaan yaitu : the Imaging Systems Divisions (ISD) yang menjual complex ultrasound dan magnetic resonance imaging system, the Heidelberg Division (Heidelberg) yang menjual monitor yang beresolusi tinggi, graphics controllers dan display subsystem, dan the Electronic Components Division (ECD) yang menjual applikasi yang mengintegrasikan secara spesifik circuits dan sub perakitan. ISD mendesign sebuah ultrasound imaging system yang disebut sistem X73. Teknisi Heidelberg turut berpartisipasi dalam mendesign X73 tetapi Heidelberg menanggung full cost dari waktu yang karyawan habiskan dalam proyek ini. Untuk material system display...
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...Hunaut Zumwald AG Case Context: Zumwald produces systems for medical diagnosis and generates 3 billion Sales. 3 operational divisions vertically integrated with a strong decentralization of decisions. This means that the Transfer price is the market price. That is the base of our problem here. Divisions have the right to buy and to sell the components and products outside the global firm. Basic map of the firm: ECD -> Heidelberg -> ISD 2 divisions are in conflict: ISD and Heidelberg The first problem is a management problem: the organisation of the group is vertical and decisions are decentralised (managers have the right to outsource): this is according to ma a contradiction. When your firm is vertically integrated, it should be clear that you buy the components to your subsidiary. They are 3 profit centres, and economic indicators should not be taken into account for some division’s decisions. This is exactly the case for Peugeot who has bought the supplier called Faurecia, to secure the supply of components for their cars. Key points for an intelligent decision: * The goal should be the maximization of the firm’s profit as a whole. The ideal would be to find a congruence goal * We should not consider sink cost (a point that ignore Paul) * We should also consider the quality and security of the supplier We will consider 2 scenarios, if ISD buy the components to Display Tech and to Heidelberg: BUY to DISPLAY | ISD | Zumwald | Sales...
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...1. A transfer price is the price of a product or service that is sold internally within a firm between financial responsibility centres. Transfer prices are important because they include cost information for inputs provided internally that can help managers make better decisions by assessing the profitability of the output that uses this input. This helps both the buying and selling managers decide how much product to buy/sell internally in order to maximize profit or some other performance measure. Transfer prices also affect the performance measure of the managers of both the buying and selling financial responsibility centre. There are several different ways to set transfer prices: market price, marginal cost, full cost, full cost plus markup, negotiated, etc. Which one is chosen depends on which fits the situation and goal of the financial responsibility centre the best. Full cost plus markup transfer prices help managers measure how viable a product/service is in the long term. For a product to be viable, it has to be able to recover its full cost plus make a profit. If full cost plus markup transfer price is too expensive for the buying profit centre, then perhaps the product/service is not viable and the selling profit centre should be closed down and the buying profit centre should buy from outside. 2. a. The sourcing decision best for the ISD is to source to Display Technologies Plc in order to minimize cost. The decrease in cost increases profitability and...
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...Case Analysis : Zumwald AG Zumwald AG is a German company specialized in the production and retail of medical equipment. In August 2002, the launch of a new ultrasound imaging system, X73, triggered a transfer pricing dispute between two of its six divisions, ISD and Heidelberg. A third division, ECD is indirectly involved because it usually provides some components to Heidelberg. The origin of the dispute between Heidelberg and ISD is the choice of supplier for some components of the X73. Zumwald has a culture of being highly decentralized : it is organized in six operating divisions and partially vertically integrated however the company policy is to let division managers choose their suppliers internally or externally. Nonetheless, in the case of the X73, the division manager of Heidelberg, Paul Halperin, challenges the choice made by ISD managers to supply themselves externally for obvious cost-‐‑based motivations. The managing director of Zumwald, Mr. Rolf Fettinger, is asked to help settle the dispute. The situation is very tricky for Mr. Fettinger. Indeed, freedom of sourcing has been the policy of the company as of now and a settlement in favor of Heidelberg could create a disturbing precedent...
