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Recommendations for Group # WMP6004 WMP6005 WMP6007 WMP6008 WMP6009 WMP6012 WMP6

015 WMP6052 CD (Group ± 2) AKSHAY BANSAL AMIT AGARWAL ANKIT SURI ANKUSH VED ANUBHA
V KUMAR JAIN BIKRAMJIT DE BNATH CHANDER SHEKHAR SIBAL SUROJEET SADHU

Situation Small firm seeking ways to compete in an increasingly intense competit
ive environment in pre-press printing. The external environment had changed with
the advent of new technology, and new players ente ring the market had increase
d the supply side of the industry. COLORSCOPE needs CHANGE in its operation, mar
keting and cost strategy

000 10.000 25.000 $ 500 $ 1. Cost of Activi ty Drivers: Output > Scanning > Assembly > QC > Job Preparation .639 200 Quality Co ntrol Idle Space $ 11.000 50.000 30.00 0 $ 72 4.000 $ 100 1.4 92 92.280 $ $ $ $ $ Output 10.246 64.000 160 $ $ $ $ $ Total 125.000 $ 148 2.811 160 $ $ $ $ $ Scanning 32.639 29.000 $ 13.311 $ 11.246 640 $ $ $ $ $ Assembly 64.000 10.500 92 15.000 20.311 $ 13.000 225.000 5.000 1.492 1.000 2.Situation Description Wages Depreciation Rent Others Total Overhead Labour hours Overhead Rate or Absorption Rate or Driver Rate (Rate / Labour Hour) Floor Spac e Job Preparation $ 8.811 $ 13 .000 4.000 2.440 $ 74 1.000 $ 86 500 $ 6.000 Note: A simplified activitybased costing system was used to measure customer pr ofitability.000 $ 500 $ 2.000 14.000 $ 1.000 8.000 $ 1.

Complications Because Colorscope was not the market leader. cost containment. and 2. its only option is t o adopt a strategy emphasizing: 1. quality control stra tegy .

Pricing Strategy should be i n sync with its Operational Costing . it needed to control costs while maintaining qua lity and to manage customer profitability. The problem required i nternal qualit y management and closer interaction with customers. the firm has to decide on questio ns such as: Customer pricing.Questions Based on the information provided in the case. and Process improvement decisions Was there need for incremental or radical change in its operations? Considering the size of the operations and cost of rework.

464 2.400 3.900 400 300 4 .000 1. 000 6.500 3.000 11.800 1 .405) (1.200 2.000 11. 000 23.Analysis Job Revenue Material Expenses Gross Margin Job Preparation 7 6 6 7 7 4 4 4 5 4 4 4 5 4 1 4 4 2 1 3 4 2 2 4 15 4 117 Scanning Assembly Output Quality Co ntrol 5 6 8 9 8 4 4 6 5 4 4 5 4 5 1 7 3 1 1 8 7 1 1 3 30 7 147 Total Time Net Pr ofit 61202 61203 61204 61601 61003 61101 61102 61201 61902 61501 61405 61702 614 01 61 404 61801 61502 61701 61602 62001 61002 61402 61603 61901 61403 61301 6100 1 $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ 23.100 4.000 20.640 1.500 9.191 $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ 10.400 7.000 4.000 12.600 8.000 2.600 3.800 16.500 2.000 11 .500 1.400 (200) 6.487 5.000 9.200 $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ 3.427) (1.000 11.200 9.000 22.500 1.200 2.554) (4.153) (1.300 3.600 16.000 9.400 5.275 5.176 3.000 5.000 8.193 4.132 ) 50.100 37.200 32 34 30 26 40 16 16 16 19 21 20 20 14 22 5 20 20 5 1 24 19 5 5 20 130 32 612 58 64 58 60 75 30 28 32 42 39 36 41 32 36 11 40 39 10 2 38 32 11 12 34 250 42 1. 100 1.600 2.800 10.000 $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ 19.000 50.278 7.500 9.900 1.800 2.900 13.958 1.637 4.200 2 40.0 00 7.000 2. 152 8 8 8 8 16 4 4 4 4 4 4 4 4 4 2 8 4 1 1 8 8 2 1 4 3 2 8 163 110 118 110 110 146 58 56 62 75 72 68 74 59 71 20 79 70 19 6 81 70 21 21 65 457 93 2.500 10.700 18.512) (2.000 4. 416 7.100 1.200 3.500 6.000 8.800 7.300 4.000 12.700 3.800 9.700 18.500 1.000 9. 800 7.400 75.6 00 315.040 .900 2.800 8.000 1.451) (1.163 8.400 2.000 20.210 975 771 647 417 (73) (207) (753) (1.100 600 200 3.

26 JOBS. 10 Unprofitable . 16 Profitable.

Analysis COLORSCOPE is making money with one group of customers and losing money with ano ther large group of customers. .

initiated thr ough internal defects or by customers. it was determined that rework. formed a major cost item . and a few custo mers were responsible for most of the firm's profit s (80-20 Rule) On further an alysis.Analysis Colorscope found that many customers were unprofitable.

Analysis 1. Rework due to change in specifications by customer 2. Quality Contro l initiat ed rework of house errors .

