DESIGNING & MANAGING THE SUPPLY CHAIN
COURSE : ADMTM Total Marks : 80
Time : 3 Hours
N.B. : 1) All Questions are compulsory
2) Illustrate your answers with suitable sketches wherever possible.
3) Figure to the right indicate full marks.
Q1) Solve any four of the following
a) Explain the push/pull view of supply chain.
b) Explain, what is the competitive strategy of supply chain.
c) Discuss the goal of Supply Chain.
d) Describe the major obstacle that must be overcome to successfully manage a supply chain.
Q2) a) Identify the major drivers of supply chain performance and discuss the role of each driver in
creating strategic fit between the supply chain strategy and the competitive strategy.
b) Evaluate the strengths and weakness of different modes of transportation
Q3) Attempt any three of the following
a) List the various view of supply chain and discuss one of them.
b) Describe how the company achieves strategic fit between its supply chain strategy and
competitive strategy.
c) Discuss the impact of replenishment policies on supply chain on safety inventory.
d) Discuss the role of distribution in the supply chain.
Q4) Write the short note on any five of the following.
a) Role of transportation in supply chain
b) Role of sourcing in supply chain.
c) Safety inventory management in Supply chain
d) Coordination in supply chain.
e) Role of Information technology in Supply chain.
f) E-Business and supply chain management.
PURCHASING & MATERIALS MANAGEMENT
COURSE : ADMTM Total Marks : 80
N.B. : 1) All Questions are compulsory
2) Illustrate your answers with suitable sketches wherever possible.
3) Figure to the right indicate full marks.
Q1) a) Define and discuss the significance of the materials management concept. [06 Marks]
b) What is the role of Materials Management in improving materials productivity?
Explain briefly. [06 Marks]
c) Explain the various materials codification methods. How Standardization reduces cost in the
Materials Management? [08 Marks]
Q2) a) Explain the concept of choice and rationalization of materials [08 Marks]
b) What is the value analysis? What are the different types of values? Describe the importance
of value analysis in an industrial enterprise. [08 Marks]
c) Discuss the computer based inventory management system with diagram and
explain in details. [04 Marks]
Q3) a) What are the activities of purchase research? In which areas can purchase
research is conducted? Explain purchase library concept. [08 Marks]
b) What is negotiation? Enumerate and discuss various tactics that may be used by
buyer while negotiating price with a supplier. [08 Marks]
c) Explain the term vender development and vender rating in details. Also explain
the benefit of vendor rating [06 Marks]
Q4) a) List and explain in brief the factors influencing make or buy decisions [08 Marks]
b) The Sahu Pump Corporation uses 60,000 valves per year and the usage is fairly constant at
5000 valves per month. Each valve costs the company Rs. 1.50. The carrying cost for the
company has been estimated at 15 % of the average inventory investment. The cost to place
an order and process the delivery is Rs. 30
i) Calculate economic order quantity
ii) What is the stock turnover rate ignoring safety stock if EOQ is ordered
frequently? [06 Marks]
MANUFACTURING PLANNING AND CONTROL
COURSE : ADMTM Total Marks : 80
Time : 3 Hours
N.B. : 1. All Questions are compulsory
2. Illustrate your answers with suitable sketches wherever possible.
3. All question carry equal marks.
Q1) a) What are the typical tasks performed by the MPC system and how do these task affect the
company operation. What is the cope of ERP implementation and how are the various modules of
the software organized.
b) What are the communication linkages between demand management, other MPC modules and
customers? And what the fundamental activities in sales and operation planning and what
techniques can be uses explain in brief.
Q2) a) Write the short note on four of the following:
I) Master production Schedule
II) Function of Manufacturing planning and control
III)Computer integrated manufacturing
IV)Breadth of purchasing in MPC.
V)Compare CPM and PERT
b) With the help of block diagram explain hierarchy of capacity planning decision.
c) Describe the function vendor development and vendor management.
Q3) a) State the seven wastes as being the targets of continuous improvement in Just in Time.
b) There are five jobs of which is to be processes through three machines A, B, and, C in order
ABC Processing time in hour are
Job A B C
1 3 4 7
2 8 5 9
AN ISO 9001 : 2000 CERTIFIED INTERNATIONAL B-SCHOOL
3 7 1 5
4 5 2 6
5 4 3 10
Determine the optimum sequence for the five jobs and the minimum elapsed time.
c) Compare the bill of materials and cookbook recipe.
d) Explain the practical steps involved in solving PERT problems.
Q4 a) Explain Role of demand management in manufacturing, planning and control with suitable
example?
b) State advantages, limitation and Application of Linear programming. What basic concepts and
module are used for shop floor and vendor scheduling and control.
c) Describe the function vendor development and vendor management
INVENTORY MANAGEMENT
COURSE : ADMTM Total Marks : 80
Section A : Marks 3 each
Q.1
(a) What is ABC analysis?
(b) Give four examples of MRP?
(c) What is meant by lead time?
(d) Define standardization?
(e) What are the various inventory models?
(f) What are the functions of inventory?
(g) Explain briefly the various types of inventories?
(h) Define traffic management?
(i) What is the need for feedback inventory information system?
(j) Give two factors considered for choosing equipments for material handling?
Section B Marks 10 each attempt any 5
Q1) Comptek computers wants to reduce a large stock of PCs it is discontinuing. It has offered a
university book store a quantity discount pricing schedule as follows:
(please see the attachment)
Quantity Price (Rs.)
1-49 14,000
50-89 11,000
>90 9000
The annual carrying cost for the bookstore for a PC is Rs. 190, the ordering cost is Rs. 2,500
and annual demand for this particular model is estimated to be 200 units. The bookstore wants
AN ISO 9001 : 2000 CERTIFIED INTERNATIONAL B-SCHOOL
to determine if it should take advantage of this discount or order the basic EOQ size.
Q2) Explain the following terms:
Lead time
Re-order point
Stock out cost
Set-up cost.
Q3) What is the purpose of safety stock? How will the use of safety stock affect the EOQ? How
will the safety stock affect the total annual carrying cost of the material?
Q4) Describe the relation between Material requirement planning and Master productions schedule.
What are the advantages and limitations of MRP?
Q5) What are the objectives of stores management? How do you decide about the location and
layout of an effective store in an organization?
Q6) What is the purpose of JIT? Why are flexible resources essential for JIT? Wow are suppliers
Principles & Practice of Management
Answer the question in one line.
Q1. Explain different roles of a manager. (10 marks)
Q2. Distinguish between management and administration. What is an importance of management? (10 marks)
Q3. Which are the skills are required by a manager? (10 marks)
Q4. a)What are the important features of Bureaucratic administration? b)State its contributions and limitations. (10 marks)
Q5. Define a management (10 marks)
Q6. Comment on a true nature of management. Is it a science or an art? (10 marks)
Q7. a)Why Taylor is regarded as the Father of Scientific Management? b)State the limitations of Scientific Management. (10 marks)
Organizational Behavior
Answer the question in one line.
Q1. Discuss three different criteria for ethical decision making (10 marks)
Q2. What is self-efficacy? (10 marks)
Q3. Explain the three job redesign options. (10 marks)
Q4. Discuss whether there are gender differences regarding emotions (10 marks)
Q5. What is team efficacy? (10 marks)
Q6. What is communication apprehension? (10 marks)
Q7. What are the key dimensions that underlie the concept of trust? (10 marks)
International Business
Answer the question in one line.
Q1. How do differences in culture affect in international business? (10 marks)
Q2. Write a detailed note on foreign direct investment (10 marks)
Q3. Explain theory of global competitiveness alignment (10 marks)
Q4. Explain global human resource management (10 marks)
Q5. Explain five features of globalization (10 marks)
Q6. What is agricultural & village industry facility in special focus initiatives? (10 marks)
Q7. What is cost & freight (CFR)? (10 marks)
HOTEL MANAGEMENT
Q1) What are the minor operating departments of a hotel? Explain each.
Q2) What are the basic principles in requisitioning guest and cleaning supplies?
Q3) Write short notes on the following (Any 2)
a) Role of the housekeeping control desk.
b) Lost and found procedure
c) Responsibilities of the Public area supervisor.
Q4) How can we reduce physical stress?
Q5) What are the types of notices in a house keeping operation?
Q6) How do small hotels survive?
Q7) Explain briefly what services dos a franchisor provide to a franchisee?
Q8) Explain the role of maintenance (engineering department)?
Q9) Discuss the relationship between management and supervisors?
Q10) Explain the meaning of the various occupancy codes?
AN ISO 9001 : 2008 CERTIFIED INTERNATIONAL B-SCHOOL
Business Communication
Answer the question in one line.
Q1. What is a bad news message? (10 marks)
Q2. What do you understand by the phrase ‘Readers responses are sharpened by Situation’? (10 marks)
Q3. Differentiate between Direct and Indirect Approach? (10 marks)
Q4. What are the basic strategies for writing bad-News Messages? (10 marks)
Q5. Define the term ‘Stylistic Accuracy’. (10 marks)
Q6. What is resume deception and personal data in resume writing? (10 marks)
Q7. Why is a claim letter written? (10 marks)
QUANTITATIVE METHODS
CASE STUDY: 1
The bulbs manufactured by a company gave a mean life of 3000 hours with standard
deviation of 400 hours. If a bulb is selected at random, what is the probability it will
have a mean life less than 2000 hours?
Question:
1) Calculate the probability.
2) In what situation does one need probability theory?
3) Define the concept of sample space, sample points and events in context of
probability theory.
4) What is the difference between objective and subjective probability?
CASE STUDY : 2
The price P per unit at which a company can sell all that it produces is given by the
function P(x) = 300 — 4x. The cost function is c(x) = 500 + 28x where x is the number
of units produced. Find x so that the profit is maximum.
Question:
1) Find the value of x.
2) In using regression analysis for making predictions what are the assumptions
involved.
3) What is a simple linear regression model?
4) What is a scatter diagram method?
CASE STUDY : 3
Mr Sehwag invests Rs 2000 every year with a company, which pays interest at 10% p.a.
He allows his deposit to accumulate at C.I. Find the amount to the credit of the person
at the end of 5th year.
Question :
1) What is the Time Value of Money concept.
2) What do you mean by present value of money?
3) What is the Future Value of money.
4) What the amount to be credited at the end of 5th year.
CASE STUDY : 4
The cost of fuel in running of an engine is proportional to the square of the speed and is
Rs 48 per hour for speed of 16 kilometers per hour. Other expenses amount to Rs 300
per hour. What is the most economical speed?
Question:
1) What is most economical speed?
2) What is a chi-square test?
3) What is sampling and what are its uses.
SUBJECT: Information Technology
TOTAL : 80 MARKS
10 MARKS EACH
Note: Attempt any 8
1. What are the characteristics of a technologically enabled organization?
2. How does an Organization acquire & disseminal knowledge?
3. Why do you suppose inquiry – only applications were developed instead of fully on lines
system?
4. What kind of technology is least flexible? Most flexible?
5. How does strategic planning differ between a firm that offers services & one that
manufacturers a product? Is there a difference in the impact of technology on strategy in
any two types of firms?
6. What kind of business activities do you think are most amenable to common systems in
different countries?
7. What kind of programs do you think are likely to make the most use of floating – point
instructions?
8. Distinguish between computer hardware & software which most concerns a manager?
9. What kind of software does a server for a local area network need to have?
10. What is OLAP? How does it contribute to the organization?
INFORMATION TECHNOLOGY
(80 Marks)
NB: 1) There are two major case studies in paper.
2) Each case study is of 40 mark each
3) Solve the questions given below the case study
4) Be analytical in your approach.
Google.Com — The World’s Number One
Internet Search Engine
“A profitable dot.com is a rare thing. For one founded only in late 1998, and - ivorse - a dotcom that
includes advertising as one half of its business plan, Google’s progress is a feat. But then it could be argued
that Google has been flying in the face of conventional wisdom since its launch.”
- Neil McIntosh, ‘Seeking Search Engine Perfection,’ (The Guardian), January 2002.
“Google had not had a single print or television advertisement so far and most people felt that when it was
launched there was not a market for another search engine. But with all other search engines developing
into portals, Google stuck to the basics and now it is better than every other search engine.”
- Matthew Ragas, Consultant, ‘The Cult Runs Deep,’ (The Economic Times), March 2003.
THE MOST PREFERRED SEARCH ENGINE’
In early 2003. Googlc.com (Google). the California (US) based company Google Inc.’s search engine, was
named the ‘Best Search Engine’ by Pandecta magazine. Google also received the ‘Outstanding Search
Service’ award by Search Engine Watch.2 The Search Engine Watch newsletter claimed that Google was
the most heavily used search site by Internet browsers. These developments were not a major surprise for
Google, which had received many such awards and recognitions since its inception in 1998 (Refer Exhibit
I).
Google was preferred by millions of browsers over search engines such as Alta Vista, Infoseek, Netscape
and Lycos. Not only did Google rank much higher than other search engines in terms of efficiency and
effectiveness, it also scored over others in terms of layout due to its uncluttered look (Refer Exhibit II for a
AN ISO 9001 : 2008 CERTIFIED INTERNATIONAL B-SCHOOL
comparison of popular search engines). Google searched more than three billion web pages and processed
more than 200 million search requests every day. The search engine could search for every possible file type
on the World Wide Web, in 36 languages and provided interface in 86 languages.
The fact that Google had become a household name (reportedly, even a generic term for search engines)
without even spending a penny on print/television advertisements or online banners was regarded as a
commendable achievement, Its success was largely attributed to its constant focus on providing the best
search services online, both in terms of speed as well as accuracy. Larry Page (Larry), CEO and co-founder
of Google commented. ‘It is through our maniac pursuit to offer only the best technology and search
experience that Google has earned its reputation.”
_________________________________
1 A search engine is an Internet based utility that helps surfers search for specified keywords by displaying
a list
of documents (web pages) on the World Wide Web that contain those keywords. Different search
engines use their on proprietary software to provide faster, more accurate and meaningful search results
to their users. Most popular search engines, such as Google and Alta Vista, are free-to-use.
2 Pandecta is a monthly c-business magazine for Internet entrepreneurs. Search Engine Watch is a leading
Internet technical guide for web developers and search engine users.
BACKGROUND NOTE ____________
The founders of Google. Lam Page (Larry) and Sergey Brin (Sergey) graduated in computer science from
Stanford University in 1995. By January 1996, the duo began working on extending their summer project
work on a search engine. They wanted to develop a technology that would retrieve a relevant set of data
from a massive database of information. They named their search engine ‘BackRub’ because of its ability to
identify and analyze ‘back links’ that pointed to a given website. Larry began creating a new kind of server3
environment that used low-end personal computers (PCs) instead of costly big machines. For this, they
needed to buy several low cost PCs. However, due to shortage of cash, they had to borrow PCs from the
university.
By 1997, BackRub gained a lot of popularity due to its unique approach to solving search problems on the.
Internet. Throughout the first half of 1998, Larry and Sergey’ focused on perfecting their technology. To
store huge amounts of data, they bought a terabyte of memory disks (one trillion bytes equal one terabyte) at
bargain prices. Larry used his dormitory room as a data center, while Sergey used his room to set up a
business office. By now they knew that their search technology was superior to any other technology
available. They actively started looking for potential partners interested in licensing the same.
