683-692_58420.CH.15.
CASE_IV-8 8/15/01 1:00 AM Page 683
CASE STUDY IV-8
Cummins/Komatsu/
Telco Joint Ventures (A)
In 1993 Cummins Engine Company established major joint
ventures to manufacture Cummins-designed diesel engines
with Komatsu in Japan and with Tata Locomotive and Engi-
neering Company (TELCO) in India. As these joint ventures
were developed from the agreement stage to operating organi-
zations, a number of issues came to the fore. The following
explores the problem of interfacing Cummins’ information sys-
tems with these new organizations. Part A explores the needs
of both joint ventures, Part B continues with Cummins’ experi-
ence with Komatsu, and Part C relates Cummins’ experience
with TELCO. Part A must precede either of the other two parts,
but either Part B or Part C (or both) may follow.
Cummins Engine Company
Cummins Engine Company, Inc., is a leading worldwide
designer and manufacturer of fuel-efficient diesel engines and
related products for trucks and other equipment. The company
was founded in 1919 in Columbus, Indiana, where its corpo-
rate headquarters and largest engine manufacturing facility are
located. Ranking 121st in sales among the Fortune 500, in
1993 Cummins reported net sales of $4.25 billion and had
approximately 23,600 employees worldwide.
Cummins sells directly to original equipment manufacturers
and to 33 distributors operating through approximately 200
locations in North America and to 110 distributors at approxi-
mately 300 locations in 130 countries outside North America.
In addition, there are approximately 3,500 dealer locations in
North America and a total of 5,000 worldwide at which
Cummins-trained service personnel and Cummins parts are
available to repair and maintain engines. Cummins has a world-
wide reputation for providing outstanding service on its engines.
For the past decade Cummins has had a strong emphasis
on “Customer-led Quality” which focuses on providing a com-
This case was prepared by Professor E. W. Martin as the basis for
class discussion rather than to illustrate either effective or ineffective
handling of an administrative situation. Copyright © 1997 by E. W.
Martin.
parative advantage to customers. This emphasis, supported by
extensive training programs, has resulted in improved product
quality with significantly reduced warranty expense to Cum-
mins, better work processes emphasizing cross-functional
teams, and smoother product introductions. Cummins’ man-
agement believes that this quality emphasis is largely respon-
sible for Cummins’ improving financial performance. Cum-
mins’ 10-year consolidated financial summary is presented in
Exhibit 1 (p. 684).
Products
Cummins’ diesel engines, ranging from 76 to 2000 horse-
power, power a wide variety of equipment in its six key mar-
kets: heavy-duty and mid-range trucks, power generation,
industrial products, bus and light commercial vehicles, govern-
ment products, and marine products. In addition to diesel
engines, Cummins products include generator sets and alter-
nators, electronic control systems, remanufactured engines, fil-
ters, turbochargers, and heat transfer systems.
Cummins’ diesel engine product line had evolved slowly
over the years until 1981, when Cummins decided to design
new heavy-duty truck engines that are smaller and lighter and
also to develop a new line of “B- and C-series” engines for
medium- and light-duty trucks and industrial equipment. The B-
series is now Cummins’ highest-volume engine, used in both
Ford and Dodge trucks. This product line introduction required
an investment of around $1 billion. In 1988, Cummins intro-
duced a line of cleaner, heavy duty engines and soon there-
after introduced electronic fuel injection, which improved fuel
efficiency and reduced truck operating costs.
With growing pressures throughout the world for reduced
pollution and increased fuel efficiency, diesel engine technol-
ogy is being forced to evolve rapidly, and thus there is a grow-
ing emphasis upon research and development in this industry.
Being the world’s highest volume producer of diesel engines
between 76 and 2,000 hp, Cummins is well positioned to
respond to these pressures. Cummins has Research and
Development facilities in the United States, the United
683
 684

Summary of Consolidated Financial Information for 10 Years

Cummins Engine Company, Inc., and Subsidiaries EXHIBIT 1
$ Millions, except per share amounts 1993 1992 1991 1990 1989 1988 1987 1986 1985 1984
Results of operations:
Net sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . $4,247.9 $3,749.2 $3,405.5 $3,461.8 $3,519.5 $3,309.9 $2,767.4 $2,303.7 $2,146.3 $2,325.8
Part IV

