Project Procurement Management.

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A case study

Questions on the case

there is a chapter which is chapter 2 from the book I attached you have to read to answer the final question. Only 4 questions

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Everything is in the files to answer all the questions. Please read carefully the instructions before you answer. A case study Questions on the case there is a chapter which is chapter 2 from the book I attached you have to read to answer the final question. Only 4 questions Please BE CAREFUL With you answers DIRECTIONS Using the attached (separate file) Harvard Business School Case Study No. 9-398-085 “Timberjack Parts: Package Software Selection Project” (Revised February 25, 1998), answer the following questions based on the techniques and concepts presented in class and available in the textbooks. This exam is open-book and open-note and is to be completed individually. Late exam submissions, without prior approval, will not be accepted or graded. QUESTIONS 1 Complete Exhibit 8 “Evaluation Criteria and Weights” (the table depicted below) for the final two cost proposals of the Timberjack Parts Package Software Selection Project (the “Procurement”), such that you can complete the final statement of the case study “The group has reached a consensus,” and determine the appropriate company to select. Within your analysis determining the selected company (Oracle or QAD), provide an explanation for your determination for of the assigned “factor weights” for each company and highlight those that determined the winning company. That is, state why/how the winning company was determined by your analysis. Exhibit 8: Evaluation Criteria and Weights Factor Weight QAD Oracle Support 20 Functionality 30 User Interface 10 Flexibility 20 Future Prospects 10 Reliability 20 Integration 30 Platform 20 Total 160 2. Complete a Procurement Evaluation of the Timberjack Parts procurement process similar to that from the Project Procurement Analysis assignment using the evaluation criteria and categories identified below. Should an individual category not be able to be evaluated from the case study, identify it as “Indeterminable.” Numeric Evaluation Criteria: 1 = lowest/worst, 5 = highest/best Evaluation Categories: − Scope Management − Time Management − Cost Management − Quality Management − Resource Management − Communications − Risk Management − Procurement Integration 3. Identify and discuss areas of strength (what worked well) and weakness (areas for which there is an opportunity to improve) for the Timberjack Parts procurement process. 4. Using the criteria identified within Chapter 2 “Placing Procurements into Generic Categories,” of the Project Procurement Management (Fleming) textbook, assign the Timberjack Parts procurement into the appropriate category and state why your assignment is appropriate (using the defections and criteria found within the chapter). For the exclusive use of R. THOMPSON, 2018. Harvard Business School 9-398-085 Rev. February 25, 1998 Timberjack Parts: Packaged Software Selection Project On the morning of December 15, 1995, Jim Utting, general manager−Parts at Timberjack Corp. in Atlanta, pondered the decision that he and his project team were about to make. The project team, which included three members from Atlanta and three from a sister parts operation in Sweden, had been given the task of selecting the same packaged software to be used on both sides of the Atlantic. While both operations were very similar in terms of sales volume and number of personnel, Utting couldn’t help but recognize the differences in opinion with regard to software requirements. While Utting had overall responsibility for the selection process and was in a position to make a final decision, he felt that his project team should come to consensus. Clearly a consensus would be reached only by compromise, and the group had already made so many to get this far. While selecting software used by excellent distribution or wholesale companies was the goal at the outset, the requirements of strong local support on both sides of the Atlantic, as well as a UNIX platform forced the list to include mainly enterprise requirements planning software companies which specialized in manufacturing software. Sahlqvist, president of Timberjack Parts AB, frequently asked during demonstrations, “Do we have to start manufacturing to use this system?” While Utting and Sahlqvist tried hard to form a single team, geography−and to a lesser extent, culture−had worked against this. As Utting explained: “When the Swedish group came over here, and we went out on site visits together, and spent time together, by the end of the week we would be one team. After a few weeks on our own, we would quickly drift apart.” Industry Background Timberjack was the world’s leading manufacturer of heavy equipment for the professional logger, with an overall market share of roughly 25%. Its owner was Rauma