They contacted many people including friends and family. One of the people whom they got in touch with
was David Fib (Fib), the founder of Yahoo, a leading portal.4 Filo complimented them for the ‘solid
technology’ they had built, but did not enter into any agreements with them. Instead, he encouraged them to
start their own company. The owners of many other portals also refused to invest in their technology. One
such portal’s CEO told them, “As long as we are 80% as good as our competitors. that is good enough. Our
users do not really care about search.”
During the late 1990s. the ‘dotcom fever’ was at its peak in the US, and almost everyone was opening a
dotcom company. Though Larry and Sergey were not very keen on opening their own company. they
decided to set up one since they were unable to attract any partners. 1-however, they had to first clear off the
debts they had accumulated to buy the memory disks amid to move out of their ‘dorm office.’ The duo put
their PhD plans on hold, and began looking for a prospective investor for their business.
Help came in the form of a faculty member who introduced them to Andy Bechtolsheim (Andy), one of the
co-founders of Sun Microsystems. Andy saw their presentation and instantly knew that it had a lot of
potential. As Andy was in a great hurry to attend a business meeting that day, he ‘closed’ the deal by writing
the duo a check for $100,000. However, the check was made out in the name of Google Inc.5, an entity that
did not yet exist. Since Lam’ and Sergey could not deposit the check in their accounts, they decided to set up
a corporation named Google Inc.
_______________________________
3 Servers are computers or devices that manage the resources rn a network. For instance,
users on a file server can store files on the server, which is essentially a storage device
dedicated to storing files. In a search engine, database servers are used to process
database queries.
4 A portal is a website featuring commonly used services as a starting point and a
common gateway to the web (a web portal) or a niche topic (vertical portal/vortal). The
services offered by most portals include a search engine, news, email, stock quotes,
chat, forums, maps, shopping and customization options. Large portals include many
more services apan from the ones mentioned above.
5 The name Google was derived from the word Googol, which denotes the number one
followed by a hundred zeros. It was coined by Milton Sirotta, nephew of Edward
Kasner, an American Mathematician.
Larry and Sergey realized that they would have to develop a new kind of server set up to provide a fast and
accurate search service. So, Google made use of large clusters (around 10.000) of Linux9 PCs so that search
queries could be quickly answered. The system consisted of three types of servers, a web server, an index
server and a doe server. A typical query was answered in the following manner: Google sent the user query
to a web server (which acted as a query processor), which in turn forwarded it to the index servers. The
index servers searched for keywords and phrases that matched the search query. Thereafter, the doc server
did the job of retrieving the actual documents that contained the search results. These results were then
returned to the user (Refer Figure Ito see the life cycle of a query).
Figure I: Life Cycle of a Search Query on Google
This innovation helped Google achieve greater scalabilily10 at lower costs and faster response times even
during peak loads. At the front end. Google made use of a search technology that carried out a series of
simultaneous calculations to process a query. This ensured that the entire search look only a fraction of a
second to complete.
Google had a comprehensive database of web content running into over three billion web pages. In addition,
Google stored a cached copy of even indexed web page so that users could access the web page even when
the main server was down or the link was broken. Thus, Google accessed more information on the Internet
and presented it in a searchable format than any other search engine (Refer Table I for details regarding the
database).
_________________________________
9 The Linux operating system was developed by l.inus Torvalds at the University of Helsinki in Finland,
to
provide PC users with a free or very low cost operating system. Traditional systems like UNIX were
very
expensive. Linux is reputed for being a very efficient and fast operating system. Google’s setup was
one of the biggest commercial Linux server clusters ever.
10 Scalability is defined as the ability of a computer (hardware or software application) to perform well
even when it is changed in size or volume in order to meet a users need.
GOOGLE’S BUSINESS MODEL
Most search engine companies spent a lot of money on marketing to build their brands. Google, however,
focused solely on building a ‘better’ search engine. Its superior search technology was the primary reason
for us popularity among Internet surfers and corporate clients. Sergey said, “We developed our approach to
search technology to address the very real challenge of finding information on the Internet. Everything we
do — from the development of our advanced technology to the design of our user interface — is focused on
delivering the best search experience on the web. We are delighted with the response we have received from
Google users around the world who have enthusiastically embraced our approach to search.”
Word-of-mouth recommendation became the main force driving traffic to the Google website. Within three
years of its launch, the website was answering more than 200 million searches a day. With traffic increasing
constantly, it became clear to Google that it could develop its business around two revenue streams, online
advertising programs and search services. Half of Google’s revenues came from the two main search
services it provided to its clients: ‘Google WebSearch’ and ‘Google SiteScarch.’
GOOGLE SEARCH SERVICES
Launched in mid-1999, the WebSearch service enabled clients (destination sites and portals) to offer
Google’s search services to their members. The client could use the results page for selling its own
advertisements on the web. The WebSearch Service provided many useful features like cached links.
directory definitions, file types. I’m feeling lucky (a button that allowed users to bypass all results and go to
the first page that was returned for a query) and a spell checker.
The Google SiteSearch service provided clients with a fully customizable search on the (client) company
extranets and public websites. SiteSearch improved site navigation and usability and also increased site
stickiness.12 Visitors to a website using the SiteSearch service could easily locate a specific product or
service and find company information. This not only enhanced customer communications, it also reduced
the number of customer service calls to the company. This in turn helped clients improve sales opportunities
by providing product and service information quickly to the customer. Using SiteSearch thus increased the
chances of customer loyalty for the (client) company and also reduced the need for customer support.
In 1999, many companies signed up as Google’s clients. The list included Virgilio, an Italian portal:
Virgin.net. Britain’s leading online entertainment guide: The Washington Post: Cisco Systems: Son: Procter
& Gamble; MarthaStewart.com; Hungary Minds.com; eBoodle.comn; Real Names Corporation; New York
Times: Ask Jeeves: AT&T: Bizrate: Dealtime: and Earthlink. The year 1999 also brought with it a lot of
awards for Google. Google was ranked first among 13 search and portal sites13 in a survey conducted by
NPD Online Research14 for user satisfaction and loyalty. The company received the Technical Excellence
Award for Innovation in Web Application Development by PC magazine. A high paint was the company’s
inclusion in Time magazine’s Top Ten Best Cybertech list for 1999.
_______________________________
12 The stickiness of a website refers to its ability o make visitors stay longer and/or return again and
again.
13 Oilier companies included AltaVista, AOL, Ask Jeeves, Excite, Go Network, Google, GoTo.comn,
HotBot, LookSmart, Lycos, Netscape, WebCrawler, and Yahoo.
14 The NPD group is an international marketing information company headquartered in Port Washington,
New York. The company was the ninth largest market research firm in the US (based on 1998 revenues).
with a set of keywords (as many keywords as required), which Google used to create a text-based
advertisement. Each keyword was then matched to different creative executions. Advertisers could also
purchase predetermined keywords or keyword phrases (from Google), which were used by Google to match
a user’s query to a closely related advertisement.
These advertisements appeared as links on top of the search results page (Refer Figure II). Once these
advertisements were put in place, the company constantly monitored them to improve their performance (i.e.
by selecting more appropriate keywords and rewriting the text of the advertisement). Google charged
approximately $10,000 or more per quarter for the premium sponsorship advertisement program.
Figure II: Google’s Premium Sponsorship Program
Impressed by the efficiency of the services provided by Google, Yahoo entered into a partnership with it in
June 2000. This added to Google’s reputation of being a leading technology provider (by now it was
answering 18 million user queries every day). Google entered into partnership deals with companies from
other countries as well, including China’s leading portal NetEase arid leading Japanese portal NEC’s
BIGLOBE.
In mid-2000, Google brought out with a cheaper alternative to Premium Sponsorship in the form of the
AdWords program. Under this program, Google allowed its customers to create their own advertisement text
or purchase carefully selected key words to target potential customers. The results for Ad Words were
highly targeted and advertisements appeared only if a user entered the same keywords or phrases that an
advertiser had purchased. For example, if a user entered a query ‘dental insurance’ into the Google search
box, it would produce search results and text based advertisements relating to the purchase of dental
insurance online. The advertisements brought out under the AdWords program appeared adjacent to the
search results (Refer Figure II).
Google also faced stiff competition from other search engines like Verity and Overture. Verity had grown to
become a leader in the corporate search market while Overture had strengthened its position in the paid
search listings business. Overture had signed a series of contracts with various businesses, the most
significant being contracts with CNN and CNN’s various online properties. These developments were a
cause for concern for Google as it earned approximately one third of its revenues in 2002 by being a third
party search results supplier.
However, Google remained confident of its position for a variety of reasons. Google had a strong tie up with
AOL and provided most of the portal’s web search capabilities. According to Nielsen NetRatings, a web
traffic tracker. AOL and Google together got six times the search traffic of Yahoo in late 2002. Also, Google
had a strong user response from its clients including AOL. Yahoo and many media customers who used
Google’s services, most importantly its news sections, to draw’ visitors.
Analysts were, however, rather skeptical about optimistic projections regarding Google’s future. Analyst
Danny Sullivan of Search Engine Watch said. “The bulk of 000gle’s business these days is built around
Googlc.com. If partners continue to grumble, the pendulum could swing — and Google may end up facing a
mutiny and a world full of hostile competitors, each seeking a piece of the king of search.”
Google faced another setback in February 2003 when Google Watch website22 nominated it for the Privacy
International’s 2003 Big Brother Awards.23 Google was accused of, among other things, recording all the
personal information it could through its cookies.24 retaining all data indefinitely and not mentioning why it
needed such data. Google toolbar was also suspected of being a spyware.25
However, Google did not make it to the final list because Privacy International did not find the company to
be a major threat to Internet privacy. An analyst at Search Engine Watch commented. “Nevertheless, the
nomination has caused some to wonder about the privacy of their search requests at Google. In addition,
some allegations made in the nomination have been transformed by others as proof of privacy violations
without being closely examined.”
In spite of these unpleasant developments. Google continued to be popular amoung users. The receipt of
Pandecta Magazine Award and the ‘Business People of the car’ award by Wired Magazine in early 2003
indicated that Google had strong growth prospects. Problems and threats notwithstanding, Google continued
to be regarded the world over as the perfect search engine.’
In early 2003, analysts remarked that Google could even go public in the near future like man oilier
successful Silicon Valley ventures. Whether or not the company decided in favor of taking on the pressures
of stock-market performance, analysts expected Google to continue innovating and developing breakthrough
technologies. In line with these expectations, a Google source stated. “Whatever is to come in the way of
search technology, you can be assured that Google is working to make it faster, more accurate and even
easier to use.”
_______________________________
22 Google Watch was formed by Daniel l3ramht in mid-2002 and is hacked by a non-profit organization
named Public Information Research.
23 Privacy International’s Big Brother Awards are given to those websites that are found guilty of privacy
violations on the Internet.
24 Cookies are small text tiles placed on a computer’s hard disk by a website through the web browser.
They are used to store information that enables websites to identify users between visits.
25 Spyware refers to software that gets installed in a user’s PC and sends information about the user — all
without his/her knowledge. The information gathered is typically about the users activities on the
internet and is transmitted to the makers of the spyware. This information is used for marketing purposes
either by the spyware developers themselves or to third-parties who purchase the information.
Questions for Discussion:
1. In what ways were the services offered by Google different from those offered by
other search engines? Discuss with specific reference to technology, corporate
client servicing and customer friendliness.
2. Most dotcom companies relied heavily on online advertisements as the primary
source of revenue, and many also spent a lot of money on advertising their brands.
However, Google did not do so — and was still rated as the world’s most preferred
search engine. Critically discuss Google’s business model in the light of the above.
Was Google’s decision not to use conventional advertising a wise one or not?
3. “Over the last three years, Google has stolen 40% of the search market directly at the
expense of AOL, MSN, and Yahoo.” Do you think Googlcs leadership position is
going to become a threat to the company’s future growth and survival? What
measures should the company take in order to sustain its position as the leading
Internet search services provider in the future?
Mercedes Benz’s E-Biz Solution: The Factory
Delivery Reservation System
“One of our most fundamental goals in developing the system was to strengthen and market the Mercedes-
Benz brand in the United States. The fact that we would be one of the first car manufacturers in the United
States to have a factory delivery program would be seen as a very positive thing in this regard.”
- William Engelke, Assistant Manager, IT Systems, Mercedes
Benz US
International, commenting on the FDRS.
LINKING CUSTOMERS
By 2000, Mercedes Benz United States International (MBUSI), builder of the high-quality M-Class sports
utility vehicle (SUV), established itself as a company that also delivered superior customer services. One
such service was the delivery option where by the customer could take delivery of the vehicle at the factory
in Alabama. US.
The program called the Factory Delivery Reservation System (FDRS), enabled MBUSI to create and
validate 1800 orders per hour. FDRS also automatically generated material requirements and Bills of
Material1 for 35,000 vehicles per hour. The Customer Relationship Management (CRM) solution that
made FDRS possible was based on Lotus Domino2 and IBM Netfinity3 server1.
Analysts felt that with its innovative use of the new program, MBUSI not only managed to improve its
customer relations by providing the best service, but also demonstrated its commitment to customers by
making them an integral part of the process. Customers were, in a way linked directly to the factory floor —
which was a powerful sales tool.
BACKGROUND: MBUSI AND ITS BUSINESS CHALLENGES
MBUSI was a wholly-owned subsidiary of Daimler Chrylser AG5 In 1993, Daimler
Benz realized that tile ‘Benz brand could be extended to wider market segments
Traditionally, Mercedes Benz6 appealed to older and sophisticated customers only.
Daimler Benz wanted to attract customers below 40 years of age, who wanted a
rugged vehicle with all tile safety and luxury features of a Mercedes.
Daimler Benz decided to develop a SUV known as the M-Class. It expected strong demand for the new
vehicle and therefore planned to build its first car-manufacturing facility — MEUSI — in the (Tuscaloosa,
Alabama) US. The MBUSI facility had many
_____________________________
1 Bill of Material keeps track of all raw materials, parts, and subassemblies used to create a finished
product.
2 A product of 113M Corp., Lotus Notes and Domino R5 are the industry’s leading client/server
combination
for collaborative messaging and e-business solutions.
3 The IBM Netfinity server offers solutions for file-and-print and application computing needs.
4 A computer or device on a network that manages network resources. For example, a file server is a
computer
and storage device dedicated to storing files. Any user on the network can store files on the server. A
print server is a computer that manages one or more printers, and a network server is a computer that
manages network traffic. A database server is a computer system that processes database queries.
5 DaimlerChrysler AG was the result of a merger between two leading car manufacturers — Daimler
Benz of
Germany and Chrysler Corp. of the US in 1998.
6 A luxury brand of passenger cars, Sports Utility Vehicles from DaimlerChrysler.
advantages. First, labor costs in the US were almost half that of in Germany. Second, the US was the leading
geographic market for SUVs. Third, as the vehicles were assembled in the US, they could be distributed to
Canada and Mexico more efficiently.
In January 1997, the factory started production at partial capacity and by the end of the year, it was
producing at full capacity. By 2000, the factory was rolling out around 380 vehicles per day. The new MClass
‘all-activity’ vehicle represented a new concept for the company. Also, mass customization required
that each vehicle be treated as a separate project, with its own Bill of Material. To deal with these
challenges, Daimler Benz decided to implement an enterprise wide Information Technology (IT) system,
with the help of IBM Global Services7.