Cost of goods sold . . . . . . . . . . . . . . . . . . . . . 3,211.0 2,906.7 2,776.7 2,857.1 2,856.9 2,669.8 2,071.4 1,757.5 1,577.5 1,595.6
Gross profit . . . . . . . . . . . . . . . . . . . . . . . . . . 1,036.9 842.5 628.8 604.7 662.6 640.1 696.0 546.2 568.8 730.2
Selling, administrative, research and
683-692_58420.CH.15.CASE_IV-8

engineering expenses . . . . . . . . . . . . . . . . . 788.8 712.0 619.3 631.7 607.4 579.8 617.0 541.4 458.1 437.2
Interest expense . . . . . . . . . . . . . . . . . . . . . . . 36.3 41.0 42.5 43.9 51.8 51.7 51.7 44.8 28.1 31.6
Other expense (income), net . . . . . . . . . . . . . 6.8 13.1 12.7 8.4 (17.2) 6.6 (7.0) (18.0) (18.1) (12.6)
Unusual charges . . . . . . . . . . . . . . . . . . . . . . — — — 62.9 — 49.0 — 134.9 39.7 29.6
Earnings (loss) before income taxes . . . . . . . 205.0 76.4 (45.7) (142.2) 20.6 (47.0) 34.3 (156.9) 61.0 244.4
8/15/01

Provision (credit) for income taxes . . . . . . . . 22.3 8.9 16.9 25.0 22.2 13.5 15.6 (52.5) 10.6 56.5
Minority interest . . . . . . . . . . . . . . . . . . . . . . .1 .4 3.0 (2.1) 4.5 2.9 4.8 2.9 — —
Earnings (loss) before extraordinary items and
cumulative effect of accounting changes . . . 182.6 67.1 (65.6) (165.1) (6.1) (63.4) 13.9 (107.3) 50.4 187.9
Extraordinary items . . . . . . . . . . . . . . . . . . . . (5.5) (5.5) — 27.4 — — — — — —
Cumulative effect of accounting changes . . . — (251.1) 51.5 — — — — — — —
1:00 AM

Net earnings (loss) . . . . . . . . . . . . . . . . . . . . 177.1 (189.5) (14.1) (137.7) (6.1) (63.4) 13.9 107.3 50.4 187.9
Preferred and preference stock dividends . . . 8.0 8.0 8.0 13.7 9.8 8.1 8.1 .8 — —
Earnings (loss) available for common shares $ 169.1 $ (197.5) $ (22.1) $ (151.4) $ (15.9) $ (71.5) $ 5.8 $ (108.1) $ 50.4 $ 187.9
Cummins’ Ten-year Consolidated Financial Summary

Per common share:

Earnings (loss) before extraordinary items and
Page 684

cumulative effect of accounting changes:

Primary . . . . . . . . . . . . . . . . . . . . . . . . . . $4.95 1.77 $ (2.48) (7.23) $ (.76) $ (3.35) .27 $ (5.23) $ 2.64 $ 9.88
Fully diluted . . . . . . . . . . . . . . . . . . . . . . . 4.77 1.77 (2.48) (7.23) (.76) (3.35) .27 (5.23) 2.61 9.69
Net earnings (loss):
Primary . . . . . . . . . . . . . . . . . . . . . . . . . . 4.79 (6.01) (.75) (6.13) (.76) (3.35) .27 (5.23) 2.64 9.88
The Information Management System

Fully diluted . . . . . . . . . . . . . . . . . . . . . . . 4.63 (6.01) (.75) (6.13) (.76) (3.35) .27 (5.23) 2.61 9.69
Cash dividends . . . . . . . . . . . . . . . . . . . . . . . .20 .10 .35 1.10 1.10 1.10 1.10 1.10 1.10 1.03
Common shareholders’ investment . . . . . . . . 18.40 11.21 17.14 18.69 19.89 27.51 32.50 30.94 37.14 34.31
Average number of common shares (millions):
Primary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35.3 32.9 29.7 24.7 20.9 21.3 21.2 20.7 19.0 19.0
Fully diluted . . . . . . . . . . . . . . . . . . . . . . . . . 38.3 32.9 29.7 24.7 20.9 21.3 21.2 20.7 19.4 19.4

Operating percentages:
Gross profit . . . . . . . . . . . . . . . . . . . . . . . . . . 24.4% 22.5% 18.5% 17.5% 18.8% 19.3% 25.1% 23.7% 26.5% 31.4%
Return on net sales . . . . . . . . . . . . . . . . . . . . 4.2 (5.0) (.4) (4.0) (.2) (1.9) .5 (4.7) 2.3 8.1

Financial data:
Working capital . . . . . . . . . . . . . . . . . . . . . . . $ 371.4 $ 271.4 $ 219.2 $ 263.4 $ 224.2 $ 306.0 $ 239.2 $ 285.0 $ 339.7 $ 370.9
Property, plant and equipment, net . . . . . . . . 958.2 928.7 953.0 921.2 890.1 911.2 909.7 840.6 702.0 567.4
Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . 2,390.6 2,230.5 2,041.2 2,086.3 2,030.8 2,064.0 2,019.4 1,989.9 1,705.1 1,505.5
Long-term debt and redeemable preferred stock 189.6 412.4 443.2 411.4 473.7 408.8 332.6 319.9 234.0 222.4
Shareholders’ investment . . . . . . . . . . . . . . . 821.1 501.1 623.8 669.3 559.2 701.5 807.3 770.3 711.6 648.2

