Case Study
Toromont Industries Ltd. is headquartered in Toronto, Canada and is one of the largest dealerships for Caterpillar heavy-construction equipment in North America. Toromont also makes process systems, industrial and recreational equipment, and operates a series of energy plants supplying Ontario's deregulated electricity market. Two-thirds of Toromont's revenue, which amounted to U.S $ 494 million in 1999, comes from its equipment group, which rents and sells heavy construction and mining equipment and parts. Toromont has more than 2,000 employees throughout North America.
Toromont's success has not been based on selling more tractors, parts, and engines but on selling the kind of service that leads customers to purchase 10-years contracts. The contracts call for Tormont to supply them heavy equipment and maintain that equipment. Customers do not need to purchase such equipment, which can amount to $150,000 per earth-moving machine, nor do they have to maintain their own warehouses or mechanics. Toromont supplies the machines and guarantees they will be maintained in top condition for the life of the contract.
Toromont faces stiff competition. Many heavy construction and mining equipment firms, including Komatsu, John Deere, and even Caterpillar itself, are putting more emphasis on customer service by selling parts on-line over the Internet. There are also Web sites such as Equipmentsite.com, Point2.com, and Equipmentrader.com, which are clearinghouses for heavy-construction equipment, parts, and services. The Internet appears to be turning heavy-construction equipment into a commodity. "With so many others vying for your customers' attention, how do you convince them to buy from you instead of from a discount place on the Internet?" Asks Rob Kugel, an analyst with FAC/Equities in Burlingame, California.
Toromont's management believes that the company can stay ahead of these competitors by the best possible customer service through a new on-line system for ordering and maintaining equipment and for tracking customer accounts. The system, ideally, would provide more interactive personalized service than could be obtained from any of its competitors. For example, the system could provide oil quality and other maintenance statistics on-line that could help customers determine prefailure conditions faster, reducing the chances of costly downtime or worker injuries on construction jobs. Customers could get quick answers to questions, such as how fast they can obtain the part they need, when their equipment needs to go into the repair shop for maintenance, and how much they owe on their accounts.
Toromont's senior management wants an interactive customer service capability as soon as possible and is willing to keep things simple to get this capability up and running. It doesn't want customers to see the same generic information. Each Toromont client should be able to see precisely the information that is specific to their company. Toromont currently provides customers with oil analyses and maintenance updates on their machines but must deliver this information via fax.
The new system should not only provide this information on-line but should also be able to deliver e-mail and pager alerts to customers, technicians, and machine operators. Toromont would also like to offer personalized real-time price quotes for parts and service based on the customer's size and contract. Customers should be able to use the system to access sales and service data, update their information, check outstanding invoices, and place orders. That would require the new system to access information housed in Toromont's basic operational systems running on an IBM AS/400 midrange computer. Box management does not want to rewrite the software for these back-end systems or to have the new system interfere with the data in the AS/400 database.
Toromont's legacy back-end order entry and billing system is written in COBOL and uses a DB2 database running on an IBM AS/400 model 720 computer. The system supports order entry for parts and machines sales, service work-order processing warranty, and inventory, and is integrated with a financial subsystem from Baan, a leading enterprise software vendor. The company has an IP network connecting 700 users to both local and wide area networks and uses frame relay to connect 18 locations to corporate headquarters near Toronto. Customers order parts by telephoning Toromont's parts department. They must also use the telephone to check part prices, part availability and the status of machines in for service.
Toromont management would like to make better use of the Internet and wonders how it could be incorporated in its system solution. It is willing to devote 25 percent of its information technology budget and wants the project completed in 6 months.
Case Study Questions
1. Analyze Toromont and its business model using the value chain model.
2. How well did Toromont's systems support its business model? What management, organization, and technology factors were responsible for its problems?
3. Propose a system solution for Toromont. Your analysis should describe the objectives of the solution, the requirements to be met by the new system (or series of systems), and the feasibility of your proposal. Include an overview of the systems you would recommend and explain how those systems would address the problems listed in your goals. Your analysis should consider organizational and management issues to be addressed by the solution as well as technology issues.
4. If you were the systems analyst for this project, list five questions you would ask during interviews to elicit the information you need for your systems study report.
5. What method would you use to develop your system solution? Why?
* Find a description in a computer or business magazine of an information system used by an organization. Look for information about the company on the Web to gain further insight into the company and prepare a brief description of the business.
Describe the system you have selected in terms of its inputs, processes, and outputs, and in terms of its organization, management, and technology features and the importance of the system to the company. If possible, use electronic presentation software to present your analysis.
*Select two businesses that are competitors in the same industry and using their Web sites for electronic commerce. Visit their Web sites. Prepare an evaluation of each business's Web site in terms of its functions, its user friendliness, and how well it supports the company's business strategy. Which Web site does a better job? Why? Can you make some recommendations to improve these Web sites? If possible, use electronic presentation software to present your findings.
*What is customer relationship management? Way is it so important to business? How do information systems facilitate customer relationship management?
*What is channel conflict? Why is it becoming a growing problem in electronic commerce?
*Why should managers pay attention to the total cost of ownership(TCO) of technology resources? How would using the TCO model affect computer hardware purchase decisions?
*What criteria should be used when selecting software for the organization?
*What is hypermedia database? How does it differ from a traditional database? How is it used for the web?
*Name and describe the technologies used for wireless transmission?
*Under what conditions should firms consider web hosting services?
*What is the difference between object-oriented software development and traditional software development? What are the advantages of using object-oriented software development in building systems?
*What kind of problems are evidence of information system failure?
*What is an electronic meeting system (EMS)? Describe its capabilities.