To further strengthen the image of Mercedes Benz in the US. MBUSI planned to deliver vehicles at the
factory, becoming the first international automobile manufacturer in the US to do so. MBUSI also wanted to
enrich the customers’ experience. Commented William Engelke. “The factory delivery option gives
Mercedes-Benz customers something that they do not get from other automobile manufacturers which is
why we think the program will resonate with our customers. We think that having the factory delivery
program available to Mercedes customers adds to the overall experience of the customer.”
THE DESIGN OF FDRS
The FDRS program was proposed in the first quarter of 1998. In the third quarter of 1998. MBUSI entered
into a contract with IBM. A development team was constituted with IBM Global Solutions specialists and
IBM c-commerce developers, who worked closely with MBUSI. The program became operational by the
first quarter of 1999. The IT team at MBUSI had a clear set of functional specifications for FDRS. However,
they relied on IBM to transform the concept into an e-business solution.
The FDRS was designed in such a way that customers buying the M-Class SUV could specify that will take
delivery of their new vehicle at the factory. They could place the order at an of the 355 Mercedes Benz
dealers in the US. An authorized employee at the dealership entered the factory delivery order the web
interface. Timing was the most important aspect of the FDRS’ functionality, as it was closely linked with
MBUSI’s vehicle production schedule.
Mercedes Benz United States of America (MBUSA)8, based in Montvale, NJ, was the first link in the FDRS
program. It was (he point where the dealer actually placed the order. MBUSA’s role was to coordinate the
distribution of vehicles to dealers across the country. Later, it had to add the order to the company’s Baan
Enterprise Resource Planning (ERP)9 system, which scheduled the order for production. About three months
before the production date, the dealer could schedule in a window, the date and time of arrival of the
customer at the factory for delivery. The window was then automatically computed by the FDRS to give the
dealer, the possible delivery dates. Apart from the delivery date, the customer could also specify the
accessories for the car and also request a factory tour.
_________________________________
IBM Global Services is the services and consultancy division of IBM Corp. that offers extensive c-business
solutions.
MBUSA is the wholly owned US subsidiary of Daimler-Chrylser.
ERP attempts to integrate all departments and functions across a company onto a single computer system
that can Serve all those different departments particular needs.
Figure 1 : System Architecture of FDRS
FDRS was based on Lotus Domino (Refer Exhibit I). Lotus Enterprise Integrator10 and IBM Netfinity
servers. It also interfaced with IBM S/390 Parallel Enterprise Server. Model 9672-R45 located in Montvale.
NJ (Refer Figure 1).
There were two Domino servers — an IBM Netfinity 5500 and an IBM Netfinity 3000. The former that
acted as the “internal Domino server’ was placed behind a firewall.11 It replicated databases through the
firewall to the external server. The replication. which was encrypted, represented the primary means by
which the FDRS system achieved security. Netfinity 3000 acted as an ‘external Domino server.’ It had
public information and was also the primary communication linkage for dealers.
The back-end of the FDRS was equipped with an Oracle database that updated the internal Domino server
database with order information. The updation was done using Lotus Enterprise Integrator. The data which
was replicated to the internal Domino
_________________________________
10 A server-based data distribution product that enables data exchange between Lotus Domino and a
number of host and relational applications.
11 A system designed to prevent unauthorized access to or from a private network. Firewalls can be
implemented in both hardware and software. Firewalls are frequently used to prevent unauthorized
Internet users from accessing private networks connected to the Internet, especially intranets. All
messages entering or leaving the intranet pass through the firewall, winch examines each message and
blocks those that do not meet the specified security criteria.
server included lists of valid dealers and lists of order numbers. When an order was placed by the dealer on
the FDRS system, the data as first stored on the external Domino server, after which it was replicated to the
internal Domino server. Then it was replicated to the back-end database via the Lotus Enterprise Integrator.
Data replication between the Lotus Notes servers happened every 15 minutes and data exchange with the
back-end database three times per day.
There was also a link between the back end database and an IBM S/39012 mainframe based system located at
MBUSA via a T113 line. MBUSA managed the flow of vehicles to Mercedes dealers across (lie United
States. This mainframe based system received new vehicle orders (as opposed to factory delivery reservation
requests) from individual dealers. The orders were then sent to MBUSIs Baan system and also to the backend
database. The vehicle ordering and factory reservation data were coordinated with each other when the
back-end database uploaded the data to the internal Domino server. This coordinated the production and
delivery information.
FDRS IMPLEMENTATION
One of the most challenging aspects of the implementation seemed to be the complexity of the Lotus and
Domino scripts. The development tea in had to group all the information from diverse systems. Commented
William Engelke. “There was a substantial amount of very complex coding involved in the FDRS solution.
This application involves a lot more than having our dealers fill out a form and submitting it. There are
many things the servers have to do for the system to function properly such as looking at calendars and
production schedules. We built a solution with some very advanced communication linkages.”
IBM faced many technical challenges during time implementation of the program. One of them was the
different timing schemes of the Lotus Notes databases and backend databases (ERP). This led to
discrepancies in the data. Domino server was a Near Real Time (NRT) Server14, and MBUSI’s backend
activities were both real time15 and batch processing16. Also, to get the best results, the Domino server was
an optimised subset of the ERP table set How ever, the development team achieved a balance between the
two ‘sides’ of the solution b focusing on issues of timing, error detection schemes, and alerts.
___________________________________
12 The IBM S/390 servers offer direct high speed access to the c-business application and are used for
Enterprise Computing.
13 A dedicated phone connection supporting data rates of 1544 Mbits per second. A T1 Line actually
consists of 24 individual channels, each of which supports 64 Kbits per second. Each 64 Kbit per second
channel can be configured to voice or data traffic.
14 The NRT Server System supports real time distribution of near-real time data.
15 Real lime refers to events simulated by a computer at the same speed that they would occur in real life.
16 Executing a series of noninteractive jobs all at one time. The term dates back to the days when users
entered programs on punch cards. They gave a batch of these programmed cards to the system operator, who
fed them into the computer. Usually, batch jobs are stored up during working hours and then executed
whenever the computer is idle. Batch processing is particularly useful for operations that require the
computer or a peripheral device for an extended period of time. Once a batch job begins, it continues until it
is done or until an error occurs. Note that batch processing implies that there is no interaction with the user
while the program is being executed.
17 The ERP tables are the database tables, (thousands of them), on which the package is built. The
programmers and end users must set these tables to match their business processes. Each table has a decision
‘switch’ that leads the software down one decision Path or another.
CUSTOMER SATISFACTION: FDRS’ PRIMARY BENEFIT
MBUSI seemed to measure FDRS’ success in terms of increased satisfaction of its customers, The company
also believed that the marketing and customer satisfaction aspects outweighed the significance of more
traditional cost-based benefits. Apart from the factory delivery experience, the program also offered the
customer a factory tour and ride on the off-road course at a low cost.
The company also seemed to gain strategic marketing benefits from the FDRS program, as it was able to
establish Mercedes-Benz as a premium brand. (Refer Table I for advantages of FDRS in different areas).
Customers could also visit the various tourist spots in Alabama after picking up their M-class vehicles.
Table 1: Advantages of the FDRS Program
AREA ADVANTAGES
Strategic Marketing
Benefits
FDRS was expected to improve customer satisfaction and brand loyalty, as it
enriched Mercedes’ customer’s experience.
The program also strengthened the brand image of Mercedes in the US.
Cost Savings
Development of a web-based solution enabled MBUSI to offer the factory delivery
program at substantially lower costs, due to less reliance on administrative
personnel.
Regional Economic
Development
“Package Marketing” the FDRS program with a ride to tourist sites, enhanced the
image of Alabama as a tourist destination.
DaimlerChrysler
AG
The creation of a similar — albeit smaller — factory delivery system to the
European Customer Delivery Center in Sindelfingen, Germany, reflected favorably
on the MBUSI business unit.
Source : MBUSI
FUTURE OF FDRS
In 2000, MBUSI planned to leverage FDRS’ platform by adding a range of other services. MBUSI built an
advanced platform to create communication links to its suppliers. Through the link, MBUSI provided them
feedback on the quality of supplies it received. The dealers and suppliers had a user-ID and password, which
the system recognized. It then routed them into the appropriate stage of the FDRS.
The company also planned to extend the innovative system to include transactional applications such as
ordering materials and checking order status on the Web. The company expected that the new system based
on FDRS. would be more cost-effective than the Electronic Data Interchange (EDI)18 system.
Q.1) “The factory delivery option gives Mercedes-Benz customers something that they do not get from
other automobile manufacturers”. Briefly discuss the salient features of the Factory Delivery Reservation
System of MBUSI.
Q.2) “One of the most fundamental goals in developing the FDRS was to strengthen and market the
Mercedes-Benz brand in the United States”. Discuss other benefits of the FDRS program.
(80 Marks)
NB: 1) There are two major case studies in paper.
2) Each case study is of 40 mark each
3) Solve the questions given below the case study
4) Be analytical in your approach.
Google.Com — The World’s Number One
Internet Search Engine
“A profitable dot.com is a rare thing. For one founded only in late 1998, and - ivorse - a dotcom that
includes advertising as one half of its business plan, Google’s progress is a feat. But then it could be argued
that Google has been flying in the face of conventional wisdom since its launch.”
- Neil McIntosh, ‘Seeking Search Engine Perfection,’ (The Guardian), January 2002.
“Google had not had a single print or television advertisement so far and most people felt that when it was
launched there was not a market for another search engine. But with all other search engines developing
into portals, Google stuck to the basics and now it is better than every other search engine.”
- Matthew Ragas, Consultant, ‘The Cult Runs Deep,’ (The Economic Times), March 2003.
THE MOST PREFERRED SEARCH ENGINE’
In early 2003. Googlc.com (Google). the California (US) based company Google Inc.’s search engine, was
named the ‘Best Search Engine’ by Pandecta magazine. Google also received the ‘Outstanding Search
Service’ award by Search Engine Watch.2 The Search Engine Watch newsletter claimed that Google was
the most heavily used search site by Internet browsers. These developments were not a major surprise for
Google, which had received many such awards and recognitions since its inception in 1998 (Refer Exhibit
I).
Google was preferred by millions of browsers over search engines such as Alta Vista, Infoseek, Netscape
and Lycos. Not only did Google rank much higher than other search engines in terms of efficiency and
effectiveness, it also scored over others in terms of layout due to its uncluttered look (Refer Exhibit II for a
AN ISO 9001 : 2008 CERTIFIED INTERNATIONAL B-SCHOOL
comparison of popular search engines). Google searched more than three billion web pages and processed
more than 200 million search requests every day. The search engine could search for every possible file type
on the World Wide Web, in 36 languages and provided interface in 86 languages.
The fact that Google had become a household name (reportedly, even a generic term for search engines)
without even spending a penny on print/television advertisements or online banners was regarded as a
commendable achievement, Its success was largely attributed to its constant focus on providing the best
search services online, both in terms of speed as well as accuracy. Larry Page (Larry), CEO and co-founder
of Google commented. ‘It is through our maniac pursuit to offer only the best technology and search
experience that Google has earned its reputation.”
_________________________________
1 A search engine is an Internet based utility that helps surfers search for specified keywords by displaying
a list
of documents (web pages) on the World Wide Web that contain those keywords. Different search
engines use their on proprietary software to provide faster, more accurate and meaningful search results
to their users. Most popular search engines, such as Google and Alta Vista, are free-to-use.
2 Pandecta is a monthly c-business magazine for Internet entrepreneurs. Search Engine Watch is a leading
Internet technical guide for web developers and search engine users.
BACKGROUND NOTE ____________
The founders of Google. Lam Page (Larry) and Sergey Brin (Sergey) graduated in computer science from
Stanford University in 1995. By January 1996, the duo began working on extending their summer project
work on a search engine. They wanted to develop a technology that would retrieve a relevant set of data
from a massive database of information. They named their search engine ‘BackRub’ because of its ability to
identify and analyze ‘back links’ that pointed to a given website. Larry began creating a new kind of server3
environment that used low-end personal computers (PCs) instead of costly big machines. For this, they
needed to buy several low cost PCs. However, due to shortage of cash, they had to borrow PCs from the
university.
By 1997, BackRub gained a lot of popularity due to its unique approach to solving search problems on the.
Internet. Throughout the first half of 1998, Larry and Sergey’ focused on perfecting their technology. To
store huge amounts of data, they bought a terabyte of memory disks (one trillion bytes equal one terabyte) at
bargain prices. Larry used his dormitory room as a data center, while Sergey used his room to set up a
business office. By now they knew that their search technology was superior to any other technology
available. They actively started looking for potential partners interested in licensing the same.
They contacted many people including friends and family. One of the people whom they got in touch with
was David Fib (Fib), the founder of Yahoo, a leading portal.4 Filo complimented them for the ‘solid
technology’ they had built, but did not enter into any agreements with them. Instead, he encouraged them to
start their own company. The owners of many other portals also refused to invest in their technology. One
such portal’s CEO told them, “As long as we are 80% as good as our competitors. that is good enough. Our
users do not really care about search.”
During the late 1990s. the ‘dotcom fever’ was at its peak in the US, and almost everyone was opening a
dotcom company. Though Larry and Sergey were not very keen on opening their own company. they
decided to set up one since they were unable to attract any partners. 1-however, they had to first clear off the
debts they had accumulated to buy the memory disks amid to move out of their ‘dorm office.’ The duo put
their PhD plans on hold, and began looking for a prospective investor for their business.
Help came in the form of a faculty member who introduced them to Andy Bechtolsheim (Andy), one of the
co-founders of Sun Microsystems. Andy saw their presentation and instantly knew that it had a lot of
potential. As Andy was in a great hurry to attend a business meeting that day, he ‘closed’ the deal by writing
the duo a check for $100,000. However, the check was made out in the name of Google Inc.5, an entity that
did not yet exist. Since Lam’ and Sergey could not deposit the check in their accounts, they decided to set up
a corporation named Google Inc.
_______________________________
3 Servers are computers or devices that manage the resources rn a network. For instance,
users on a file server can store files on the server, which is essentially a storage device
dedicated to storing files. In a search engine, database servers are used to process
database queries.
4 A portal is a website featuring commonly used services as a starting point and a
common gateway to the web (a web portal) or a niche topic (vertical portal/vortal). The
services offered by most portals include a search engine, news, email, stock quotes,
chat, forums, maps, shopping and customization options. Large portals include many
more services apan from the ones mentioned above.
5 The name Google was derived from the word Googol, which denotes the number one
followed by a hundred zeros. It was coined by Milton Sirotta, nephew of Edward
Kasner, an American Mathematician.
Larry and Sergey realized that they would have to develop a new kind of server set up to provide a fast and
accurate search service. So, Google made use of large clusters (around 10.000) of Linux9 PCs so that search
queries could be quickly answered. The system consisted of three types of servers, a web server, an index
server and a doe server. A typical query was answered in the following manner: Google sent the user query
to a web server (which acted as a query processor), which in turn forwarded it to the index servers. The
index servers searched for keywords and phrases that matched the search query. Thereafter, the doc server
did the job of retrieving the actual documents that contained the search results. These results were then
returned to the user (Refer Figure Ito see the life cycle of a query).
Figure I: Life Cycle of a Search Query on Google
This innovation helped Google achieve greater scalabilily10 at lower costs and faster response times even
during peak loads. At the front end. Google made use of a search technology that carried out a series of
simultaneous calculations to process a query. This ensured that the entire search look only a fraction of a
second to complete.
