earn on the go

Get the app

Skip to main content

Shahs Training $37$

Case $3$

Purchase Decision

$7$

time he would have during the Diwali mid$-$term break. Prof.

Shah diligently read

Show image transcript

Shah's Training $37$ Case $3$ Purchase Decision $7$ time he would have during the Diwali mid$-$term break. Prof. Shah diligently read all the literature received from the companies as well as his notes made during these holidays and also consulted the maintenance staff. As a first step, Prof. Shah ruled out two companies which were just not in a position to complete the task before $1$ July, the following year, the date of commencement of the next academic year. This left only three companies in the race. Finally, Prof. Shah prepared the following table of comparative merits of the three suppliers. He called these A$,$ B and C so that the decision was not coloured by the names of the companies. He replaced financial data with hypothetical monetary units and also replaced the name of the item being purchased from 'boiler' to 'the system' $.$ Shah's Training Table: Relative Merits Characteristic Company Company Company $$ B $32530135041\mathrm{.}540441.$ Total installed cost of the system in thousands of monetary units $2.$ Annual maintenance cost for $750$ hours of use in thousands of monetary units $3.$ Expected life of the system in hours of use $4.$ Income from selling the scrapped system in thousands of monetary units $5.$ Expenses for running the system per annum in thousands of monetary units $70,00055,00075,000103$ Prof. J$.$M$.$ Shah was the Head of the Department of Mechanical Engineering, Birla Institute of Technology and Science, Pilani. He was a conscientious teacher, fully devoted to academics. He believed that students must work hard to become successful in their future life. But in spite of a tough exterior, Prof. Shah loved his students, since he himself had no children. The student community at Pilani, thus, had a very peculiar love$-$hate relationship with Prof. Shah. Suddenly, there were rumours of Prof. Shah being tipped to become the ice$-$Principal. His training to handle the administrative work had begun. Much more paper work started coming to Prof. Shah, which he totally disliked. One day, Prof. Shah was summoned by the Principal and told that, $\text{'}$To become a Vice Principal, you must not only learn to handle paper work, but also financial and purchase tasks. It is$,$ therefore, in your interest to also deal with the purchase of a new boiler for our laboratory.$\text{'}$ Prof. Shah would have liked to say that he had never bought even a pair of socks for himself, but only said, $\text{'}$It will be a bit difficult, but I will try, Sir.$\text{'}$ The Principal smiled and concluded that the task must be completed before the commencement of the next academic year. Prof. Shah faced a number of aggressive salesmen during the next two months. He listened with rapt attention to every visitor without making any commitment. He took extensive notes and by the end, he had started asking searching questions. Keeping the deadline for the completion of the task in mind, Prof. Shah had decided that the decision must be made during the free $15707963$ Prof. Shah felt very happy at being able to convert the problem into a numerical question. The quantitative analysis would be fully scientific and his purchase decision unquestionable. However, at this stage, he decided to call his favourite student Roy, who was then studying for his MBA. Prof. Shah handed him the above chart and directed him to prepare logical recommendations. Place yourself in the shoes of Roy and prepare a statement for the purchase of the boiler for submitting to the Principal. Maximum time for solving this case study: $25$ minutes.