Supplemental data:
Property, plant and equipment expenditures . $ 174.2 $ 139.3 $ 123.9 $ 147.0 $ 137.9 150.8 $ 133.1 $ 213.1 $ 198.2 $ 109.1
Depreciation and amortization . . . . . . . . . . . 125.1 122.5 127.2 143.4 135.0 131.8 119.4 106.6 79.2 72.2
Common shareholders of record . . . . . . . . . . 4,400 4,800 5,900 5,900 5,700 5,700 5,400 5,500 5,900 5,900
Number of employees . . . . . . . . . . . . . . . . . . 23,600 23,400 22,900 24,900 25,100 26,100 24,500 23,400 19,600 21,000
683-692_58420.CH.15.CASE_IV-8 8/15/01 1:01 AM Page 685
Case Study IV-8 Cummins/Komatsu/Telco Joint Ventures (A)
Kingdom, Brazil, and India. Cummins’ research and engineer-
ing investments over the past 10 years are shown in Exhibit 2.
Exhibit 3 (p. 686) presents an overview from a sales
brochure of Cummins’ current line of on-highway engines.
Information on the B-series engine from a sales brochure is
shown in Exhibit 4 (p. 687).
International Activities
Since 1956 Cummins has been a multinational business, and
Cummins’ operations include plants, joint ventures, or license
agreements in the United Kingdom, India, Mexico, Brazil, Japan,
South Korea, China, Russia, Zimbabwe, Pakistan, and Turkey, as
well as in the United States. A distribution of Cummins’ United
States and international net sales over the past 10 years is
depicted in Exhibit 5 (p. 688).
Cummins has license agreements under which two Chi-
nese plants produce Cummins engines, and in recent years
sales of these engines have doubled each year. The Chongqing
Automotive Engine Plant makes heavy duty diesel engines for
work boats, electrical generator sets, and many other types of
equipment, and Dong Feng Motors makes Cummins’ midsized
truck engines. In early 1994 Cummins was negotiating to turn
these license agreements into joint ventures under which
Cummins would invest additional money and technology in
China. Cummins was also working on similar arrangements in
Korea.
In early 1994 Cummins was engaged in two activities in the
international arena that were of major importance. In late 1993
Cummins and Komatsu Ltd. announced a joint venture to man-
ufacture Cummins’ B-series engines at a Komatsu plant in
EXHIBIT 2
Cummins’ 10-Year Research
and Engineering Investments
Dollars in millions
270
240
210
180
150
120
90
60
30
0
1984 '85 '86 '87 '88 '89 '90 '91 '92 '93
685
Oyama, Japan, and another joint venture to manufacture
Komatsu’s 30-liter engines at a Cummins plant in Seymour,
Indiana. Production in Japan is scheduled to begin in 1996 and
is expected to produce around 40,000 engines a year by the
end of the decade.
Also in 1993 Cummins and TELCO, a member of the huge
Tata group in India, formed a joint venture to manufacture
Cummins B-series engines in India. Starting in early 1994, they
are building a factory in India that they expect to be one of the
most efficient diesel engine factories in the world.
Information Systems in Joint Ventures
Information systems (IS) are a critical part of Cummins opera-
tions and are central to design, manufacturing, and service of
Cummins’ engines throughout the world. Joint ventures com-
bine the resources of two companies, which involves combin-
ing or at least interfacing their information systems. John L.
Becker, Director of Business Development, who has been
involved in the development of several Cummins’ joint ven-
tures, explains:
We establish an operating joint venture in two phases: First we
negotiate a contract between the two organizations, and then
we implement this agreement and set up a functioning busi-
ness. In the negotiation phase there are so many things to deal
with and so much uncertainty that we do not get all the impor-
tant operating functions involved. I am currently involved in the
implementation phase of both the TELCO and the Komatsu
joint ventures. In the process of business planning and bringing
the functional areas of the company into these projects, we
encountered a number of IS issues that should have been con-
sidered in the negotiation phase.
In early 1993 M. D. (Maury) Lankford, Business Systems
Consultant in the Cummins Management Systems Depart-
ment, was assigned responsibility for leading the effort to iden-
tify and deal with the information systems issues involved in
Cummins’ joint ventures. Lankford, who had 30 years of varied
experience in Management Systems at Cummins, explains how
he started:
My first challenge was to obtain an understanding of the sys-
tems and information requirements for a joint venture with an
international corporation. This presents some real problems,
when you start to think about how much information has to be
exchanged between the two parents and the joint venture and
what kind of systems support has to be in place so that the
joint venture will be successful. Then we have to figure out how
to provide this systems support.
In March 1994, the Joint Ventures Support Group was
formed when Diane Chu and Jerry Pennington began to work
with Lankford. Chu had been with Cummins for 13 years in
Management Systems and in the after-market service area;
683-692_58420.CH.15.CASE_IV-8 8/15/01 1:01 AM Page 686

686 Part IV The Information Management System

EXHIBIT 3
Cummins’ On-Highway Engines

Power that's right for you.