Google had a comprehensive database of web content running into over three billion web pages. In addition,
Google stored a cached copy of even indexed web page so that users could access the web page even when
the main server was down or the link was broken. Thus, Google accessed more information on the Internet
and presented it in a searchable format than any other search engine (Refer Table I for details regarding the
database).
_________________________________
9 The Linux operating system was developed by l.inus Torvalds at the University of Helsinki in Finland,
to
provide PC users with a free or very low cost operating system. Traditional systems like UNIX were
very
expensive. Linux is reputed for being a very efficient and fast operating system. Google’s setup was
one of the biggest commercial Linux server clusters ever.
10 Scalability is defined as the ability of a computer (hardware or software application) to perform well
even when it is changed in size or volume in order to meet a users need.
GOOGLE’S BUSINESS MODEL
Most search engine companies spent a lot of money on marketing to build their brands. Google, however,
focused solely on building a ‘better’ search engine. Its superior search technology was the primary reason
for us popularity among Internet surfers and corporate clients. Sergey said, “We developed our approach to
search technology to address the very real challenge of finding information on the Internet. Everything we
do — from the development of our advanced technology to the design of our user interface — is focused on
delivering the best search experience on the web. We are delighted with the response we have received from
Google users around the world who have enthusiastically embraced our approach to search.”
Word-of-mouth recommendation became the main force driving traffic to the Google website. Within three
years of its launch, the website was answering more than 200 million searches a day. With traffic increasing
constantly, it became clear to Google that it could develop its business around two revenue streams, online
advertising programs and search services. Half of Google’s revenues came from the two main search
services it provided to its clients: ‘Google WebSearch’ and ‘Google SiteScarch.’
GOOGLE SEARCH SERVICES
Launched in mid-1999, the WebSearch service enabled clients (destination sites and portals) to offer
Google’s search services to their members. The client could use the results page for selling its own
advertisements on the web. The WebSearch Service provided many useful features like cached links.
directory definitions, file types. I’m feeling lucky (a button that allowed users to bypass all results and go to
the first page that was returned for a query) and a spell checker.
The Google SiteSearch service provided clients with a fully customizable search on the (client) company
extranets and public websites. SiteSearch improved site navigation and usability and also increased site
stickiness.12 Visitors to a website using the SiteSearch service could easily locate a specific product or
service and find company information. This not only enhanced customer communications, it also reduced
the number of customer service calls to the company. This in turn helped clients improve sales opportunities
by providing product and service information quickly to the customer. Using SiteSearch thus increased the
chances of customer loyalty for the (client) company and also reduced the need for customer support.
In 1999, many companies signed up as Google’s clients. The list included Virgilio, an Italian portal:
Virgin.net. Britain’s leading online entertainment guide: The Washington Post: Cisco Systems: Son: Procter
& Gamble; MarthaStewart.com; Hungary Minds.com; eBoodle.comn; Real Names Corporation; New York
Times: Ask Jeeves: AT&T: Bizrate: Dealtime: and Earthlink. The year 1999 also brought with it a lot of
awards for Google. Google was ranked first among 13 search and portal sites13 in a survey conducted by
NPD Online Research14 for user satisfaction and loyalty. The company received the Technical Excellence
Award for Innovation in Web Application Development by PC magazine. A high paint was the company’s
inclusion in Time magazine’s Top Ten Best Cybertech list for 1999.
_______________________________
12 The stickiness of a website refers to its ability o make visitors stay longer and/or return again and
again.
13 Oilier companies included AltaVista, AOL, Ask Jeeves, Excite, Go Network, Google, GoTo.comn,
HotBot, LookSmart, Lycos, Netscape, WebCrawler, and Yahoo.
14 The NPD group is an international marketing information company headquartered in Port Washington,
New York. The company was the ninth largest market research firm in the US (based on 1998 revenues).
with a set of keywords (as many keywords as required), which Google used to create a text-based
advertisement. Each keyword was then matched to different creative executions. Advertisers could also
purchase predetermined keywords or keyword phrases (from Google), which were used by Google to match
a user’s query to a closely related advertisement.
These advertisements appeared as links on top of the search results page (Refer Figure II). Once these
advertisements were put in place, the company constantly monitored them to improve their performance (i.e.
by selecting more appropriate keywords and rewriting the text of the advertisement). Google charged
approximately $10,000 or more per quarter for the premium sponsorship advertisement program.
Figure II: Google’s Premium Sponsorship Program
Impressed by the efficiency of the services provided by Google, Yahoo entered into a partnership with it in
June 2000. This added to Google’s reputation of being a leading technology provider (by now it was
answering 18 million user queries every day). Google entered into partnership deals with companies from
other countries as well, including China’s leading portal NetEase arid leading Japanese portal NEC’s
BIGLOBE.
In mid-2000, Google brought out with a cheaper alternative to Premium Sponsorship in the form of the
AdWords program. Under this program, Google allowed its customers to create their own advertisement text
or purchase carefully selected key words to target potential customers. The results for Ad Words were
highly targeted and advertisements appeared only if a user entered the same keywords or phrases that an
advertiser had purchased. For example, if a user entered a query ‘dental insurance’ into the Google search
box, it would produce search results and text based advertisements relating to the purchase of dental
insurance online. The advertisements brought out under the AdWords program appeared adjacent to the
search results (Refer Figure II).
Google also faced stiff competition from other search engines like Verity and Overture. Verity had grown to
become a leader in the corporate search market while Overture had strengthened its position in the paid
search listings business. Overture had signed a series of contracts with various businesses, the most
significant being contracts with CNN and CNN’s various online properties. These developments were a
cause for concern for Google as it earned approximately one third of its revenues in 2002 by being a third
party search results supplier.
However, Google remained confident of its position for a variety of reasons. Google had a strong tie up with
AOL and provided most of the portal’s web search capabilities. According to Nielsen NetRatings, a web
traffic tracker. AOL and Google together got six times the search traffic of Yahoo in late 2002. Also, Google
had a strong user response from its clients including AOL. Yahoo and many media customers who used
Google’s services, most importantly its news sections, to draw’ visitors.
Analysts were, however, rather skeptical about optimistic projections regarding Google’s future. Analyst
Danny Sullivan of Search Engine Watch said. “The bulk of 000gle’s business these days is built around
Googlc.com. If partners continue to grumble, the pendulum could swing — and Google may end up facing a
mutiny and a world full of hostile competitors, each seeking a piece of the king of search.”
Google faced another setback in February 2003 when Google Watch website22 nominated it for the Privacy
International’s 2003 Big Brother Awards.23 Google was accused of, among other things, recording all the
personal information it could through its cookies.24 retaining all data indefinitely and not mentioning why it
needed such data. Google toolbar was also suspected of being a spyware.25
However, Google did not make it to the final list because Privacy International did not find the company to
be a major threat to Internet privacy. An analyst at Search Engine Watch commented. “Nevertheless, the
nomination has caused some to wonder about the privacy of their search requests at Google. In addition,
some allegations made in the nomination have been transformed by others as proof of privacy violations
without being closely examined.”
In spite of these unpleasant developments. Google continued to be popular amoung users. The receipt of
Pandecta Magazine Award and the ‘Business People of the car’ award by Wired Magazine in early 2003
indicated that Google had strong growth prospects. Problems and threats notwithstanding, Google continued
to be regarded the world over as the perfect search engine.’
In early 2003, analysts remarked that Google could even go public in the near future like man oilier
successful Silicon Valley ventures. Whether or not the company decided in favor of taking on the pressures
of stock-market performance, analysts expected Google to continue innovating and developing breakthrough
technologies. In line with these expectations, a Google source stated. “Whatever is to come in the way of
search technology, you can be assured that Google is working to make it faster, more accurate and even
easier to use.”
_______________________________
22 Google Watch was formed by Daniel l3ramht in mid-2002 and is hacked by a non-profit organization
named Public Information Research.
23 Privacy International’s Big Brother Awards are given to those websites that are found guilty of privacy
violations on the Internet.
24 Cookies are small text tiles placed on a computer’s hard disk by a website through the web browser.
They are used to store information that enables websites to identify users between visits.
25 Spyware refers to software that gets installed in a user’s PC and sends information about the user — all
without his/her knowledge. The information gathered is typically about the users activities on the
internet and is transmitted to the makers of the spyware. This information is used for marketing purposes
either by the spyware developers themselves or to third-parties who purchase the information.
Questions for Discussion:
1. In what ways were the services offered by Google different from those offered by
other search engines? Discuss with specific reference to technology, corporate
client servicing and customer friendliness.
2. Most dotcom companies relied heavily on online advertisements as the primary
source of revenue, and many also spent a lot of money on advertising their brands.
However, Google did not do so — and was still rated as the world’s most preferred
search engine. Critically discuss Google’s business model in the light of the above.
Was Google’s decision not to use conventional advertising a wise one or not?
3. “Over the last three years, Google has stolen 40% of the search market directly at the
expense of AOL, MSN, and Yahoo.” Do you think Googlcs leadership position is
going to become a threat to the company’s future growth and survival? What
measures should the company take in order to sustain its position as the leading
Internet search services provider in the future?
Mercedes Benz’s E-Biz Solution: The Factory
Delivery Reservation System
“One of our most fundamental goals in developing the system was to strengthen and market the Mercedes-
Benz brand in the United States. The fact that we would be one of the first car manufacturers in the United
States to have a factory delivery program would be seen as a very positive thing in this regard.”
- William Engelke, Assistant Manager, IT Systems, Mercedes
Benz US
International, commenting on the FDRS.
LINKING CUSTOMERS
By 2000, Mercedes Benz United States International (MBUSI), builder of the high-quality M-Class sports
utility vehicle (SUV), established itself as a company that also delivered superior customer services. One
such service was the delivery option where by the customer could take delivery of the vehicle at the factory
in Alabama. US.
The program called the Factory Delivery Reservation System (FDRS), enabled MBUSI to create and
validate 1800 orders per hour. FDRS also automatically generated material requirements and Bills of
Material1 for 35,000 vehicles per hour. The Customer Relationship Management (CRM) solution that
made FDRS possible was based on Lotus Domino2 and IBM Netfinity3 server1.
Analysts felt that with its innovative use of the new program, MBUSI not only managed to improve its
customer relations by providing the best service, but also demonstrated its commitment to customers by
making them an integral part of the process. Customers were, in a way linked directly to the factory floor —
which was a powerful sales tool.
BACKGROUND: MBUSI AND ITS BUSINESS CHALLENGES
MBUSI was a wholly-owned subsidiary of Daimler Chrylser AG5 In 1993, Daimler
Benz realized that tile ‘Benz brand could be extended to wider market segments
Traditionally, Mercedes Benz6 appealed to older and sophisticated customers only.
Daimler Benz wanted to attract customers below 40 years of age, who wanted a
rugged vehicle with all tile safety and luxury features of a Mercedes.
Daimler Benz decided to develop a SUV known as the M-Class. It expected strong demand for the new
vehicle and therefore planned to build its first car-manufacturing facility — MEUSI — in the (Tuscaloosa,
Alabama) US. The MBUSI facility had many
_____________________________
1 Bill of Material keeps track of all raw materials, parts, and subassemblies used to create a finished
product.
2 A product of 113M Corp., Lotus Notes and Domino R5 are the industry’s leading client/server
combination
for collaborative messaging and e-business solutions.
3 The IBM Netfinity server offers solutions for file-and-print and application computing needs.
4 A computer or device on a network that manages network resources. For example, a file server is a
computer
and storage device dedicated to storing files. Any user on the network can store files on the server. A
print server is a computer that manages one or more printers, and a network server is a computer that
manages network traffic. A database server is a computer system that processes database queries.
5 DaimlerChrysler AG was the result of a merger between two leading car manufacturers — Daimler
Benz of
Germany and Chrysler Corp. of the US in 1998.
6 A luxury brand of passenger cars, Sports Utility Vehicles from DaimlerChrysler.
advantages. First, labor costs in the US were almost half that of in Germany. Second, the US was the leading
geographic market for SUVs. Third, as the vehicles were assembled in the US, they could be distributed to
Canada and Mexico more efficiently.
In January 1997, the factory started production at partial capacity and by the end of the year, it was
producing at full capacity. By 2000, the factory was rolling out around 380 vehicles per day. The new MClass
‘all-activity’ vehicle represented a new concept for the company. Also, mass customization required
that each vehicle be treated as a separate project, with its own Bill of Material. To deal with these
challenges, Daimler Benz decided to implement an enterprise wide Information Technology (IT) system,
with the help of IBM Global Services7.
To further strengthen the image of Mercedes Benz in the US. MBUSI planned to deliver vehicles at the
factory, becoming the first international automobile manufacturer in the US to do so. MBUSI also wanted to
enrich the customers’ experience. Commented William Engelke. “The factory delivery option gives
Mercedes-Benz customers something that they do not get from other automobile manufacturers which is
why we think the program will resonate with our customers. We think that having the factory delivery
program available to Mercedes customers adds to the overall experience of the customer.”
THE DESIGN OF FDRS
The FDRS program was proposed in the first quarter of 1998. In the third quarter of 1998. MBUSI entered
into a contract with IBM. A development team was constituted with IBM Global Solutions specialists and
IBM c-commerce developers, who worked closely with MBUSI. The program became operational by the
first quarter of 1999. The IT team at MBUSI had a clear set of functional specifications for FDRS. However,
they relied on IBM to transform the concept into an e-business solution.
The FDRS was designed in such a way that customers buying the M-Class SUV could specify that will take
delivery of their new vehicle at the factory. They could place the order at an of the 355 Mercedes Benz
dealers in the US. An authorized employee at the dealership entered the factory delivery order the web
interface. Timing was the most important aspect of the FDRS’ functionality, as it was closely linked with
MBUSI’s vehicle production schedule.
Mercedes Benz United States of America (MBUSA)8, based in Montvale, NJ, was the first link in the FDRS
program. It was (he point where the dealer actually placed the order. MBUSA’s role was to coordinate the
distribution of vehicles to dealers across the country. Later, it had to add the order to the company’s Baan
Enterprise Resource Planning (ERP)9 system, which scheduled the order for production. About three months
before the production date, the dealer could schedule in a window, the date and time of arrival of the
customer at the factory for delivery. The window was then automatically computed by the FDRS to give the
dealer, the possible delivery dates. Apart from the delivery date, the customer could also specify the
accessories for the car and also request a factory tour.
_________________________________
IBM Global Services is the services and consultancy division of IBM Corp. that offers extensive c-business
solutions.
MBUSA is the wholly owned US subsidiary of Daimler-Chrylser.
ERP attempts to integrate all departments and functions across a company onto a single computer system
that can Serve all those different departments particular needs.
Figure 1 : System Architecture of FDRS
FDRS was based on Lotus Domino (Refer Exhibit I). Lotus Enterprise Integrator10 and IBM Netfinity
servers. It also interfaced with IBM S/390 Parallel Enterprise Server. Model 9672-R45 located in Montvale.
NJ (Refer Figure 1).
There were two Domino servers — an IBM Netfinity 5500 and an IBM Netfinity 3000. The former that
acted as the “internal Domino server’ was placed behind a firewall.11 It replicated databases through the
firewall to the external server. The replication. which was encrypted, represented the primary means by
which the FDRS system achieved security. Netfinity 3000 acted as an ‘external Domino server.’ It had
public information and was also the primary communication linkage for dealers.