Oy, a Finnish conglomerate that was listed on both the NYSE and the Finnish stock exchange. In 1995, Timberjack had sales of 627 million USD, net profits of 88 million USD, and roughly 1,600 employees. Timberjack and a few other large competitors such as John Deere, Blount, Caterpillar, and Valmet, had maintained the dominant share of the market over the long term. Many smaller firms also Research Associate Darryl Romanow and Associate Professor Mark Keil of Georgia State University and Professor F. Warren McFarlan of the Harvard Business School prepared this case as the basis for class discussion rather than to illustrate either effective or ineffective handling of an administrative situation. Copyright © 1998 by the President and Fellows of Harvard College. To order copies or request permission to reproduce materials, call 1-800-545-7685, write Harvard Business School Publishing, Boston, MA 02163, or go to No part of this publication may be reproduced, stored in a retrieval system, used in a spreadsheet, or transmitted in any form or by any means—electronic, mechanical, photocopying, recording, or otherwise—without the permission of Harvard Business School. 1 This document is authorized for use only by RICHARD THOMPSON in 2018. For the exclusive use of R. THOMPSON, 2018. 398-085 Timberjack Parts: Packaged Software Selection Project participated with specialized equipment that met a niche market. The Timberjack group was formed through a number of acquisitions during the 1980s and 1990s, as outlined in Exhibit 1. The evolution of logging equipment had dramatically changed the way that logging was done worldwide. While felling trees with chain saws and using animals to haul felled trees was still practiced, these methods were disappearing. In North America, trees were cut down using machines called feller bunchers, then dragged to the roadside by skidders, where they were trimmed by delimbers, and then lifted on to log trucks using log loaders. In Scandinavia, harvesters would cut and delimb trees in the forest, and then a forwarder would carry the logs to the roadside. This method allowed the logger to selectively harvest the forest rather than clear cutting. Exhibit 2 shows an overview of the Timberjack product line. The industry was extremely cyclical, as it was directly tied to the prices of pulp and lumber, which were in turn highly dependent on the overall strength of the economy. During severe downturns in wholesale pulp and lumber prices, annualized machine sales could fall by 75% with very little advance warning. A typical downturn lasted one to two years, and often many of the leveraged dealers, contractors, and manufacturers would not be able to weather the storm. For this reason, many capital projects were completed during the prosperous years. Timberjack Parts Operations Timberjack operated two service parts operations to service its equipment worldwide; one in Marsta, Sweden, which was located just outside of Stockholm, and one in Atlanta, Georgia. Both facilities were opened in 1994 and involved the relocation of personnel from other locations. In 1995, each facility had approximately 35 employees and sales of roughly 35 million USD. The European operation sold most of its parts directly to company-owned retail stores in Scandinavia; in North America, Timberjack sold exclusively to third-party heavy equipment dealers. In Scandinavia, Timberjack’s parts operation relied on a software system known as DAIM which was acquired in 1987 and ran on an AS400 platform. Timberjack in Atlanta relied on Hewlett-Packard’s MM3000 software designed to run on HP3000 hardware. This system, originally acquired in 1981, included a custom-coded dealer module developed in the early 1990s. The dealer module allowed dealers dialup access to electronically transmit orders and inquire on the price and availability of parts using a PC acting as a dumb terminal. Roughly 80% of all Timberjack North American orders were placed on the dealer system. The Need for New Software In early 1995, Sahlqvist and the Marsta group were actively investigating the acquisition of new computer software to run their parts operations. The main impetus behind the decision was the instability of their existing systems. Heavy modifications of their source code over the years had led to frequent system failures. As a result, the users could not always rely on the data that was presented to them. For these reasons, Sahlqvist actively sought a new computer system, with the intent of installing the system by early 1996 at the latest. At the same time, at the Timberjack North American headquarters in Woodstock, Ontario, Canada, Coopers & Lybrand was helping top management outline a future information systems strategy. This project included the integration of manufacturing, the dealer network, as well as parts and service. While Woodstock was in no hurry to replace all of its systems, it did face the year 2000 problem; more importantly, Hewlett-Packard had notified customers that it