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...Analisis kasus Perhitungan contribution margin dari tiap calon supplier ISD : Item Heidelberg Bogardus Display Tech Price X73 340000 340000 340000 Direct Material 140000 120000 100500 Other Component 72000 72000 72000 Conversion Cost - Variable Overhead 27000 27000 27000 - Fixed Cost 117000 117000 117000 Total Costs 356000 336000 316500 Contribution Margin (16000) 4000 23500 Dari perhitungan ini, ISD memilih Display Tech karena memberikan contribution margin terbesar. Memilih Heidelberg akan membuat contribution margin dari ISD negatif. Untuk Heidelberg, seharusnya bidding price yang tepat adalah : Item Heidelberg Current bid Competitive bid Direct Material 21600* 21600* Conversion Cost - Variable Overhead 28400 28400 - Fixed Cost 55000 Total Costs 105000 50000 Mark up (33%) 35000 16500 Harga yang ditawarkan 140000 66500 Fixed cost untuk membayar tenaga kerja tidak relevan untuk diperhitungkan, karena bagaimanapun Heidelberg harus tetap membayarnya. Karena kapasitas yang digunakan baru 70% maka tidak ada opportunity cost yang diperhitungkan. Agar Heidelberg mendapat profit yang positif, Heidelberg boleh menetapkan mark up yang pantas. * Direct materials disuplai oleh ECD yang dihitung dari full manufacturing costs 18000 x 120% ada 2 perhitungan apabila Heidelberg yang memenangkan bidding: - dengan harga penawaran yang sekarang Item ISD Heidelberg ECD Total Price X73 dan komponen 340000 140000 21600 ...
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...Research Paper Enterprise Resource Planning Enterprise Resource Planning began with early attempts in the 1940’s but was not mastered until the early 1960’s by J.I. Case, the manufacturer of tractors and other construction machinery, and partner IBM. It also has its relationship with Material Requirement planning (MRP), which serves as the method for planning and scheduling materials for complex manufactured products in the 1980. But it was too big clumsy and expensive and eventually lead to the focus of MRP II by JD Edwards. Enterprise Resource Planning help provides corporate platform for information technology and include financial and manufacturing applications. Its attempt to integrate all areas of the company function into a single system that can serve different department needs throughout the company. By integrating all business function it helps the company to function more efficiently in the business processes. With the integration of business processes ERP helps to reduce operation cost, such as production and inventory costs, it helps with budgeting, generating more accurate demand forecasts, bill of material, speed production cycles and enhance customer service. ERP system has been growing tremendously since it first introduction, according to a Gartner research in 2005, the total ERP application grew 5.2 percent annually as the market deal with mergers, on demand and technology advances with Europe having the largest segment of the market at 42 percent...
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...AsiAn PAints GaininG a 360-DeGree View of the CuStomer “we don’t paint walls, we style them.” that catchy slogan describes a key business initiative launched several years ago by asian Paints Limited, india’s largest paint company. instead of simply manufacturing decorative coatings, the company is increasing customer satisfaction and boosting sales by engaging with customers, dealers, and other partners to provide complete home painting solutions. to achieve the necessary 360-degree view of all stakeholders, asian Paints chose the SaP® Customer relationship management (SaP Crm) application to integrate customer-facing processes. SAP Business Transformation Study Superior Customer Value Content 3 4 5 6 7 8 10 11 Asian Paints Key Challenges Why SAP Was Selected Implementation Process and Best Practices Strong Governance and Project Management Business Process Transformation and Value Realized Future Road Map Lessons Learned AsiAn PAints GaininG a 360-DeGree View of the CuStomer QuiCk faCtS Industry Consumer products Revenue uS$1.1 billion Employees 5,000 (worldwide) Headquarters mumbai, india Web Site www.asianpaints.com SAP® Solutions and Services SaP® Customer relationship management application (functionality for marketing, interaction center, sales, service, and partner channel management), SaP ramp-up program Implementation Partners mahindra it Consulting Pvt. Ltd., a unit of mahindra & mahindra Group; SaP Consulting Key Challenges • Gain visibility...