The back-end of the FDRS was equipped with an Oracle database that updated the internal Domino server
database with order information. The updation was done using Lotus Enterprise Integrator. The data which
was replicated to the internal Domino
_________________________________
10 A server-based data distribution product that enables data exchange between Lotus Domino and a
number of host and relational applications.
11 A system designed to prevent unauthorized access to or from a private network. Firewalls can be
implemented in both hardware and software. Firewalls are frequently used to prevent unauthorized
Internet users from accessing private networks connected to the Internet, especially intranets. All
messages entering or leaving the intranet pass through the firewall, winch examines each message and
blocks those that do not meet the specified security criteria.
server included lists of valid dealers and lists of order numbers. When an order was placed by the dealer on
the FDRS system, the data as first stored on the external Domino server, after which it was replicated to the
internal Domino server. Then it was replicated to the back-end database via the Lotus Enterprise Integrator.
Data replication between the Lotus Notes servers happened every 15 minutes and data exchange with the
back-end database three times per day.
There was also a link between the back end database and an IBM S/39012 mainframe based system located at
MBUSA via a T113 line. MBUSA managed the flow of vehicles to Mercedes dealers across (lie United
States. This mainframe based system received new vehicle orders (as opposed to factory delivery reservation
requests) from individual dealers. The orders were then sent to MBUSIs Baan system and also to the backend
database. The vehicle ordering and factory reservation data were coordinated with each other when the
back-end database uploaded the data to the internal Domino server. This coordinated the production and
delivery information.
FDRS IMPLEMENTATION
One of the most challenging aspects of the implementation seemed to be the complexity of the Lotus and
Domino scripts. The development tea in had to group all the information from diverse systems. Commented
William Engelke. “There was a substantial amount of very complex coding involved in the FDRS solution.
This application involves a lot more than having our dealers fill out a form and submitting it. There are
many things the servers have to do for the system to function properly such as looking at calendars and
production schedules. We built a solution with some very advanced communication linkages.”
IBM faced many technical challenges during time implementation of the program. One of them was the
different timing schemes of the Lotus Notes databases and backend databases (ERP). This led to
discrepancies in the data. Domino server was a Near Real Time (NRT) Server14, and MBUSI’s backend
activities were both real time15 and batch processing16. Also, to get the best results, the Domino server was
an optimised subset of the ERP table set How ever, the development team achieved a balance between the
two ‘sides’ of the solution b focusing on issues of timing, error detection schemes, and alerts.
___________________________________
12 The IBM S/390 servers offer direct high speed access to the c-business application and are used for
Enterprise Computing.
13 A dedicated phone connection supporting data rates of 1544 Mbits per second. A T1 Line actually
consists of 24 individual channels, each of which supports 64 Kbits per second. Each 64 Kbit per second
channel can be configured to voice or data traffic.
14 The NRT Server System supports real time distribution of near-real time data.
15 Real lime refers to events simulated by a computer at the same speed that they would occur in real life.
16 Executing a series of noninteractive jobs all at one time. The term dates back to the days when users
entered programs on punch cards. They gave a batch of these programmed cards to the system operator, who
fed them into the computer. Usually, batch jobs are stored up during working hours and then executed
whenever the computer is idle. Batch processing is particularly useful for operations that require the
computer or a peripheral device for an extended period of time. Once a batch job begins, it continues until it
is done or until an error occurs. Note that batch processing implies that there is no interaction with the user
while the program is being executed.
17 The ERP tables are the database tables, (thousands of them), on which the package is built. The
programmers and end users must set these tables to match their business processes. Each table has a decision
‘switch’ that leads the software down one decision Path or another.
CUSTOMER SATISFACTION: FDRS’ PRIMARY BENEFIT
MBUSI seemed to measure FDRS’ success in terms of increased satisfaction of its customers, The company
also believed that the marketing and customer satisfaction aspects outweighed the significance of more
traditional cost-based benefits. Apart from the factory delivery experience, the program also offered the
customer a factory tour and ride on the off-road course at a low cost.
The company also seemed to gain strategic marketing benefits from the FDRS program, as it was able to
establish Mercedes-Benz as a premium brand. (Refer Table I for advantages of FDRS in different areas).
Customers could also visit the various tourist spots in Alabama after picking up their M-class vehicles.
Table 1: Advantages of the FDRS Program
AREA ADVANTAGES
Strategic Marketing
Benefits
FDRS was expected to improve customer satisfaction and brand loyalty, as it
enriched Mercedes’ customer’s experience.
The program also strengthened the brand image of Mercedes in the US.
Cost Savings
Development of a web-based solution enabled MBUSI to offer the factory delivery
program at substantially lower costs, due to less reliance on administrative
personnel.
Regional Economic
Development
“Package Marketing” the FDRS program with a ride to tourist sites, enhanced the
image of Alabama as a tourist destination.
DaimlerChrysler
AG
The creation of a similar — albeit smaller — factory delivery system to the
European Customer Delivery Center in Sindelfingen, Germany, reflected favorably
on the MBUSI business unit.
Source : MBUSI
FUTURE OF FDRS
In 2000, MBUSI planned to leverage FDRS’ platform by adding a range of other services. MBUSI built an
advanced platform to create communication links to its suppliers. Through the link, MBUSI provided them
feedback on the quality of supplies it received. The dealers and suppliers had a user-ID and password, which
the system recognized. It then routed them into the appropriate stage of the FDRS.
The company also planned to extend the innovative system to include transactional applications such as
ordering materials and checking order status on the Web. The company expected that the new system based
on FDRS. would be more cost-effective than the Electronic Data Interchange (EDI)18 system.
Q.1) “The factory delivery option gives Mercedes-Benz customers something that they do not get from
other automobile manufacturers”. Briefly discuss the salient features of the Factory Delivery Reservation
System of MBUSI.
Q.2) “One of the most fundamental goals in developing the FDRS was to strengthen and market the
Mercedes-Benz brand in the United States”. Discuss other benefits of the FDRS program.
FINANCIAL & COST ACCOUNTING
Total Marks: 80
N.B. : 1) All questions are compulsory
2) All questions carry equal marks.
Q1) ABC Ltd. Produces room coolers. The company is considering whether it should continue to
manufacture air circulating fans itself or purchase them from outside. Its annual requirement is
25000 units. An outsider vendor is prepared to supply fans for Rs 285 each. In addition, ABC Ltd
will have to incur costs of Rs 1.50 per unit for freight and Rs 10,000 per year for quality inspection,
storing etc of the product.
In the most recent year ABC Ltd. Produced 25000 fans at the following total cost :
Material Rs. 50,00,000
Labour Rs. 20,00,000
Supervision & other indirect labour Rs. 2,00,000
Power and Light Rs. 50,000
Depreciation Rs. 20,000
Factory Rent Rs. 5,000
Supplies Rs. 75,000
Power and light includes Rs 20,000 for general heating and lighting, which is an allocation based on
the light points. Indirect labour is attributed mainly to the manufacturing of fans. About 75% of it
can be dispensed with along with direct labour if manufacturing is discontinued. However, the
supervisor who receives annual salary of Rs 75,000 will have to be retained. The machines used for
manufacturing fans which have a book value of Rs 3,00,000 can be sold for Rs 1,25,000 and the
amount realized can be invested at 15% return. Factory rent is allocated on the basis of area, and the
company is not able to see an alternative use for the space which would be released. Should ABC
Ltd. Manufacture the fans or buy them?
AN ISO 9001 : 2008 CERTIFIED INTERNATIONAL B-SCHOOL
Page 1 Out of 1
Q2) Usha Company produces three consumer products : P, Q and R. The management of the
company wants to determine the most profitable mix. The cost accountant has supplied the following
data.
Usha Company : Sales and Cost Data
Description Product Total
P Q R
Material Cost per unit
Quantity (Kg) 1.0 1.2 1.4
Rate per Kg (Rs) 50 50 50
Cost per unit (Rs) 50 60 70
Labour Cost per unit 30 90 90
Variable Overheads per unit 15 10 25
Fixed Overheads (Rs .000) 9,175
Current Sales (Units ,000) 100 50 60 210
Projected Sales (Units ,000) 109 55 125 289
Selling Price per unit (Rs) 150 200 270
Raw material used by the firm is in short supply and the firm can expect a maximum supply of 350
lakh kg for next year. Is the company’s projected sales mix most profitable or can it be changed for
the better?
Q3) DSQ Company Ltd, a diversified company, has three divisions, cement, fertilizers and
textiles. The summary of the company’s profit is given below :
(Rs/Crore)
Cement Fertilizer Textiles Total
Sales 20.0 12.0 18.0 50.0
Less : Variable Cost 8.0 9.6 5.4 23.0
Contribution 12.0 2.4 12.6 27.0
Less : Fixed Cost (allocated to
divisions in proportion to
volumes of Sales)
8.0 4.8 7.2 20.0
Profit (Loss) 4.0 (2.4) 5.4 7.0
After allocating the company’s fixed overheads to products the Fertilizers, division incurs a loss of
Rs 2.4 crore. Should the company drop this division?
Total Marks: 80
N.B. : 1) All questions are compulsory
2) All questions carry equal marks.
Q1) ABC Ltd. Produces room coolers. The company is considering whether it should continue to
manufacture air circulating fans itself or purchase them from outside. Its annual requirement is
25000 units. An outsider vendor is prepared to supply fans for Rs 285 each. In addition, ABC Ltd
will have to incur costs of Rs 1.50 per unit for freight and Rs 10,000 per year for quality inspection,
storing etc of the product.
In the most recent year ABC Ltd. Produced 25000 fans at the following total cost :
Material Rs. 50,00,000
Labour Rs. 20,00,000
Supervision & other indirect labour Rs. 2,00,000
Power and Light Rs. 50,000
Depreciation Rs. 20,000
Factory Rent Rs. 5,000
Supplies Rs. 75,000
Power and light includes Rs 20,000 for general heating and lighting, which is an allocation based on
the light points. Indirect labour is attributed mainly to the manufacturing of fans. About 75% of it
can be dispensed with along with direct labour if manufacturing is discontinued. However, the
supervisor who receives annual salary of Rs 75,000 will have to be retained. The machines used for
manufacturing fans which have a book value of Rs 3,00,000 can be sold for Rs 1,25,000 and the
amount realized can be invested at 15% return. Factory rent is allocated on the basis of area, and the
company is not able to see an alternative use for the space which would be released. Should ABC
Ltd. Manufacture the fans or buy them?
AN ISO 9001 : 2008 CERTIFIED INTERNATIONAL B-SCHOOL
Page 1 Out of 1
Q2) Usha Company produces three consumer products : P, Q and R. The management of the
company wants to determine the most profitable mix. The cost accountant has supplied the following
data.
Usha Company : Sales and Cost Data
Description Product Total
P Q R
Material Cost per unit
Quantity (Kg) 1.0 1.2 1.4
Rate per Kg (Rs) 50 50 50
Cost per unit (Rs) 50 60 70
Labour Cost per unit 30 90 90
Variable Overheads per unit 15 10 25
Fixed Overheads (Rs .000) 9,175
Current Sales (Units ,000) 100 50 60 210
Projected Sales (Units ,000) 109 55 125 289
Selling Price per unit (Rs) 150 200 270
Raw material used by the firm is in short supply and the firm can expect a maximum supply of 350
lakh kg for next year. Is the company’s projected sales mix most profitable or can it be changed for
the better?
Q3) DSQ Company Ltd, a diversified company, has three divisions, cement, fertilizers and
textiles. The summary of the company’s profit is given below :
(Rs/Crore)
Cement Fertilizer Textiles Total
Sales 20.0 12.0 18.0 50.0
Less : Variable Cost 8.0 9.6 5.4 23.0
Contribution 12.0 2.4 12.6 27.0
Less : Fixed Cost (allocated to
divisions in proportion to
volumes of Sales)
8.0 4.8 7.2 20.0
Profit (Loss) 4.0 (2.4) 5.4 7.0
After allocating the company’s fixed overheads to products the Fertilizers, division incurs a loss of
Rs 2.4 crore. Should the company drop this division?
AUDITING
Q1) H.W.P Private Ltd. Is having only two members H
and W. During the audit of accounts for the year ended 31st March
2000, you as a auditor find that :
a) H,
who is incharge of purchase has introduce fictitious purchase bills of Rs 50
lakhs.
b) W,
who is incharge of sales has sold goods worth Rs 1 crore without brining the
same in the books of accounts. You raise the matter with H and W in their
capacity as directors. They contest that as this is a position know to them and
within their own fold, you should not report the same under the Company’s Act
1956. Discuss whether the above arguments are acceptable under the Company’s
Act 1956 for non-reporting?
Q2) As an auditor, how
would you react to the following situation? The company produced photocopies of
fixed deposit receipts as the original receipts were kept in the iron safe of
the director finance who was presently out of the country on company business?
Q3)
ABC Private Limited is engaged in the wholdesale business of buying and selling
silk sarees. The accounts are maintained under the Companies Act from 1st
October to 30th September each year. The Chief Accountant of the
company is requesting the tax auditor to conduct tax audit U/S 44 AB of the
I.T. Act for the period for which accounts have beeen maintained under the
Company’s Act. As the tax auditor of ABC Private Limited, how will you react to
the Chief Accountant request?
Q4) Comment: The
Auditor is responsible for failure to disclose the affairs of the company kept
out of books and concealed from him.
Q5) Comment: Balance
confirmations from debtors/creditors can only be obtained for balance standing
in their accounts at the year end?
Q6) Give your comments
and observations on the following many cheques have been received by the
auditor on the last day of the year, but not yet deposited with the bank?
AUDIT
MANAGEMENT
1. Focus of the auditor is no longer
on the routine audit but rendering value added services like cost efficiency
and decision making. Critically examine the statement with particular emphasis
on the changing computer environment?
2)
How can the auditor be useful in achieving the objectives of a Charitable Trust
or Society and a Co-operative Society? What is the legal position under the
relevant status?
3)
It is the job of the directors to prepare the accounts of a company, auditor
only reports on it. Elucidate and describe the types of audit report?
4)
The thrust area of an auditor is “True and Fair” and not “True and Correct”
Elucidate in the light of statutory provision under the Companies Act 1956.
5)
Discuss the three types of audits, which although not mandatory under the
Income Tax Act 1961, are get done by the assessee to avail certain benefits
under the act?
7)
The auditor only audits the books of account, he does not guarantee them,
Elucidate
8) Tax
auditor is a Catalyst of Revenue Collection, function of the State on the one
hand, and a Consultant to the tax payer on the other, discuss?
9) Who can be appointed as an
auditor of co-operative societies? What are the rights and duties of auditor
under Maharashtra co-operative societies Act?
10)
An auditor is protected from unceremonial removal from office enabling him to
maintain his independence? Do you agree with the statement? If so discuss the
position of the auditor in the regard in the light of statutory provision under
the companies Act 1956?
INDIRECT TAX.
80 MARKS
10 MARKS EACH
Q1 Ability to pay is one of the most important cannons of Taxation.
Q2. State with reasons whether the following is true or false. There are common provisions in
Customs/Central Excise/ST
Q3. State briefly the basic requirements of principle of natural justice in the context of adjudication in
indirect taxes.
Q4. State the powers of Central Government in the area of taxation, as per the Constitution of India
Q5. Bopara & Co., which has heavy indirect taxes outlay, wishes to know the situations in which it
can file a revision application with the Central Government. Please outline the various situations
Q6. What is the difference between short levy and short payment?
Q7. Write short notes on :
(a) Related person under the Central Excise Act.