would no longer be supporting its aging MM3000 software. After several months on site in Woodstock, Coopers & Lybrand prepared a strategic IS plan. The strategy concluded that Timberjack would benefit by selecting best-of-breed software to run the various units within the North American operations. Rather than relying on one package to run manufacturing, parts, and service, it was proposed that a 2 This document is authorized for use only by RICHARD THOMPSON in 2018. For the exclusive use of R. THOMPSON, 2018. Timberjack Parts: Packaged Software Selection Project 398-085 strong “distribution company package” would best serve parts, and a separate manufacturing system would best suit the factory. The Coopers & Lybrand recommendations to the North American headquarters were subsequently presented to the board of directors in Helsinki, Finland. Mikko Rysaa, president of Timberjack Group, concluded that a more global software strategy would be beneficial to Timberjack. The headquarters office in Helsinki continually struggled to compare financial results of the various units, with only marginal success. One financials package would help solve this problem. Integrated systems implemented worldwide would also make it easier to send employees overseas for a few years, as there would be no need for them to learn new computer software. Global selection would also add leverage to negotiations with software and hardware vendors. For these reasons, Rysaa felt that Timberjack should embark on a global software strategy. The service parts organizations were subsequently given the task of selecting one system to run the parts businesses in Atlanta and in Marsta. Rysaa appointed Utting to head up the project, and instructed Sahlqvist to halt the process of choosing new software independently. Instructions to Utting were fairly clear; he was to gain consensus on one package for both sites, and he was told “There will be no disasters.” If the two groups failed to reach consensus, then the Timberjack board would decide. Rysaa had warned Utting in his usual dry humor, “The intelligence level does not always go up when the decision is made by the board.” Over the next week, Utting and Sahlqvist decided on project team members, as well as a rough timetable. On April 17, 1995, the joint project team had its first meeting in Woodstock, Ontario. The team members present were Christine Smedjer, IS manager in Marsta, Jorma Nikkinen, materials manager in Marsta, Mark Gonzalez, information services coordinator for service parts, Darryl Romanow, materials manager in Atlanta, as well as Utting and Sahlqvist. Exhibits 3 and 4 show Timberjack organization charts for the Atlanta and Marsta parts operations. Coopers & Lybrand appointed Ilya Bahar to the project, although Timberjack had not yet decided on the extent of the Coopers & Lybrand involvement. Both organizations were in considerable transition at the time the project began. In April 1995, the team members were at various stages of relocation to the new parts facilities, in Atlanta and Marsta. Utting, Romanow, and Gonzalez lived near the Woodstock, Ontario factory. Utting was to relocate to Atlanta in May; Romanow was moving at the end of June; while Gonzalez had not yet decided whether he was going to move to Atlanta. While the new parts facility in Atlanta was opened in February 1994, it consisted of the distribution center staff, one buyer, and three accounting staff, all of whom were new to Timberjack. Marsta was in a similar situation, as Timberjack had closed its parts operations in Tampere, Finland, and Alfta, Sweden, and combined the facilities into one in Marsta. While Smedjer was recently hired from the Marsta area, Nikkinen continued to commute on weekends from Tampere (central Finland), and Sahlqvist commuted from Gotenborg, a three-hour drive from Marsta. In the spring of 1995, the North American operation had the core group of parts buyers, customer service, and accounting staff still working in Woodstock. Although most were offered positions in Atlanta, very few were contemplating the move. Most members of the group were actively searching for new positions in the factory operation. Utting felt that he had a narrow window of opportunity to gain input from this group of people who averaged 20 years’ seniority. Utting’s primary concern was that the commitment to the project might be limited as many of the people would be leaving the parts department. At the end of the first meeting, it was decided that Bahar would be invited to bid on the software selection contract and that the requirements definition would be done in Woodstock, with a sign-off in Marsta. Romanow and Gonzalez would work with Bahar during May and June, with a request for proposal (RFP) to be mailed to vendors in late August 1995. In order to free up time for Romanow to work on the project, Utting decided that an interim supervisor, reporting to Romanow, 3 This document is authorized for use only by RICHARD THOMPSON in 2018. For the exclusive use of R. THOMPSON, 2018. 