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...After extensively reviewing ERP vendors, Summit selected ERP software from SAP because of its functionality in sales and distribution, materials management and financials, and its knowledge of the distribution business. Summit visited other electrical distributers using SAP, including some of its competitors, to make sure the software would work in its line of business. Summit was able to go live with its new ERP system across 19 locations in January 2007. Nevertheless, Summit still had to customise its SAP software to meet its unique business requirements. Most SAP delivery and material scheduling functions were designed for overnight processing, because many industries have longer lead times for order fulfilment. Waiting for overnight inventory updates would significantly delay Summit’s sales. Summit found it could solve this problem by running smaller, more frequent updates for just the material received during the day, rather than running big inventory updates less often. This provided more timely and accurate snapshots of what was actually available in inventory so that orders could be rapidly processed. Wire and cable are one of Summit’s most popular product categories. Summit buys these products by the reel in lengths up to 5,000 feet and then cuts them into various lengths to sell to customers. This makes it difficult to determine how much of this type of inventory has been sold and when it is time to replenish. To address this issue, Summit used a “batch management”...
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...------------------------------------------------- Project Failures From the Top Down: Can Marchionne Save Chrysler When Chrysler merged with Fiat on June 10, 2009, there was cause for hope and optimism. After an endless string of bad news, perhaps, the auto industry was not dead yet. On paper it looked like a good deal for everyone. Fiat would return to the US market and sell its popular 500 (Cinquecentro), Chrysler would acquire a line of cars that consumers might actually buy, and tens of thousands of workers would keep their jobs. But the real prize might just be Sergio Marchionne, CEO of Fiat and now CEO of FiatChrysler. When he first became CEO of Fiat in 2004, Marchionne inherited a company on the brink of failure. It manufactured a lackluster product line and had suffered more than $12 billion in losses over the previous five years. To transform the company he embarked on several strategic and operational projects. He fired senior managers, upended a bloated bureaucracy, and brought a team of young aggressive managers on board. Then, he reviewed all projects and killed those that could not pass the market test. And he hired new designers, and demanded a portfolio of exciting projects that would bring customers back to dealer showrooms. In less than three years he succeeded in one of the most impressive turnarounds in automotive history. Now, as part of his plan to grow Fiat into a global competitor he has taken on Chrysler. But, can he perform his magic again? Can he save...
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...1) What problems occurred when Wolf Peak upgraded from QuickBooks to a new accounting software package? How could these problems have been avoided? These problems could have been avoided if when they made the initial decision for replacement of QuickBooks, they had sought the advised of a finance person before the change was made. Traditional quick books was user friendly for the staff, however, the newly implemented accounting system was more sophisticated and complicated accounting system than what everyone was used to. Employees were unable to extract financial or operational data needed to make critical business decisions. As a result of this upgrade, Wolf Peak International experienced several problems stemming from the implementation of this software; some of them are listed below: Very complicated and hard to learn, not user friendly. Time consuming and sophisticated. Very expensive I think the first step in avoiding these problems, is before deciding to choose the software first being sure about the accounting needs of the organization from detail discussions and expert advice. It’s very important to know your needs and requirements in order to choose the best product, so they should have understand the functionality of the software first and made it clear to everybody using it, so that problems in execution wouldn’t appear. They could have developed the time frame with clear chain and pattern of doing things so that it wouldn’t have taken much time for execution...
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...Compensation Management (PACM) Release 4.6C HELP.PACM Compensation Management (PA-CM) SAP AG Copyright © Copyright 2001 SAP AG. All rights reserved. No part of this publication may be reproduced or transmitted in any form or for any purpose without the express permission of SAP AG. The information contained herein may be changed without prior notice. Some software products marketed by SAP AG and its distributors contain proprietary software components of other software vendors. Microsoft , WINDOWS , NT , EXCEL , Word , PowerPoint and SQL Server are registered trademarks of Microsoft Corporation. IBM , DB2 , OS/2 , DB2/6000 , Parallel Sysplex , MVS/ESA , RS/6000 , AIX , S/390 , ® ® ® AS/400 , OS/390 , and OS/400 are registered trademarks of IBM Corporation. ORACLE is a registered trademark of ORACLE Corporation. INFORMIX -OnLine for SAP and Informix Dynamic Server Informix Software Incorporated. ® ® ® ® ® ® TM ® ® ® ® ® ® ® ® ® ® ® ® ® ® ® ® ® are registered trademarks of UNIX , X/Open , OSF/1 , and Motif are registered trademarks of the Open Group. HTML, DHTML, XML, XHTML are trademarks or registered trademarks of W3C , World Wide Web Consortium, Massachusetts Institute of Technology. JAVA is a registered trademark of Sun Microsystems, Inc. JAVASCRIPT is a registered trademark of Sun Microsystems, Inc., used under license for technology invented and implemented by Netscape. SAP, SAP Logo, R/2, RIVA, R/3, ABAP, SAP ArchiveLink, SAP Business Workflow, WebFlow...