(b) Determination of value when goods are manufactured on job work basis.
(c) Transaction value under the Central Excise Act
Q8. Discuss provisions relating to mandatory penalty equal to the amount of duty under the Central
Excise Act and circumstances when such penalty shall be reduced.
Production Management
Total marks 80
Case 1 (10 Marks)
Plant Location Analysis
A chemical manufacturing company has three options to select the location for a new factory. The
costs associated with various factors for the locations are:
Rupees in lacs
Cost element Site X Site Y Site Z
1 Land Development 1000 980 560
2 Building construction 6000 585 580
3 Labour Charges 2250 2000 2000
4 Power generation &
maintenance
35 39 42
5 Water charges 50 65 10
6 Raw-material expenses 5005 4900 4200
7 Local taxes Heavy Nil Moderate
8 Transportation
expenses
20 15 18
AN ISO 9001 : 2008 CERTIFIED INTERNATIONAL B-SCHOOL
* These charges are on annual basis for the predetermined rate of production.
* Total operating costs could be calculated from the table.
The company also has the following data for further analysis:
(1) It is observed that the cost of living at X,Y and Z is lowest, highest and moderate respectively.
But the community facilities are also of the same level. The company has to take a prudent decision
because most of the employees are currently resident at urban locations.
(2) The housing facilities available at X, Y and Z are rated poor’, ‘good’ and ‘better’ respectively. In
fact the availability of these facilities is equally good at all places.
(3) The climatic conditions are better at Y, X is comparatively very hot during the day and Z has very
high humidity. The materials need a dry and cool climate for protection.
Questions
Q.1) Suggest the best decision?
CASE-2 (20 Marks)
CAD/CAM Application: Case Study of BMW AG
BMW AG had about 44,000 employees and a turnover of DM 11,480 million in 1983. CAD/CAM
are used in both the automobile and motorcycle businesses. The major objectives behind the initial
decision to invest in CAD/CAM were to reduce the overall design and development time cycle, to
increase productivity by integrating previously independent phases of this cycle, and to optimize
design. The first CAD/CAM system was in place in 1978, with 20 workstations, and by the end of
1985, about 200 CAD/CAM workstations had been installed.
The major phases in the design and development cycle of a car are pre-development, concept
development, detailed design, prototype manufacture and testing, design of tools and fixtures for
production, manufacture of these tools and fixtures, planning and quality control, production of the
preserves and finally, series production. Traditionally (i.e. before CAD/CAM was used), each phase
was carried out separately and in sequence, and little work could be carried out on a phase until the
previous phase had been terminated. With CAD/CAM it is possible to increase the overlap of the
design phase and, for example, to pass the data from the first phase to the second before the first
phase has been completed. Similarly, new opportunities arising from the use of 3-D representations
with CAD/CAM allow the designer to carry out stress-, kinematics-, collision- and assembly-analysis
before a prototype has been built. This not only saves time but leads to design optimization.
It is recognized that different application areas have different CAD/CAM requirements. At the time
at which CAD/CAM was introduced, no individual CAD/CAM system met all the requirements. The
solution of a single CAD/CAM system for all applications was rejected as being unproductive. Such
a system would, in general, only have been used in carrying out the most mundane parts of the
design. Had such a system been chosen at that time, it would have been of assistance only in drafting.
This solution would not have met the objectives mentioned above, nor contributed much to the
overall product requirements such as high-quality, high-precision and attractive design. It was
therefore decided that the best possible system for an application (i.e. the system meeting a particular
application’s requirements as closely as possible) would be applied to that application. This led to the
use of several CAD/CAM systems within the company. Each of these systems was required to meet
the specific requirements of the application for which it was used. The order in which systems have
been installed reflects the benefits expected to arise from their use in a particular application area.
CAD/CAM systems were first installed to support car-body applications as this was the area believed
to offer the highest potential productivity gains. Within this area, the individual activities include
styling, model manufacturing, digitization of models, production of computer-based model drawings,
smoothing of surfaces, model generation by NC milling, tool designing, tool manufacturing (copymilling)
and checking. With CAD/CAM it was found possible to create more body design
alternatives within a reduced time, and to increase the quality of the body.
The systems used for body applications are GILDAS, MEFISTO and STRIM. GILDAS is an inhouse
development for managing the multitude of digitized points produced from models. MEFISTO
is another in-house development. It is a surface-milling system with 5-axes capabilities. STRIM
(from Cisigraph), a surface modeller based on a multiparametric polynomial representation, is used
by the designer to ‘smooth’ the digitized points to form individual patches of surface. These patches
are then blended together, and modified if necessary, to from an aesthetically pleasing car body
surface. The entire outer body surface is designed using STRIM.
The same system handles many of the inner body parts. Although many of these are not made up of
such complex shapes as the external body, they are often designed using information available in the
external body description (e.g. offset surfaces). The system is also used to design interior fittings and
mountings for parts such as seats and sun visors. It is also used in windscreen design and
manufacture; for example to design a developable windscreen surface to fit the requested windscreen
outline, or to calculate the best shape of the flat glass that will be moulded to produce a nondevelopable
windscreen surface.
Once the use of CAD/CAM had been successfully demonstrated in car-body applications,
CAD/CAM systems were implemented for other applications. In 1979, CABLOS (from AGS) was
implemented for schematic diagrams and layouts. In 1980, CD- 2000 (from Control Data
Corporation) was implemented for the design and drafting of mechanical parts. CADAM (from
Lockheed/IBM) and CATIA were then installed for manufacturing engineering applications such as
design of press tools, casts, fixtures and production machine mechanisms, and for preparation of NC
machine-tool programs. Finally, 1983 saw the development of GRIVAD, a system for circuit design,
electrical wiring layout and electrical-parts-list generation.
BMW purchased CAD/CAM systems wherever possible (i.e. whenever there has been a system
available on the market to meet the requirements of a particular application). In-house developments
were made when a suitable system was not found on the market. Typical in-house developments
have been in linking systems together, and in special car-industry-related applications (e.g.
kinematics-analysis of wheel movements, calculations of visible areas and calculation of the wiped
area on the windscreen).
It was found that the initial acceptance of the CAD/CAM system is decisive for its long-term success.
Another requirement for success is a constructive dialogue between system managers and users, with
the user being able to influence the development of the system positively. Other important
requirements were found to be high stability and availability of the system, transparency to the user
EDP problems, and the possibility of adapting the system to specific requirements of the company
(particularly with respect to data inferences, data protection and special applications).
BMW found that the use of CAD/CAM led to saving in time, lower costs, higher flexibility, and
increased product quality. It also offered, in some cases, the possibility of carrying out tests that were
just not possible before the introduction of CAD/CAM. Reduction of time cycles is particularly
appreciated partly because it offers the possibility of creating alternative designs within a given time
period, and partly because it offers, for example, at an early stage of styling and design, the chance to
reduce the lead times. Quality improvement both produces a better product and results in a reduction
of harmonizing and modification work at later stages of the manufacturing process.
The period 1979 to 1984 is seen as a highly successful one in which productivity in several
application areas was increased by the introduction and use of specific CAD/CAM systems meeting
specific application requirements. Since 1983, BMW has been preparing for a new phase of
CAD/CAM development in which further productivity gains can be attained by increasing the
integration between systems. One major requirement is to improve the transfer of CAD/CAM data
both between applications and with sub-contractors. An in-house development, CADNET uses IGES
and VDA formats. BMW is also co-operating with other companies (e.g., on an Esprit project), to
attain a unique data interface between systems. Whereas the initial period of CAD/CAM use led to
success in specific application areas, productivity gains in the next phase will come both from full
integration of systems within the same development phase and from integrating different
development phases.
CAD/CAM at BMW is not seen as an isolated technique, but as a major component of CIM. It is
therefore developed in conjunction with production automation (NC machine tools, robots, etc.) and
communication techniques for improved technical administrative logistics (including process
planning and engineering data management).
Questions
1) Analyze the above case and give your comments?
CASE-3 (20 Marks)
Manpower Planning at Mylin
INTRODUCTION
Mylin is a private limited company in Pune, specializing in switch gear manufacturing and has over
1500 employees. The company manufactures a large number of electrical products to rigid
specifications, under collaborations with many renowned manufacturers from England, West
Germany, France and Switzerland. Important products manufactured by the company include
starters, contactors, circuit breakers, switches and switch gears. The company has two Units, one
situated inside the city and another in an industrial suburb. It is an expanding organization.
ORGANIZATION STRUCTURE
Mylin has a matrix organization structure which is shown in Fig. 1. The structure at the middle
management level is neat and well designed, thus affording a close control over the operations.
The firm has steadily grown over the years, from 1980 to 1991 and particularly from 1985 onwards,
as can be seen from Fig. 2.
During the lean period from 1981 to 1985 in which the sales of the company steadily fell, Mylin
hired the services of a consultant (in 1982) to make a corporate plan and a manpower plan for the
company (Table 10.1). As such, Mylin adjusted its manpower and went on performing well starting
from 1985. In 1992, the management decided to plan for a third unit and was reviewing its human
resources. It was found that a large number of highly skilled workers would be retiring in the mid
nineties and therefore, there was a need to review the manpower of the company.
The Chairman, Gopalan, called a meeting of the senior executives of the company to discuss the
issues. He said that the skilled workers were their greatest asset. It was because Mylin had a large
number of skilled workers that it had managed to pull through during and after the recession and now
they were back on their legs and were poised for a good growth. He said that at a time when they
were planning expansion of their facilities and diversifying the products, the importance of skilled
workers became even greater. But, he said that according to the personnel officer Sastry, in a decade
the company could lose most of the stock of skill, it had at present, as usually, after a year or two a
good proportion of new incumbents left their organization and joined the public! private sector
giants. It is necessary therefore, for them to find out why this happened, remedy it and plan for
generating a manpower with sufficient skill to take over from the veterans who would he retiring in
large numbers in 95’. He asked Parate, the industrial engineer to develop a long range plan for
manpower and suggest policies for maintaining a healthy human resource in the organization. He
also requested all the senior executives, to help him in his efforts in whatever way they could.
Table 1 : Employees Strength Fixed Assets and Sales of Mylin
Sales
Year Employees
strength Fixed assets (Rupees,
in million)
1980 968 2,714,581 20.83
1981 1183 3,677,303 23.89
1982 1260 5,067,835 22.67
1983 1247 4,906,531 22.35
1984 1263 4,753,644 22.81
1985 1359 4,769,169 20.52
1986 1458 4,947,088 24.71
1987 1515 5,143,585 31.77
1988 1524 5,318,212 36.82
1989 1692 5,603,325 46.52
1990 1799 6,568,049 55.22
1991 1692 10,795,067 54.47
MANPOWER PLANNING STUDY
Parate, the industrial engineer collected the following information on manpower planning at Mylin.
The company did not have a separate manpower planning group. This function was carried out by the
personnel officer with the help of the divisions. The company decided its short range manpower
requirements depending upon the demand for the products and made shop side adjustments to deal
with fluctuations. It decided the manpower level product wise and service wise using industrial
engineering techniques, and then, integrated it on the basis of experience and judgement. To prepare
the long range forecast, the company used statistical methods, five year plans and forecasts of Indian
electrical manufacturing association.
In respect of supervisory, technical and managerial manpower, the company seemed to prefer to
follow the policy of replacement of retiring, or dead or leaving personnel and was guided in this
respect by the sanctioned positions which were communicated from time to time by the top
management of the company.
Recruitment was done by open advertisement. The company had a well equipped Training
Department to train apprentices, engineers and technical trainees. Promotions were from within the
organization, based on merit rating and performance appraisal. The company used all modern
methods to acquaint the employees with current industrial practices. These included:
1. Demonstrations/lectures by competent authorities arranged in the factory.
2. Deputation of’ employees to various lectures/seminars/training courses arranged by many
professional bodies like National Productivity Council (NPC).
Manpower Data
Parate further collected the following data (given as tables in the appendices):
1. Employees strength for the previous 14 years (Table).
2. Labour turnover figures (workmen) for the previous four years (Table A 10.2).
3. Codes of labour skill categories (Table A 10.3).
4. Workmen statistics as per wage scale in the city unit (Table A 10.4).
5. Age distribution of employees (Table AlO.5).
Manpower Projections
Parate assumed that trends in the past would continue in the future. Workmen and total strength were
predicted for the next four years by the least squares analysis. For this, a straight line relationship, as
given below, was assumed.
y = mx+c (1)
where
y = workmen strength or total employees strength
x = time (number of years)
m = slope of straight line
c = intercept of straight line on the y-axis.
From the data collected, the results obtained are given in the table below:
Parameters Workmen Total employees
Slope=m 49 79
Intercept = c 558 707
Correlation coefficient 0.9648 0.9699
F value 162 191
Equations predicted for manpower were:
for workmen y = 49.27x + 558 (2)
for employees y = 79.12x + 707 (3)
From the high correlation coefficients, Parate concluded that a high degree of relationship existed
between y and x.
NOTE: As the past data for the previous 14 years was taken into consideration to fit a best straight
line, this line would have n — 2(14 — 2 = 12) degrees of freedom. From the statistical tables, F
value for 12 degrees of freedom should not be less than 10.2 for 95.5 per cent confidence level. F
values for these regression lines are more than 10.2, therefore, it was concluded that the regression
was significant.
These regression lines were extrapolated to get the values of y for the subsequent four years. The
predicted manpower requirements are shown in Table 10.2 (for workmen).
Analysis of Labour Turnover
The industrial engineer, next turned his attention to the analysis of labour turnover in the factory.
Table 2 Predicted Manpower* Requirements at the End of Each Year (as on 31st March).
*All figures are in numbers.
The regression analysis did not take into consideration the movement of employees from one grade
to another, wastage, dismissals, etc. To take the employee mobility into account, labour turnover
figures (workmen) were analyzed by him.
There were 36 trades in the company. For the purpose of analysis, all 36 trades were classified into
eight different classes depending upon their common characteristics (classes C1 to C8). Parate
assumed that workmen in a particular category would be promoted or transferred to different trades
within that category.
The ratios of the number of persons appointed to the total number of persons at the end of a year in
each trade (AlT), and the ratios of the number of persons quitting to the total number of persons at
the end of a year in each trade (Q/T) were computed. Thus for each trade, four values of AlT and
QIT were calculated. The values (AlT, QIT) for each class were grouped in different class widths to
get the frequency distribution.
From the frequency distribution, the mean values of AlT and QIT were calculated for each class by
the formula:
Mean = E(f x x) IE (f)
where
f = frequency of occurrence
x = mid-value of the class
From the total number of workmen in each class at the end of a year, the proportion of workmen in
each class was computed by the formula:
Time Workmen strength Total employees strength
1992 1297 1864
1993 1346 1973
1994 1395 2072
1995 1445 2132
R= Total workmen in a class (1988 to 1991)
Total workmen strength (1988 to 1991)
This ratio was assumed to be constant over the number of years. The results of all the above
computations are shown in Table 10.3.
From the total workmen strength (1988 to 1991) at the end of a financial year (31st March) and the
total workmen strength (1988 to 1991) at the end of a calendar year (31st December), the average
increase in strength from March to December was computed as follows:
The average of the ratio =
total workmen on 31st December — total workmen on 31st March
total workmen on 31st March
This value was computed for the years 1988 to 1991 as 0.03 or three per cent, i.e.