398-085 Timberjack Parts: Packaged Software Selection Project would remove him somewhat from the day-to-day activities. Jim McGregor, a 40-year employee and a senior buyer in the parts department, was given the task. McGregor had already decided that he was not moving to Atlanta and that he would likely retire at the end of the project. RFP Process In early May, Utting received a quotation from Bahar, which included the services to be offered and a fee schedule. The bid covered the RFP creation, list of potential vendors, vendor and site visits, consultation on the final selection decision, as well as advice on negotiation of the contract. The bulk of the work would be during the RFP creation, as a number of Coopers & Lybrand specialists would be involved in the process. Bahar guaranteed that the fees, including travel costs would not exceed $100,000 CDN (75,000 USD) which would then be split between Marsta and Atlanta. While Utting and Sahlqvist thought that this fee was high, both realized that the team could use the expertise as well as the resources necessary to choose the right software. Utting signed the contract, and work started soon after. Bahar, Romanow, and Gonzalez put together a schedule of meeting dates to complete the majority of the work on the RFP prior to the middle of June. Sessions were to be scheduled with several members of each functional area within the parts department. The sessions were scheduled to take a half-day for the initial meeting, a half-day to review procedures from the first session and to develop a comprehensive requirements list, and a series of short follow-up meetings to finalize requirements and gain approvals. The final draft of the RFP was to be ready by mid-August, with a final review set for the week of August 25, 1995. During the first meeting, three or four functional representatives would outline all the business processes used at Timberjack within their area. One Coopers & Lybrand expert would be the facilitator, and an alternate kept notes. Gonzalez and Romanow, who attended all of the sessions, would work with the group to try and ensure that all processes were covered in enough detail that formal requirements could be drafted. Special attention was paid to the most important processes at Timberjack, regardless of whether or not the functionality existed in standard packaged software. Each group, and its manager, was also asked to consider any additional software functionality that would improve the efficiency of their area. After each session, Coopers & Lybrand would prepare the minutes for review at the next stage. At the second meeting, each business process was broken into a number of abbreviated requirements statements in the form of a question, such as “Does your package support EDI?” or “Does your package calculate forecasts automatically?” Once all the Timberjack requirements were determined, Coopers & Lybrand presented an exhaustive list of requirements that they and other clients had developed over the years. This list was compared to the existing Timberjack list, and occasionally new items from the Coopers & Lybrand list were added to Timberjack’s list of requirements. Sessions were held for accounting, finance, purchasing/planning, customer service, pricing, distribution, as well as information systems. All of the meetings were completed prior to the middle of June, and the preliminary lists of requirements were sent to Marsta for review. Members of the Swedish team were not present during the RFP meetings in Woodstock. Marsta approved the requirements lists quickly and added requirements related to multilanguage capability, electronic funds transfer for payments to suppliers, and Intrastat reporting, which was used in Europe to track the movement of goods. A benefits review was also started in Woodstock. This benefits analysis was an attempt to tie potential improvements in software functionality to savings in operating costs or improved customer service. In Woodstock, all capital expenditures required a capital appropriation, and approval was 4 This document is authorized for use only by RICHARD THOMPSON in 2018. For the exclusive use of R. THOMPSON, 2018. Timberjack Parts: Packaged Software Selection Project 398-085 based on expected return on investment. In the European operations, capital expenditures were not as formalized. Romanow explained the rationale for the benefits analysis: We recognized that from a project approval standpoint, the benefits analysis wasn’t necessary; we had been asked by the head office to implement the new system. We were doing the benefits analysis to weight the potential functionality improvements. This would help us decide which software had the most potential to improve our operations. To complete the RFP, Romanow and Nikkinen gathered basic business statistics such as the number of part numbers, number of sales orders processed daily, and the number of customers. 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