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GROUP 4 (BQS303)

Case Study: 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, (MBUSI) 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 server4.
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


DaimlerChrylser AG.5 In 1993, Daimler Benz realized that the '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 the
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 MBUSI in the (Tuscaloosa,
Alabama) US. The MBUSI facility had many 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 M-Class 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 Services 7.
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
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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 e-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 any 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
the 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. 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 I). There were two
Domino servers an IBM Netfinity 5500 and an IBM Netfinity 3000.

FIGUREI: SYSTEM ARCHITECTURE OF FDRS

Source: MBUSI
The former that acted as the internal Domino server was placed behind a firewall11. 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
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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 updating was done using Lotus Enterprise Integrator. The data which was replicated to the internal
Domino 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 was 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 the 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 MBUSI's Baan system and also to
the back-end 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 team 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 the 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 optimized subset of the ERP table set17. However, the development team
achieved a balance between the two sides of the solution by focusing on issues of timing, error
detection schemes, and alerts.

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 Mclass vehicles.
TABLE I 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.
1] Bill of Material keeps track of all raw materials, parts, and subassemblies used to create a finished product.
2] A product of IBM 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.
7] IBM Global Services is the services and consultancy division of IBM Corp. that offers extensive e-business solutions.
8] MBUSA is the wholly owned US subsidiary of DaimlerChrylser.
9] 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.
10] A server-based data distribution product that enables data exchange between Lotus Domino an
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, which examines each message and blocks those that do not meet the specified security criteria.
12] The IBM S/390 servers offer direct high speed access to the e-business application and are used for Enterprise Computing.
13] A dedicated phone connection supporting data rates of 1.544 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 time refers to events simulated by a computer at the same speed that they would occur in real life.
16] Executing a series of no interactive 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.

18] EDI connects all the suppliers in and out of the US.

Discussion Questions
1. Describe and outline the management issues in this case
2. The factory delivery option gives Mercedes-Benz customers a service that they do not get
from other Auto manufacturers. Briefly discuss the salient features of the Factory Delivery
Reservation System (FDRS), of MBUSI
3. One of the fundamental goals in developing the FDRS was to strengthen and market the
Mercedes-Benz brand in the United States of America Discus the benefits and down side of
the FDRS program and give examples from the case and Industry
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