(4767/4628) – 1 = 0.03 (3%)
Table 3 Proportion of Workmen in Each Class
Trade
Classes
Ratio R Mean values
(A/T) (Q/T)
1 0.46 0.123 0.122
2 0.025 0.000 0.0786
3 0.0545 0.175 0.265
4 0.0138 0.125 0.0875
5 0.105 0.241 0.204
6 0.0702 0.260 0.127
7 0.185 0.132 0.0955
M 0.0965 0.133 0.10
Therefore, the predicted workmen strength obtained for the period, March 1992 to March 1995 was
increased by three per cent to get the predicted workmen strength at the end of December of each
year (Table 4).
Table 4 Predicted Workmen Strength at the End of Each Year from 1992 to 1995
The predicted total strength was sub-divided to get the strength in each trade/class by multiplying the
total strength with proportions R in Table 3 (see Table 5).
Table 5 Classwise Workmen Strength
Workmen strength
Year ending
Trade classes 1992 1993 1994 1995
Year Workmen strength as on
31st March 31st dec.
1992 1297 1330
1993 1346 1385
1994 1395 1435
1995 1445 1485
1 610 638 660 682
2 33 35 36 37
3 72 75 78 81
4 18 19 20 21
5 140 145 151 156
6 93 97 101 104
7 246 255 124 130
From this, Table 6 was prepared to get the predicted values of A and Q from 1992 to 1995.
Questions
1) Analyze the above case and give your comments?
Case 4 (20 Marks)
Order Promising with ATP
Mitel Corporation, headquartered in Kanata, Ontario, Canada, is an international supplier of
telecommunications equipment and services. Its product lines include business telephone systems,
semiconductors, public switching systems, network enhancement and gateway products, systems
development, and software products. Mitel is active in major growth markets such as computer
telephony integration and emerging technology systems. By combining its products, services, and
knowledge, the company provides solutions to a variety of telecommunication problems for
customers.
One of the company’s products is a telephone, the Superset 430. The dark gray version of the phone
is part number 9116-502-000-NA. The order promising record for this product is shown as Figure
6.11. At the top of the header information is the part number, and product description. Next, data on
stock status and availability are given. The “Whs” is the warehouse where the stock is located. The
“OH” is the on-hand balance, which might overstate availability because some product is already
allocated (“Ale”) for a customer, has been picked (“Opk”) and is ready to ship to a customer, or is
being inspected for damage (“Dmg”). The net result is the amount of product available (“Avl”) for
delivery to customers in the future. The record has a 13-month horizon, of which only 9 weeks are
shown on the screen. The starting availability refers to the beginning of the first week of the record.
The detailed record itself is used to develop the available-to-promise quantities that are used to make
order promises to customers. The record displays nine weeks of information
Figure 1 Order-Promising Record for Mitel
Product Description
9116-502-000-NA Superset 430 Dark Grey
Schedule/Stock-by-Week
---WHS---OH---ALC---OPK---DMG---AVL----BKO---ONO---COM---INTDIS
1039 1039
APT Horizon: 13 Starting Avl: 1039
Week
Ending
3/8 3/15 3/22 3/29 4/5 4/12 4/19 4/26 5/3
Unal Ship 2 8 3 188 93
Sch Rcpt
Mfg Rcpt
84 150
Prj OH 1037 1029 1026 838 745 745 829 829 979
Cum B’log
Atp
294
745
292
745
284
745
281
745
93
745
745 829 829 979
Figure 2 Update of ATP after Booking Order
-Product------------Description------------Extended Description-----------
9116-502-000-NA SUPERSET 430 DARK GREY
Schedule/Stock-by-Week
---Whs---OH---Alc---Opk---Dmg----Avl----Bko---Ono---Com----Int-
DIS 1039 1039
ATP Horizon: 13 Starting Avl: 1039
Week Ending 3/8 3/15 3/22 3/29 4/5 4/12 4/19 4/26 5/3
Unal Ship 2 8 3 188 93 100
SChRcpt
Mfg Rcpt
84 150
Prj OH
1037 1029 1026 838 745 645 729 729 879
Cum B’log
ATP
394
645
392
645
384
645
381
645
193
645
100
645
729
729
879
using the week ending date as the indicator of the week. The row labeled “Unal Ship” (unallocated
shipments) contains the booked customer orders that have not yet been allocated or picked. The
second line shows scheduled receipts (“Sch Rcpt”), for items for which purchasing is an alternative,
and manufacturing receipts (“Mfg Rcpt”), which come directly from the master production schedule
and are managed using a different record. The projected on-hand balance (“Prj OH”) is calculated
from the booked orders directly, since there is no forecast information included in the Mitel orderpromising
record. For instance, the starting availability of 1,039 is reduced by the demand of 2 in the
week of 3/8 to leave a balance of 1,037. Similarly, the demand of 8 in 3/15 further reduces the
balance to 1,029.
The final row on the record totals the cumulative backlog for each week in the future for all
subsequent weeks. For week 3/8 it is the sum of the booked orders for the first five weeks, 294. For
week.3/1 5 it is the sum of the first five weeks minus the first week. Since the last booked order
occurs in week 4/12, that is the last week for which there is a backlog. The ATP row shows that there
are 745 units available to promise up to week 4/19 where an MPS quantity increases the availability.
Another MPS quantity increases the ATP in week 5/3. The ATP amount (745) is just the difference
between the starting availability and the cumulative backlog for the first six weeks. The record says
that up to 745 units can be promised to customers anytime over the next six weeks and that another
84 will be available in seven weeks.
Figure 6.12 shows the results of booking an order for 100 telephones for the week of 4/12. The order
increases the cumulative backlog by 100 units to 394 and reduces the ATP to 645 in the first six
weeks. Salespeople use this record to inform customers when orders can be delivered. The actual
booking of the orders is done formally, however, so there can be no game playing with the quantities.
Once an order has been placed and is booked, the record is immediately updated for all subsequent
order promises. The record is also updated when there is a change in the master production schedule.
Questions
1) Analyze the above case and give your comments?
Case 5 (10 Marks)
Kawasaki, U.S.A.
Kawasaki produces six different types of motorcycles as well as motorized water skis at its U.S.
plant. About 100 different end-product items are manufactured for shipment to the firm’s distribution
centers. Although demand for products is highly seasonal, workload at the plant is stabilized by
permitting fluctuations in the finished-goods inventory carried at the distribution centers. The
company frequently introduces new product designs that represent styling changes in the product.
The key elements in gaining sales are price, product
Market
Characteristics
Manufacturing Strategy
Manufacturing Manufacturing Planning and Control System
Task Features Master
Production
Scheduling
Detailed
Material
Planning
Shop-Floor
Systems
Narrow Product
Standard Products
High volume per
Product
Seasonal demand
Sales from finished
Goods inventory at
distributors
Introduction of new
products
Changing product mix
Key customer
requirements: Price
Delivery speed
Provide a
low-cost
manufactu
ring
support
capability
Support
the
marketing
activity
with high
delivery
speed
through
finishedgoods
inventory
High-volume
batch and line
production
process
Short setup
times
Small batch
size
Low-cost
manufacturing
Low labor
cost
High material
cost
Low
overheads
(low MPC
Make-tostock
Manufacture
to forecast
Level
Production
Three-Month
frozen
planning
horizon
Manufacture
to replenish
distribution
inventories
Ratebased
material
planning
JIT-based systems
Kanban containers
JIT flow of
material,
component and
WIP inventory
(through finishedgoods
inventory in
distribution divisions)
Market qualifies:
Basic design and
peripheral design
changes
Costs)
styling, and product performance. Factors qualifying the firm to compete in the market are quality
and delivery speed. Figure 11 1 summarizes characteristics of the market served by ‘Kawasaki along
with key e4ments of its manufacturing strategy.
Manufacturing’s task is o produce standardized products in high volume at low cost. Since material
costs are significant, major emphasis is placed on reducing plant inventories using just-in-time
manufacturing methods. The production process is characterized by short setup times and small
production batches using production line and high-volume. batch processes. Standardized assembly
operations and repetitive employee tasks characterize the production process.
All the manufacturing planning and control functions in Figure z 1 are performed a Kawasaki; a
make-to-stock master production scheduling approach is used. Customer orders for end products are
filled from the finished-goods inventory held by the company’s distribution division. The MPS is
based on forecast information, and mixed model assembly is used in performing final assembly
operations. Substantial emphasis is placed on 1eveling the master production schedule and freezing it
over a three-month planning horizon.
A rate-based material planning approach utilizes a simple planning bill of materials to schedule the
rates of flow for manufactured and purchased components. A JIT shop scheduling system using
kanban containers controls the flow of material between work centers. The JIT system supports lowcost
manufacturing with small plant inventory levels and high-volume material flows. Very few
personnel and minimal transactions are required in 1anning and controlling production activities.
Questions
1) Analyze the above case and give your comments?
Production Management
Total Marks : 80
N.B. : 1) All questions are compulsory
2) All questions carry equal marks.
1. What are the different types of production/operation system? Where would each one of them be
applicable? Give practical examples.
2. What is flexibility in operations function? Can it be one of the strategic weapons? Explain your
response.
3. What is the distinction between accounting profit & economic profit? How is such a distinction linked
with the concept of opportunity cost?
4. What is the difference between the Scanlon & rucker plans?
5. Productivity improvement is not a one shot project Do you agree with this statement? Discuss
6. Is supply chain management a philosophy? Discuss
7. What is the aim of production planning?
8. What is forecasting? Elements of forecasting & Methods of forecasting?
AN ISO 9001 : 2008 CERTIFIED INTERNATIONAL B-SCHOOL INDUSTRIAL MANAGEMENT
(Marks 80)
CASE 1 : (30 Marks)
Trade Unions in the TNC Supply Chain and their relationship with the CSR
movement
Chinese enterprises are essentially passive players at the sharp end of CSR in China. They are in a
position of having to juggle between the different factors governing the development of industrial
relations in China, including trade union reform. In this often tense dynamic, CSR is seen as an
external factor and trade unions an internal factor. These two factors have an impact on each other.
As part of the research for this case study, the research team (RT) ¡¥shadowed¡¦ a CSR audit. The
factory had come under very heavy CSR pressure in 2004. Altogether, the RT carried out two
investigations: in March (see earlier printed report) and August 2006
Initial conclusions:
1) That factories undergoing CSR audits have better working conditions than those that don¡¦t.
2) There is no evidence to suggest that trade unions have an impact on wage levels at enterprise level.
However, factories subject to CSR pressure are generally large workplaces and this was perhaps a
factor in improving labour conditions. Moreover, CSR-targeted factories are prone to data distortion
due to ¡¥training of workers¡¦ answers¡¦ in interview and double or even triple accounting.
Enterprise Y was established in 1997 and now has 1,200 workers. It was ¡¥Re-registered¡¦ in 2002 to
take advantage of tax breaks etc. It manufactures electronic goods for export chiefly to three retailers
and over 50% of goods go to a single US company.
Employment breakdown: 80 managers, 300 skilled workers; remainder are ordinary workers.
Managers and skilled workers have contracts and social insurance based on minimum legal standards.
The extent of contracts among unskilled workers remains unclear. The enterprise had previously
AN ISO 9001 : 2008 CERTIFIED INTERNATIONAL B-SCHOOL
2
supplied a ¡¥comprehensive¡¦ contract and social insurance list to CSR audit team (excluding
probationary workers) but the RT¡¦s interviews with workers revealed that many had no idea if they
had a contract or not or if they were paying into various social insurance schemes such as work injury
or pensions. The RT was not given access to formal SI contribution records.
Wages were verified at between 900-1100 yuan per month with on average more than 60 hours o/t
but this was subject to orders. There were few disputes and conditions generally were better than at
surrounding factories. Up until Aug 2006 accommodation was free and reasonably good. The labour
turnover rate for unskilled workers was just 8% and most workers had been there more than two
years already. However, in the same period the labour turnover rate for skilled workers had increased
dramatically.
Enterprise Trade Union
Established in 2004. Trade union chair M directly elected by workers, largely as a result of pressure
from the Brand. By August the follow-up research revealed M had left, apparently for ¡¥personal
reasons¡¦ according to management. Former vice chair C had taken over his position. C¡¦s previous
experience had been as a member of a trade union committee in an SOE trade union. He was
appointed to the post at Y. The local township union said that there would be fresh union elections
¡¥soon¡¦. The trade union at Y had three other union committee members. All were mid or senior level
managers: human resources manager, one an engineer, and a finance manager. The union had an
office in the enterprise but has no bank account or independent accounts/expenses system. All union
activities were entirely dependent on management transferral of funds.
Trade Union Work
Approach to union work very similar to work in SOEs ¡V i.e. very traditional. Also the union works
very closely with the township union and pretty much depends on it for policy etc. The latter is very
pleased with the Y union, which has received a number of awards. Activities include labour
productivity competitions, May Day competitions. Prizes include going on holiday to HK. Examples
of general day union work included:
„h Management introduced a charge for canteen food. The service had been franchised to outside
contractors. In response the union organised a small group (xiao zu) which negotiated with the
company and succeeded in getting the food and food hygiene situation improved.
„h Dormitory Management Team: made up of company reps and worker reps. Aim was to selfmanage
the dormitories and avoid management imposing arbitrary fines on workers. The
committee¡¦s work was based on a ¡¥Dormitory Management Contract¡¦ which the union drew
up. Any fines imposed had to be in accordance with the contract and workers reported an
improvement in the overall dormitory conditions.
3
Union representing workers in wage consultations
The union was very proud of this aspect of its work. Wages stipulated in contracts were 574 yuan per
month ¡V however the real income of workers varied between 900 and 1100 per month due to o/t.
On 1 September 2006 ¡V the government introduced new standards for min. wage which were reset at
690 yuan per month, which at current contract and o/t levels in the factory would mean a 300 yuan
per month wage increase. Company provided figures which made it clear that if they abided by the
wage increase in current market conditions they would go bust. Y¡¦s HR department presented a
proposal saying that Y should meet new min. wage requirements but cancel food and board subsidy.
However, this would break contracts with workers in which the company agreed to supply food and
dormitory accommodation. Management consulted with local government and township trade union
and decided to try and solve the problem through consultations with enterprise union.
RT investigation found that the consultation did not follow either the regulations on collective
consultations on wages, nor did they constitute a collective contract. Instead: Workers Rep meeting
called by boss: mostly production managers but also a small number of line workers present who
were appointed as ¡¥reps¡¦ by the trade union chair. RT observed this meeting and also provided legal
advice to worker reps. At the meeting was a deputy managing director and the two managers from the
union committee.
Meeting procedures and presentations recorded in report ¡V worker reps presented with an ultimatum
regarding bankruptcy plus threat of dismissal from HR dep. for anyone who did not agree with the
cancellation of free food and board. Trade union said: it wanted the new min. wage standard met;
new charges for food and board should be reasonable and include a self management team for
dormitory. Union also called for further consultation with members.
Not much feedback from members. Union held further talks with senior company managers. This led
to the Method of New wage Management. New charges 200 for dorm and 60 for food, a rate below
market prices but reduced the wage rise itself to between 40-60 yuan. RT interviews with workers
showed that most workers agreed with the new arrangements. A minority felt that they had been
cheated. All signed the new agreement and anyone who refused was told their contracts would not be
renewed.