For over-the-road power, there's a hardworking Engine Model Power Torque
Cummins diesel that is just your style. From 105 to B3.9-105 105 hp @ 2500 rpm 265 lb-ft @ 1700 rpm
460 horsepower, Cummins is the world leader in B3.9-120 120 hp @ 2500 rpm 300 lb-ft @ 1700 rpm
designing and manufacturing diesel engines that B5.9-160 160 hp @ 2500 rpm 400 lb-ft @ 1700 rpm
deliver the fuel efficiency, performance, reliability B5.9-190 190 hp @ 2500 rpm 475 lb-ft @ 1600 rpm
and durability you're looking for. B5.9-210 210 hp @ 2500 rpm 520 lb-ft @ 1600 rpm
B5.9-230 230 hp @ 2500 rpm 605 lb-ft @ 1600 rpm
Because Cummins leads the way in diesel technology,
you can count on your Cummins diesel to always be Engine Model Power Range Torque
on the cutting edge. C8.3-210 210 1300-2400 rpm 605 lb-ft @ 1300 rpm
C8.3-250 250 1300-2400 rpm 660 lb-ft @ 1300 rpm
N14 C8.3-250 250 1300-2200 rpm 800 lb-ft @ 1300 rpm
If you're looking for big power, the N14 has what it C8.3-275 275 1300-2200 rpm 800 lb-ft @ 1300 rpm
takes. The power to get the big loads up the big hills… C8.3-275 275 1300-2000 rpm 860 lb-ft @ 1300 rpm
and with Cummins C Brake™ as an option, you get C8.3-300 300 1300-2400 rpm 820 lb-ft @ 1300 rpm
strong braking power to slow you on the way down. L10-260 260 1200-1800 rpm 975 lb-ft @ 1200 rpm
L10-260 260 1200-1950 rpm 975 lb-ft @ 1200 rpm
L10 L10-280 280 1200-1800 rpm 1050 lb-ft @ 1200 rpm
The perfect combination of strength and fuel efficien- L10-280 280 1200-1950 rpm 1050 lb-ft @ 1200 rpm
cy, the L10 has the technology to pass up every com- L10-280E 280 1200-1800 rpm 1050 lb-ft @ 1200 rpm
petitive diesel engine on the market today. The proven L10-300 300 1200-1950 rpm 1150 lb-ft @ 1200 rpm
lightweight leader, the fuel-efficient L10 is one of the L10-310 310 1200-1800 rpm 1150 lb-ft @ 1200 rpm
most popular fleet engines on the road today. L10-310E 310 1200-1800 rpm 1150 lb-ft @ 1200 rpm
L10-310E 310 1200-2000 rpm 1150 lb-ft @ 1200 rpm
CELECT™ electronics. L10-330E 330 1200-1800 rpm 1250 lb-ft @ 1200 rpm
N14 and L10 engines are available with CELECT, L10-330E 330 1200-2000 rpm 1250 lb-ft @ 1200 rpm
Cummins totally integrated electronic control system. L10-350E 350 1200-1800 rpm 1250 lb-ft @ 1200 rpm
Through CELECT technology, you get the benefits of N14-310P 310 1100-1700 rpm 1250 lb-ft @ 1100 rpm
integrated electronic controls engineered and built to N14-330P 330 1100-1700 rpm 1350 lb-ft @ 1100 rpm
put you in total command of fuel efficiency, perfor- N14-330 330 1100-1950 rpm 1350 lb-ft @ 1100 rpm
mance, and more. N14-350P 350 1100-1700 rpm 1400 lb-ft @ 1100 rpm
N14-350 350 1100-1950 rpm 1350 lb-ft @ 1100 rpm
C8.3 N14-370 370 1200-1800 rpm 1400 lb-ft @ 1200 rpm
The C8.3 is smaller and over 600 pounds lighter than N14-370 370 1200-1950 rpm 1400 lb-ft @ 1200 rpm
its nearest heavy-duty competitor. The C8.3's lighter N14-410 410 1200-1800 rpm 1450 lb-ft @ 1200 rpm
weight adds up to higher payloads…and higher profits N14-410 410 1200-1950 rpm 1450 lb-ft @ 1200 rpm
for you. Even though it's compact in size, the Cummins N14-430 430 1200-1800 rpm 1450 lb-ft @ 1200 rpm
C8.3 has heavy-duty big bore design features and is N14-310E 310 1100-1800 rpm 1250 lb-ft @ 1100 rpm
built to last.
N14-330E 330 1100-1800 rpm 1350 lb-ft @ 1100 rpm
N14-330E 330 1100-2100 rpm 1350 lb-ft @ 1100 rpm
B5.9/B3.9
N14-350E 350 1100-1800 rpm 1400 lb-ft @ 1100 rpm
With over 750,000 in operation, Cummins B engines
N14-370E 370 1200-1800 rpm 1400 lb-ft @ 1200 rpm
are proving they really deliver. Advanced design and
N14-370E 370 1200-2100 rpm 1400 lb-ft @ 1200 rpm
modern manufacturing techniques have given
N14-410E 410 1200-2100 rpm 1450 lb-ft @ 1200 rpm
Cummins B engines "big bore" engine durability in a
N14-430E 430 1200-1800 rpm 1450 lb-ft @ 1200 rpm
smaller-size engine.
N14-430E 430 1200-2100 rpm 1450 lb-ft @ 1200 rpm
Power your way. N14-430E 430 1200-2100 rpm 1550 lb-ft @ 1200 rpm
Whatever your application, there's a Cummins engine N14-460E 460 1200-2100 rpm 1550 lb-ft @ 1200 rpm
right for the job. Designed, built and backed better
than any other diesels on the road today. s Cummins Engine Company, Inc.
in
m Box 3005
Choose the one that's right for you and then see your
C um
Cummins distributor or dealer, or call 1-800-DIESELS Columbus, IN 47202-3005
for more information. USA
683-692_58420.CH.15.CASE_IV-8 8/15/01 1:01 AM Page 687