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...1. Definition According to Needle (2010) joint venture is two or more firms working together to achieve mutually beneficial objectives – e.g. sharing resources, R&D projects, setting up a third company with shared ownership. In this case – setting up a new company! AMC(American company)+ BAIC(Chinese company) = BJC (Beijing Jeep Corporation) AMC evolution: AMC- one of the smallest companies in the USA Chrysler bought AMC – one of the biggest companies(acquisition) Chrysler merged with Daimler(merger) 2. Advantages AMC | BAIC | Minimal finincial risk | Access to western technology (product and manufacturing) | Cost reduction | Vehicle with global brand and reputation | Profit: Parts(took control over supply)Hard currency(inelastic- does not change from environment) | Gaining R&D centre ( knowledge that is helpful for other industries) | Entry to an emerging market | Knowledge of management practices | Extnded life-cycle of an old product | Development of local supply chain | Learn about Chinese market | Learning about West and its businesses | Learn about Joint ventures | Job creation with hard currency levels | 3. Disadvantages The most appropriate way of looking at disadvantages is by using Medcoff’s (1997) ‘4Cs’ model for JV’s. 3.1 Compatibility * Highly Political nature of doing business in China was very frustruating for Chrysler and as their biggest problem: 2. Cumbersome bureaucracy 3. Having accept local...
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...INTRODUCTION: SAP stands for Systems, Applications and Products in data processing. It is an integrated business applications package that covered most functions of an organization. But now, ATLAM is facing a tight circumstance to embrace the new system-SAP since the existing economic crisis play a part in impacting ATLAM financial position. Now, the management of ATLAM, a wholly owned organization of MICT Berhad, had been asked to upgrade its accounting system with the PETRA group-wide SAP system as to meet PETRA group service and time quality requirement. But with the current financial position and culture of ATLAM staff style of working urged the ATLAM management to think carefully and critically to ensure the best possible outcome for the organization. PROBLEMS: 1) Financial position of ATLAM was in fiscal deficit during the year 2001. Incoming cash flow of ATLAM is much lower than the outgoing cash flow. Root cause: Higher expenses on operational cost and implementation cost SAP; such as software cost, SAP license cost and customization cost for each financial report). Year 2001: SAP implementation cost: RM 5000000 -Request for each customization report (going to cost about RM 10,000 per report). -SAP software cost: RM -IT Software for licensing (SAP): 1000000 Suggested solution: To implement of SAP completely in ATLAM, ATLAM management representative should consider negotiating with SAP management representative; in order to reduce the cost...
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...The Technology Choices Written By: Predrag Jakovljevic Published On: August 27 2005 Microsoft's Uncontested UI Supremacy In the battle between Microsoft Business Solutions (MBS) and the UK-based the Sage Group plc (LSE: SGE.L) for the small-to-medium enterprise (SME) market segment, technology choices will be a major factor. The previous parts of this note detailed the strategies of these two major vendors and analyzed how the market would respond. But, going a mile further, there are some important areas where the synergy and a bridge between MBS and the rest of the "classic" Microsoft world could take place, such as the previously mentioned "user experience" mantra. The basic hypothesis is that Office (i.e., Word, Excel, and Outlook) constitute the core of the user experiences of many millions of existing and prospective desktop customers. Leveraging that ubiquitous look-and-feel acquaintance in the MBS product lines (and in those of rapidly increasing independent software vendors [ISV]) is something that can add tremendous clout to MBS sales efforts—with the supposedly minimal training for the information technology (IT)-resource constrained SME market. In fact, the ongoing Outlook, Excel, or Word user interface (UI) metaphor moves may speak volumes about where the entire market is going. Possibly the most vocal in that regard could be the recent announcement made by Microsoft and SAP that they are jointly developing a product that will integrate back-end SAP...
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