CSR audit
RT shadowed and at times provided translation for a social audit team. Despite the professionalism of
the audit team, their task to report actual conditions at the factory was essentially a failure. The audit
team asked that the factory management bring o/t levels down to legal levels, although they also
expressed an understanding of local conditions and stated that workers were able to take adequate rest
time despite high levels of overtime. No workers expressed dissatisfaction with pay and conditions
directly to audit team.
The audit team also had an extensive meeting with trade union chair who told them that the new
wage levels had been met but did not mention the introduction of dormitory and canteen charges. The
audit team also asked that a dispute mediation committee be established at factory level as well as
warning management that a complaints system for workers should be implemented as soon as
possible. Also discussions over whether the deposit that the factory demanded for work uniform was
an illegal job deposit. Audit team agreed that it wasn¡¦t.
4
Audit team did not discover the fact that some workers who did not meet piece rate targets had to
complete quotas in their own time ¡V up to 1-2 hours per day! The trade union chair had told workers
it was in their interests to lie to audit team over working hours as trained to do so by enterprise
management. He was under no pressure to take this line from the enterprise itself.
Discussion:
„h Organisation of the trade union was from CSR pressure not pressure from workers i.e. in
effect top down. 2004 US client retailer had cancelled an order due to working conditions and
this had caused losses.
„h Union operated in a cooperative manner with management not confrontational.
„h With regard to a workers¡¦ complaints and mediation system. The US client did not believe it
to be true when management had told them there were no disputes with or among the workers.
The real situation was that the union had not taken part in any disputes. RT checked with the
MOLSS and found that a dispute had occurred following a death in the dormitory.
Management denied it was due to a work injury and police ruled out criminal behaviour.
Eventually MOLSS brokered compensation with family and Y enterprise. No details made
available. However, RT concluded from this dispute that the company did not have an injury
compensation scheme for workers. If they did have, the settlement would have been between
the dead worker¡¦s family and the insurance company.
„h Audit ream did not discover that the HR department pressured workers to hand in their notice
when they wanted to cut staff levels rather than simply lay them off. This was to avoid
compensation. The union also kept silent on this.
„h The wage negotiation process was entirely non-confrontational except for HR attitude to the
workers, who were threatened with dismissal if they objected to concluding the agreement.
„h The union helped the enterprise and the brand find an easy way out of the wage dilemma. It
did not ¡¥represent¡¦ the workers in this process.
Questions :
1. What is the experience of China about Trade Union in the above mentioned case?
2. How Trade Union resolved the dispute? By confrontation or by negotiations?
3. What is the general impression about the Trade Union movement with reference to this case?
4. Give your comments and opinion
5
CASE 2 (30 Marks)
Acas and Essex Ambulance Service NHS Trust: Improving
consultation and working patterns.
The Challenge
Essex Ambulance Service (EAS) is an organisation dealing with unscheduled care,predominantly
accessed via 999 calls. It was established as an NHS Trust in 1990 and employs around 1,300 people
who are primarily members of two unions, Unison and the GMB.
The Trust had two inter-related problems. Firstly, relations between management and unions had
deteriorated after a national ambulance dispute in 1989. Trade unions did not have recognition at the
Trust, and a trade union representative described the management-union relationship throughout the
1990s as ¡§arms-length¡¨ and ¡§fairly
tense¡¨. During this time, trade union involvement was restricted to representatives attending health
and safety committees and representing union members during individual disputes. Consultation
between management and the workforce was nonexistent, and this was due in part to the management
style of the organisation. A JNCC (joint negotiation and consultation committee) was established at
the unions¡¦ insistence, but it was largely ineffective. Decisions made at the JNCC were often
overturned or ignored by the Chief Executive Officer (CEO), thereby damaging the committee¡¦s
credibility, and the CEO had no involvement in the committee.
This contributed to a second problem: a failure to respond to different staff interests by modernising
working arrangements for part-time and relief staff. These workers were unable to influence their
work roster and shift patterns to the same extent as full-time and longer serving staff. And because of
a lack of consultation mechanisms, it was proving difficult to agree on strategies that would mutually
resolve the problem.
The Trust eventually recognised trade unions in 1999. In 2002, following the departure of key
managers who had resisted engaging in joint consultation, trade union representatives, supported by
management, contacted Acas for help in addressing these problems and improving the employment
relations climate. Acas was approached, according to the HR manager, because it was seen as
¡§independent, and expert around this area¡¨.
How Acas helped
In October 2002 the Acas adviser met with management and trade unions to develop two sets of
workshop programmes, each addressing the issues identified as problems.
Two initial workshop sessions were held to discuss rostering issues. The Acas adviser led these
workshops, using techniques to break down barriers between participants, including splitting them
into mixed (management-trade union) groups to work on problems and design solutions. Throughout
the workshops, the adviser also profiled examples of how problems were resolved in other
organisations she had worked with.By the end of the first workshop a number of recommendations
were developed, including the need to have clear principles driving consultation, the need for a
review of the roster system, and the need to have stronger informal ties between key managementunion
players. The Acas adviser then put together a report based on the ideas and suggestions
6
generated at the workshop, and these were discussed at a further workshop, at which participants
ratified and agreed a new system of rosters.
¡¥Break-out groups¡¦ addressed problems in a way that included the voice of all parties, and
stakeholders and the adviser also worked with specific sub-groups of staff ¡V for example relief
workers (who fill in for workers on holiday or sick leave) ¡V to tackle particular rostering problems
and design improved working practices.
The adviser organised a subsequent facilitated workshop in early 2003, attended by key Trust
managers and union groups. Its aim was to establish the purpose of the JNCC and its terms of
reference. Whilst no formal output emerged from the workshop, participants felt that it had formed
the basis for the renewal of the forum. The HR manager described the imperatives driving this
initiative:
¡§¡K bear in mind we¡¦re coming from a stance where the unions weren¡¦t involved in negotiation at all
¡K We¡¦re moving towards Agenda for Change now and that¡¦s very much about partnership working
with staff-side. So we wanted to make sure that the JNCC had the right terms of reference and was
going to be working effectively for both sides to benefit.¡¨
The benefits: improved consultation and working patterns:
A range of positive outcomes flowed from Acas¡¦ involvement at the Trust, with management and
trade union representatives emphasising their significance in light of the relationship difficulties and
low levels of trust at the Trust during the 1990s. Firstly, the JNCC has become a central feature of
employment relations at the Trust. It now functions effectively, partly as a result of good informal
relations between key trade union representatives and HR managers. The Committee has provided a
vehicle for regular management-trade union dialogue on a wide variety of issues, including work-life
balance and flexible working. The JNCC has also become a crucial medium for discussions around
Agenda for Change. Secondly, in terms of work rosters, there is a new system that accommodates the
interests of both full-time staff and those on a variety of different contracts. Employees who formerly
had little advance knowledge of when they were working can now plan their rest days more clearly.
In facilitating changes in working patterns, the Acas project has brought part-time staff closer to the
strategic concerns of the Trust. This has meant that human resource planning is clearer and more
consensual in nature, and levels of commitment from part-time staff are, according to trade union
representatives, higher than in the past.
Thirdly, the process of improving consultative mechanisms and the roster system has helped build
relationships between management and union representatives, enabling them to develop other new
practices relating to, for example, meal breaks and work-life balance initiatives. A joint approach has
also been taken to managing the implementation of Agenda for Change, with trade union
representatives reporting that they now feel that they have some ownership over its development.
There are now ¡¥joint management-union chairs¡¦ for sub-groups, including Agenda for Change subgroups,
each tackling a variety of new issues and reforms. These new issues are approached in a very
different way to the past, when the level of dialogue was virtually non-existent. There are still
differences and problems, but the new framework has sustained a high degree of joint working.
Central to this has been the strong explicit commitment and support for consultative mechanisms
from the union and senior management, including the interim CEO, who chaired the JNCC. As one
trade union representative explained:
¡§(The Acas project) has built a foundation to move forward on the working lives for our relief staff,
for full time staff. And we¡¦ve now got the JNCC firmly established as the main staff conduit to the
head of the organisation on a formal basis.¡¨
7
According to HR managers and trade union representatives, longer term benefits of Acas
involvement have become evident over the last two years. These include increased levels of trust
between employees, unions and managers, and improved formal and informal workplace relations.
Trade union representatives and managers now speak to each other openly and constructively, and
improvements to operational systems and practices are the subject of consultation and dialogue to a
much greater extent than in the past. Such is the nature of the turnaround that Trust managers and
union representatives are often called upon to provide advice to other Trusts who are attempting to
improve employer-trade union relationships.
Questions:-
1. Give the brief history of the above mentioned case study
2. What was the problem? How it was resolved?
3. What was the effect of solution on the unit¡¦s mechanism?
4. What is the message ?
8
CASE 3 (20 Marks)
Changing role of trade unions
The curtain has at last come down on one of the most famous marquees in the motorcar industry,
with MG Rover finally shutting down production earlier this month.
A company that once employed 40,000 people in the British Midlands, with an equal number
employed in the factories of suppliers, had been forced to scale down its operations over the years.
But even skeletal operations with 4,000 people has now ceased. It is an example of what destructive
trade unionism can do to an industry.
Arthur Scargil in the 1980s set out to destroy industry in the Midlands with his brand of militant and
destructive trade unionism. Finally Mrs Thatcher stood up to him and showed him the limits to which
trade unions could push industry.
She privatised industries and Scargil lost his power base, which was mainly in public sector heavy
industries. Successive governments in Britain after Mrs Thatcher have refused to bail out public
sector undertakings with subsidies and grants.
This has resulted in Britain transforming itself from being the sick man of Europe to one of the more
dynamic economies in the West.
In India too we have had examples of the Arthur Scargil brand of trade unionism. What Datta Samant
did to the cotton textile and engineering industries in Mumbai was equally devastating.
Almost all the textile mills in the city closed because of the unreasonable demands made by trade
unions under Datta Samant. India has the advantages of (a) growing both long staple and short staple
cotton and (b) a huge domestic market.
We could have been the cotton textile source for the whole world. But battling militant trade unions,
on the one hand, while coping with price controls imposed by unimaginative governments and textile
quotas imposed by foreign governments, on the other, proved too much for our textile industry.
It did not have the necessary financial and managerial resources, and it failed to modernize and
remain competitive in terms of quality and cost. So it declined and became terminally ill.
Trade unions are a legitimate system for organizing workers and to voice their rights and grievances.
Without them companies would become either too paternalistic or too dictatorial.
Responsible unions help to create a middle path in the relationship between management and labour
while maintaining the responsibilities of the former and the dignity of the latter.
Where things go wrong is when the management becomes authoritarian, especially in owner/familymanaged
companies, or when a trade union leader allows emotion and ego to overcome reason.
9
Fortunately today, workers have become better informed and aware of the economic forces that
impact their industry. The media has helped to create much greater economic awareness.
So it is not so easy to mislead them. Managements too have become more sensitive and skilled in
handling relationships with employees. This is true of even family-owned and managed businesses.
TVS [Get Quote] in the South is a prime example of how a large family-managed industrial group
has successfully managed its relationship with employees through enlightened management. There
are more such examples in other parts of the country.
Perhaps the labour departments of governments at the state and the Centre should sponsor the
institutes of management to do case studies of companies that have built up such successful
relationships. Instead of merely administering rules and labour laws, these government departments
could also act as apostles of good practices in the field.
As the skill levels and educational qualifications of employees advance, the role and significance of
trade unions tend to diminish. This is because (a) employees are able to represent their own case and
(b) managements are more sensitive to the needs of individual employees, whose intellectual skills
become almost uniquely valuable.
This is already happening in the sunrise industries based on brainpower such as IT and
telecommunications. Another phenomenon in these modern industries is that employees have greater
opportunity and tendency to move from one company to another, not only because of better terms of
employment but also because of their yearning to learn new skills.
This appetite for learning is something remarkable, especially in the IT industry. In fact, people in
that industry are more bothered about what they can learn in a company than about how much they
earn.
This phenomenon is facilitated by the fact that there are plenty of employment opportunities in IT
and it is a young industry. That is why one does not notice any union flags in the Silicon Valley of
India/Bangalore's Electronic City.
Trade unions have declined in their importance even in the UK, the original home of trade unions.
The UK's Labour Party was formed by socialist leaders of trade unions.
Today, Tony Blair does not have to depend on trade unions as much as his predecessors had to do in
the 1980s and 90s. The Labour Party's appeal to the public is based on key policy issues such as
spending on the National Health Service and the education system, rather than anything to do with
labour policy.
In the US, trade unions are powerful in negotiations with individual employers, but have no
significant political clout although they generally support the Democratic Party.
The same is the case in Japan. Even in Germany, France, and Italy, the role of trade unions has
become more focused on negotiations with employers rather than on politics.
The privatization or corporatisation of many public services such as electricity and water supply has
accelerated this shift. Hopefully the same shift in the character and role of trade unions will happen in
10
India -- even in places like Kerala and Bengal, as employment starts to move to more intellect-based
activities and public sector industries are privatized.
Responsible trade union leaders with a long-term vision will adapt their policies to suit the new
realities.
Correspondingly, there has also been a change in the attitude of management, even in familymanaged
companies. They are now better educated and many of them have been exposed to
international education and international markets.
They realise the dignity of human beings more than their previous generation and therefore are less
prone to treat employees in a scurvy manner. More and more companies are investing in management
training and development.
This has also helped to create much better awareness of the aspirations of workmen, among the
managers.
Yet the last vestiges of negative union practices continue to persist in monopolistic public services
like the state transport undertakings, state electricity boards, etc.
The only way to correct this is to corporatise or privatise these undertakings or open them up to
competition. A prime example of the change that is possible is what has happened in aviation.
Once airline services were opened up to competition, the whole scene changed. Instead of treating
passengers with the indifference typical of a public sector employee, Indian Airlines staff learnt even
to smile while greeting passengers.
In addition, we have created some world-class private carriers in the domestic market who are now
set to take wing on international routes. Even the railways can be privatised.
The rail track in each region can be owned and operated by a company, which then allows competing
companies to run their trains on these tracks. Similarly, there is no reason why urban bus services
cannot be made more efficient by opening them up to competition.
Today they are run as monopolies due to pressure from unionised labour. For example, in Mumbai
the urban bus service is cross-subsidised by BEST Electric Supply services.
Questions:-
1. What do you know about changing role of Trade Union activities?
2. What is the role of responsible Trade Unionism?
3. Is Privatisation a challenge for Union activities?
4. What is the lesson learnt from the IT sector?
SUBJECT:- INDUSTRIAL MANAGEMENT
MARKS :100
1. Write short note on : { 10 Mark }
a) Programmed instruction
b) Computer-assisted instruction
2.Explain the Ranking and Job grading methods of job evaluation. {10 Mark }
3.Define Accident. What you can do to prevent the causes of industrial
accidents?{10 Mark }
4.Define job enrichment. Discuss core dimensions of job enrichment. {10 Mark }
5.Explain price elasticity of demand and determinants of price elasticity of
demand. { 10 Mark }
6. What is Delhi Method? What are the uses of this method in demand forecasting?
{10 Mark }
7. What is law of diminishing marginal utility? { 10 Mark }
8.Discuss different types of Monopoly. How pricing and output decisions are taken
in the monopoly market in the short run? { 10 Mark }
9. Define break even analysis and outline its uses and applications. { 10 Mark }
10. What are the different methods of measuring national income? Which of these
are followed in India? { 10 Mark }
AN ISO 9001 : 2008 CERTIFIED INTERNATIONAL B-SCHOOL
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