Case Study IV-8 Cummins/Komatsu/Telco Joint Ventures (A) 687

EXHIBIT 4
Cummins’ B-Series Engines

s
in
m
Cum

S P E C I F I C A T I O N S 1 6 0
P E R F O R M A N C E
Performance at SAE standard J1995 conditions of 300 ft.
(90m) altitude (29.61 inches Hg[100 kPa] barometic
pressure), 77°F (25°C) air intake temperature, and 0.30
inches Hg (1 kPa) water vapor pressure with No. 2 diesel
fuel will be within 5% of that shown at the time of engine
shipment. Actual peformance may vary with different
ambient conditions.
Curves represent performance of the engine with fuel
system, water pump, lubrication oil pump, air compressor
(unloaded), and with 10 in. H20 (250mm) inlet air
restriction and with 2.0 inches Hg (50mm) exhaust
restriction; not included are alternator, fan, optional
equipment and driven components.
The BSFC curve shown is at full load conditions. This is
not a true indicator of fuel tank mileage due to the fact that
the engine spends only a portion of time operating on the
full load curve. A significant amount of time is spent at
various part load conditions. Therefore, full load BSFC
curves should not be used as an indicator of fuel tank
mileage.

B5.9 - 160 FR-9798 S PECIFICATIONS

542 400
Maximum Horsepower 160 bhp (119 kW)
508 375
TORQUE TORQUE Peak Torque (1200 rpm) 400 lb.-ft. (542 N•m)
(N–M) (LB-FT) Governed Speed (Vocational) 2500 rpm (2500 rpm)
474 350
Number of Cylinders 6 (6)
440 325 Bore and Stroke 4.02 4.72 in. (102x120 mm)
119 160
Engine Displacement 359.0 cu.in. (5.9 L)
111 150
Compression Ratio 17.5:1 (17.5:1)
POWER OUTPUT 104 140 POWER OUTPUT
Operating Cycles 4 (4)
(KW) 96 130 (BHP)
Oil System Capacity 17.3 U.S. gals (16.4 L)
89 120 Coolant Capacity (Engine Only) 10.5 U.S. qts. (9.9 L)
82 110 Net Weight with Std.
243 . 40
Accessories, Dry 942 lbs. (428 kg)
231 . 38
FUEL FUEL Installation Diagram Number 3626286
218 . 36
CONSUMPTION 206 CONSUMPTION
. 34
(G/KW-HR) (LB/BHP-HR)
194 . 32
182 . 30
1400 1800 2200 2600
1600 2000 2400
683-692_58420.CH.15.CASE_IV-8 8/15/01 1:01 AM
688 Part IV The Information Management System
EXHIBIT 5
Cummins’ U.S. and International Sales
Net Sales
Dollars in millions
4500
4000
3500
3000
2500
2000
1500
1000
500
0
1984 '85 '86 '87 '88 '89 '90 '91 '92 '93
International
United States
Pennington had 17 years of experience working in plant sup-
port and was part of the start-up team for the new B-series
engine plant in Columbus that was completed in 1991.
After some initial investigation of the problem, Lankford
recognized that there are a number of obvious considerations
that affect the systems support that will be required. First,
there will be significant differences between the required
systems support, depending upon the joint venture. In India,
for example, they will be building a new plant, so they have a
free hand in the systems to be employed. In the Komatsu joint
venture, however, the engines will be produced in existing
plants in Japan and the United States, so one would presume
that the local plants’ systems would be used to support
manufacturing.
Cummins’ Information Systems Environment
The Cummins Management Systems (IS) Department reports
to Wynne W. Gulden, Jr. Vice President—Information Processes
and Technology. Management Systems is responsible for sys-
tems development and maintenance, but not mainframe oper-
ations because the Columbus data center has been out-
sourced to Electronic Data Systems (EDS).
All of Cummins’ engine plants in the United States and
the United Kingdom operate with a set of systems referred to
as “Cummins Common Systems” for manufacturing and
logistical support. These systems are based on 1970s soft-
