Zumwald Case Study
Zumwald Case Study
Zumwald produces and sells a range of medical diagnostic imaging systems, biomedical test equipment and instrumentation. The company has 6 divisions. The case mainly deals with three of its divisions namely: Imaging Systems Division (ISD), Heidelberg division and ECD (Electronic Components division). In 2001, ISD designed a new ultrasound imaging system knows as the X73. Heidelberg division and two outside companies were asked to bid for the display needed for the production of the X73. Following were the prices quoted by all 3 of them: Heidelberg – 140,000; Bogardus NV – 120,500; Display Technologies – 100,500. The tension arose when Cornad (ISD’s MD) decided to buy display screen from Display Technologies Plc instead of internal division Heidelberg. As we did in the class, to analyze the situation we need to calculate which of the sourcing decision is best in the interest of individual divisions and overall Zumwald. If we look at the problem in the interest of Zumwald as a whole (All prices in euros):
Price of Display from Heidelberg 140,000 Variable Costs 50,000 Contribution to Heidelberg 90,000
In addition to that ECD will also get some contribution, as Heidelberg will buy all of its components from ECD.
Zumwald produces and sells a range of medical diagnostic imaging systems, biomedical test equipment and instrumentation. The company has 6 divisions. The case mainly deals with three of its divisions namely: Imaging Systems Division (ISD), Heidelberg division and ECD (Electronic Components division). In 2001, ISD designed a new ultrasound imaging system knows as the X73. Heidelberg division and two outside companies were asked to bid for the display needed for the production of the X73. Following were the prices quoted by all 3 of them: Heidelberg – 140,000; Bogardus NV – 120,500; Display Technologies – 100,500. The tension arose when Cornad (ISD’s MD) decided to buy display screen from Display Technologies Plc instead of internal division Heidelberg. As we did in the class, to analyze the situation we need to calculate which of the sourcing decision is best in the interest of individual divisions and overall Zumwald. If we look at the problem in the interest of Zumwald as a whole (All prices in euros):
Price of Display from Heidelberg 140,000 Variable Costs 50,000 Contribution to Heidelberg 90,000
In addition to that ECD will also get some contribution, as Heidelberg will buy all of its components from ECD.