ware technology—COBOL and IMS—operating on IBM 3090-
type mainframes in the Columbus data center. Although
they are strategically important to Cummins, these systems
Page 688
are old and difficult to change and are based on obsolete
technology.
As an example of how difficult it is to implement these sys-
tems for a new plant, when the new B-series engine plant in
Columbus was started in 1991, 25 people and $750,000 of
effort were required to set up the Cummins Common Systems
for that plant. Because the systems for the new plant operate
on the same computer as the systems for the old plants, each
database in the system must be renamed to make it refer to
the new plant, and each database reference in every program
of the system must be changed to conform to the new name
of that database. Also, if a program is changed, it must be
tested. All of these actions have to be done not only for routine
parts of the system, but also for each special report, weekly
summary, monthly report, and so on.
The Management Systems Department has recognized the
problems with these technologically obsolete common systems
and in 1993 established a project team to plan how to replace
these systems with more modern technology. Cummins now
plans to move to distributed processing and relational data-
bases in a UNIX environment. Cummins is purchasing Avalon
software packages that can provide 50 percent to 60 percent of
the functionality needed and will modify these packages to sat-
isfy Cummins’ special needs. A pilot project is under way to
install the Avalon software in the engine assembly plant in
Brazil, and Cummins’ subsidiary Holset Engineering has also
signed a contract to install this software. After three to five years
and several million dollars, Cummins should have a set of com-
mon systems that can be easily replicated throughout the world.
Systems Needs of All Joint Ventures
After talking with representatives of both TELCO and Komatsu
and conferring with many others at Cummins, the Joint Ven-
tures Support Group found that there was little agreement on
the IS support that would be needed by the joint ventures. To
get a better understanding of the support required, the group
decided to analyze the role of information systems in Cum-
mins’ manufacturing operations. They started by determining
the business processes that are necessary for a Cummins plant
to operate. A high-level diagram of the result of their analysis
depicts both corporate and plant level business functions, the
databases that support them, and the relationships between
these functions (Exhibit 6).
At a more detailed level, they identified some 70 business
functions. Then they were able to identify the information sys-
tems that are necessary to support each of these business
functions. These 70 business functions also provided the basis
for a responsibility chart for each joint venture that suggests
who (the joint venture team, the joint venture, Cummins, the
other parent) should be responsible for each of these business
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Case Study IV-8 Cummins/Komatsu/Telco Joint Ventures (A) 689

EXHIBIT 6
Cummins Engine Manufacturing Business Systems Overview

CPIF CAF PAF PPIF

Cost
Central Product Central Action File Plant Action File Plant Product
Engineer Information File Information File
Data Control
Shop Order
Customer Inventory Mgmt.
(DCSO)
Customer System (IMS)
Specification
Spec.
Language (CSL)
Master
OR Production
Schedule (MPS) Receiving
Central Engine
Orders Order Mgmt. Material
(CEOM) Requirements
Plant Engine
Order Mgmt. Planning (MRP)
(PEOM)
Supplier
Scheduling
Forecast
Interplant Shipping
Orders

functions. Exhibit 7 (p. 690) is the first page of this proposed • Cummins’ distribution channel will be responsible for
responsibility chart for the joint venture with TELCO. aftermarket support.
Based on the business process analysis and much discus-
Cummins retains control of the B-series engine design in
sion with Cummins’ management, the Joint Ventures Sup-
both the Komatsu and TELCO joint ventures. According to
port Group has also defined the following six crucial inter-
Lankford:
faces that usually must exist between Cummins and any joint
venture. We have complete authority on all design changes and control
on the B-series engine worldwide, and that is managed out of
our Mid-range Engine Technical Center (METC) in Columbus,
Engineering Change Control
Indiana. This means we have to link the joint ventures in Japan
Any joint venture plant must use the Cummins Engineering and India with our product definition system to deal with all the
Change Control/Engineering Release Process, including main- configuration management, change control management, and
taining a Plant Product Information File, if any of the following the engineering releases that take place.
There will be some local product engineering in Japan
conditions hold:
and India, primarily to deal with add-on parts to customize the
• Cummins controls the product design. engines for specific equipment installation requirements.
These joint ventures will also initiate some engineering
• The joint venture plant will be a source of parts for other
changes, both in the product and in the manufacturing
Cummins plants.
process, leading to improvements that we will want to utilize
• The products will be resold to Cummins’ customers. worldwide. In any case, the final design authority remains in
EXHIBIT 7
Proposed Responsibility Chart
690

TATA CUMMINS LIMITED

TCL
A B C D E F
Part IV

1 FUNCTIONS BY LEVEL JV TCL TELCO CUM NOTES

2 TEAM
683-692_58420.CH.15.CASE_IV-8

3 CORPORATE BUSINESS FUNCTIONS

4 • DESIGN CONTROL X X USE CUMMINS CHANGE CONTROL
5 • ELECTRONIC VAULT DRAWING ACCESS X X X X AS PRACTICAL & COST-EFFECTIVE
6 • ENGINE EMISSION CERTIFICATION X X USE CUMMINS RIL/DCSO
8/15/01

7 • CSL/CEOM - ORDER MANAGEMENT X X USE CUMMINS SYSTEMS

8 • APPLICATIONS ENGINEERING X X PERFORMED BY PARENTS
9 • ENGINE HISTORY/WARRANTY- AFTERMARKET SUPPORT X X X X REQUIRES DATA FROM PLANT
10 • DUTY DRAWBACK (INDIA?) X X X REQUIREMENTS?
1:01 AM

11 • WARRANTY/CLAIMS PROCESSING ? X X PERFORMED BY PARENTS

12 • SERVICE MANAGEMENT ? X X PERFORMED BY PARENTS
13 • FAILURE & COST ANALYSIS X X X PERFORMED BY PARENTS
14
15 PLANT BUSINESS FUNCTIONS TELCO SYSTEM INADEQUATE
Page 690

16 • LOGISTICS MANAGEMENT X (OPPORTUNITY FOR AVALON)

17 —MATERIAL REQUIREMENTS PLANNING (MRP) X X TELCO SYSTEM INADEQUATE
18 —INVENTORY (INCLUDING CHARGE-OFF) X X
19 —PURCHASING X X
The Information Management System

20 —SUPPLIER MASTER MAINTENANCE X X

21 —BILL-OF-MATERIAL (BOM) X X INTERFACE W/CUMMINS PPIF
22 —RECEIVING/INSPECTION X X
23 —SUPPLIER QUALITY ASSURANCE X X
24 —MATERIAL/ORDER RELEASES/SUPPLIER SCHEDULING X X EDI ORDER TO CUMMINS
25 —SHIPPING (BILL-OF-LADING?) X X
26 —MASTER PRODUCTION SCHEDULING (MPS) (FORECASTING?) X X TELCO DOES NOT HAVE
27
28 • CUSTOMER/ORDER MANAGEMENT X
29 —CUSTOMER MASTER MAINTENANCE (“BILL-TO”/“SHIP-TO”) X X
30 —PLANT ORDER MANAGEMENT/ORDER SCHEDULE X X INTERFACE TO CUMMINS CEOM
31
32 • MANUFACTURING PRODUCT MANAGEMENT X
33 —PLANT CHANGE CONTROL X X CUMMINS CHANGE CONTROL
34 —ORDER CONTENT (BUILD DOCUMENT/DATA PLATE) X X CUMMINS DCSO PROCESS
683-692_58420.CH.15.CASE_IV-8 8/15/01 1:01 AM Page 691
Case Study IV-8 Cummins/Komatsu/Telco Joint Ventures (A)
Columbus, so the joint ventures will be putting in requests for
changes that will be processed in Columbus and fed back to
them.
Engine Certification
Emissions control is a very important aspect of diesel engine
technology today. The United States, Australia, the European
Community, and California all have emissions standards for on-
highway engines, and most of the world is adopting such stan-
dards. The United States and other countries will also mandate
emissions controls for off-highway engines in the near future.
One of the primary motivations for TELCO and Komatsu to
partner with Cummins is to avoid the high engineering cost of
redesigning their engines to meet these emissions standards.
Each engine sold in a country with emissions controls must
be certified to assure that it meets the specified standards. Cer-
tification is a complicated process in which the engines are run
in a test cell and the emissions are measured and compared
with the applicable standards. Certification is not just by engine
model, but rather by a list of part numbers that make up the
certified engine, so if a part that affects emissions (e.g. piston,
fuel pump, fuel pump setting) is changed in any way, that is a
new engine for certification purposes. Several countries require
that a manufacturer keep certification information online so that
inspectors can visit the plant and examine this information in
real time. Inspectors may also randomly pick engines off the
line and set them aside for testing to make sure that they still
meet certification standards.
All certified engines sold by Cummins must be validated by
using Cummins’ Regulatory Item List and Certification Compila-
tion Process computer systems. Therefore, all joint venture
plants that furnish engines for sale by Cummins must use
these systems.
Original Engine Parts List
For each engine produced in a Cummins factory, Cummins
maintains an Original Engine Parts List (OEPL) record that lists
the parts in the original engine and maintains that engine’s ser-
vice history. This information is provided to Cummins distribu-
tors worldwide so that any service facility can determine exactly
what part is required when a replacement is needed.
Joint venture partners may be competing with each other
for the very profitable aftermarket support business. For exam-
ple, Cummins and Komatsu often have dealerships in the
same cities throughout the world, and a Cummins engine in a
Komatsu bulldozer might be repaired by either company’s
dealer. Because OEPL data makes it easier to service an
engine, having this data provides a competitive advantage to a
distributor. Therefore, the ownership of this OEPL data for par-
691
ticular engines may be a sensitive issue with the joint venture
partners. Cummins’ statement on the required interfaces with
Cummins systems specifies that the joint venture must feed
the necessary data to the Cummins OEPL file for all engines
that are sold through the Cummins distribution system and/or
supported by the Cummins aftermarket group. But Cummins
does not require the OEPL data on engines sold by and sup-
ported by the joint venture or the joint venture partner.
This may present a problem when Cummins engines are
being produced by many organizations. Lankford elaborates:
I can imagine a major construction project, say in Brazil, having
Komatsu equipment with Komatsu-built Cummins engines,
construction equipment from other manufacturers with Cum-
mins engines, trucks from India with TELCO-built Cummins
engines, and trucks with Cummins engines built in Brazil or the
United States or the United Kingdom All of this equipment
would be on the same site, and the owner may recognize that
they are all Cummins engines and take them to the local Cum-
mins dealer when repairs are needed. But the Cummins dealer
would not have OEPL data on some of these engines.
Cummins Order-Entry System
Cummins has an online order-entry system that is used world-
wide by customers to order engines from any of Cummins fac-
tories. Each engine model may have many variations, and this
system guides the person entering the order through the
process of specifying exactly what the engine is to include,
while checking to assure that the specified configuration is fea-
sible, that it conforms to the current engine design, and that it
meets certification requirements. Then the system produces a
list of the parts required that the plant can use to build the
engine. Although Cummins does not require that joint ventures
use this system, some such system will be needed to enter
orders. Because such order-entry systems are quite complex,
joint ventures may decide to use the Cummins order-entry sys-
tem rather than developing their own. But if a joint venture
develops its own order-entry system and Cummins sells
engines from the joint venture, then the Cummins order-entry
system will have to feed Cummins-generated orders into the
joint venture’s order-entry system.
EDI Standards
Any engine parts or components that the joint venture pro-
cures from Cummins must be ordered via EDI using the
UN/EDIFACT standard. In the long run, a joint venture may pro-
duce all the engine parts itself, but during start-up of the factory
most joint ventures will procure some parts or components
from Cummins. Therefore this interface will usually be neces-
sary, but it may be temporary.
683-692_58420.CH.15.CASE_IV-8 8/15/01 1:01 AM Page 692

692 Part IV The Information Management System

Financial Reports
In addition to the normal financial reporting from a joint ven-
ture to the parents, product cost information must be provided
in order to determine transfer prices that conform to govern-
ment tax regulations.
Lankford believes that most people in the companies
involved do not understand the implications of the above
required interfaces:
It is so easy to say that they must use the Cummins product def-
inition system, but that means a lot more than what it says! In
addition to engineering change control, it implies a great deal
about manufacturing management, starting with capturing an
accurate customer order, checking it to make sure it meets the
design control and certification requirements, providing a parts
list to the MRP system and the shop order processing system,
and so on. It is all very complicated and everything is interrelated.
While the Joint Ventures Support Group was developing the
principles described above that apply to most joint ventures,
Lankford was simultaneously working with Komatsu and TELCO
to develop a shared understanding of the information systems
support needed by their joint ventures. Part B describes the
Cummins/Komatsu joint ventures and Lankford’s interactions
with Komatsu. Part C describes the Cummins/TELCO joint ven-
ture and Lankford’s interactions with TELCO.