.

193 $ 4.000 6.35 Net Profit (with error rework + demanded rework) $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ (4.000 22.451) 3.800 (200) 2 0.405) $ ( 1.600 23.554) 975 (1.163 8.000 Customer 10 Customer 10 Customer 10 Customer 11 Custom tomer 12 Customer 12 Customer 12 Customer 12 Customer 13 Customer 14 Customer 14 Customer 14 Cust omer 14 Customer 14 Customer 15 Customer 15 Customer 16 Custom er 16 Customer 16 Customer 17 Customer 17 Customer 18 Customer 19 Customer 19 Cu stomer 10 61001 61002 61003 61101 61102 61201 61202 61203 6120 61301 61 01 61 02 61 03 61 0 61 05 61501 61502 61601 61602 61603 61701 61702 61801 61901 61902 62 001 Idle T ime Capacity $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ 9.640 417 7.800 8.637 $ 4.640 417 7.27 8 (2.000 11.132) (1.000 4.000 50.Analysis Customer # Job Revenue Material Expenses Gross Margin Net Profit Net Pr ofit (with error (with rework) demanded rework)2 $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ 4.500 19.500 2.210 647 (1.200 6.427) $ (73) $ 1.153) 5.193 4.275 (207) (1.416 7.637 4.163 $ 8.176 10.275 (207) (687) (73) 1.655) 975 1.200 $ (1.958 2.487 5.132) (1.637 4.000 11.700 1.64 0 $ 1.35 $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ (4.100 18.427) (73) 1.512) $ 771 $ 1.278 $ (713) $ 975 $ (1.000 .958 $ 2.278 ( 1.400 16.112 $ (988) $ 3.176 $ 10.900 7.60 0 9.840) 37 .124 887 771 1 .200 $ 75.464 $ (75 3) $(21.958 2.000 20.487 5.405) (1.400 400 5.210 $ 1.765 Net Profit (without any rework) $ 315.600 16.000 12.200 9 . 487 $ 5.618 $ 7.416 7.900 4.700 18.153) 5.464 (753) (21.8 00 37.400 300 9.176 10.163 8.416 $ 7.000 23.100 6.275 $ (207) $ (1.800 7.840) 3 .038) $ 936 $ 5.512) 771 1.193 4.500 9.500 10.800 8.451 ) 3.900 7.840) 37.000 7.464 (753) (21.210 647 (1.

500 1.000 1.112 (988) 3.163 8.000 20. 200 .000 9.038) 936 5.840) 28.000 2.200 200 $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ (1.500 1.100 2.000 1.000 2.900 2 .9 58 2.640 1.800 1.000 2.000 9.176 10.487 5.600 3.400 8.500 1.300 3.000 4.275 (207) (687) (73) 1.500 4.300 600 1.100 2.000 11.193 4.200 13.210 1.500 3.100 3.400 3.400 3.600 1.618 7.700 2.416 7.464 (753) (21.0 00 $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ 5.000 12.000 10.800 3.8.800 11.200 3.124 887 771 1.000 2.278 1 86 975 1.637 4.

Analysis NO REWORK REWORK (Self-Error) REWORK (On Demand) REWORK (All Types) .

Client 10 could have been the 5th or better c ustomer if we had charged for repeated revisions. Colorscop e should initiate quality improvement techniques. the mana gement can co nsider yielding a stake in the company to one of the large printin g companies li ke R.NO REWORK 1. Donnelley Sons Co REDUCE Self-Error CHARGE Client-Revisio ns REWORK (All Types) . Colorscope has to come up with a new pricing policy. Client 14 could ha ve been the 4th most profitable customer if we had reduced self-committed errors . Alternatively. an incremental cha nge. 1. to limi t in-house errors. Colorscope can consider additional stock issues or b ond issues to raise funds for making this investment. 1. 1. Implement new technology to ge t great price advantage. 2. offering disco unts propo rtionate to the number of color images ordered.R.

meaning that it sh ould not allow one customer account for more than 30% of its business. Colorscope has to learn not to put all eggs in one basket. It sho uld try to retain the currently profitable clients by provi ding competitive pric ing and specialized attention to the clientdeliverable.Defensive Strategy 1. 2. Ag gressive Strategy 1. Colorscope managers should probably start an aggressive mar keting campaign to recruit new clients .

Color scope manager s should probably start some allied service s to leverage the spac e (if they wou ld require it in future) or sell the unutilized portion to reduce their overhead s IDLE SPACE . Actually. it may make no sense to install the technology currently used by rival s if a new t echnique is in the making. Colorscope has to change its operation sequence to reduce idle time during as sembly.IDLE TIME 1. a high i dle time for assembly means that scanning is taking lots of time 2. Since the company is following a sequential processing of job s. Colorscope can consider purchasing the t echnology of the next generation and thus be the first in the new field 1.

THANK YOU Group # WMP6004 WMP6005 WMP6007 WMP6008 WMP6009 WMP6012 WMP6015 WMP605 2 CD (Group ± 2) AKSHAY BANSAL AMIT AGARWAL ANKIT SURI ANKUSH VED ANUBHAV KUMAR JA IN BIKRAMJIT DE BNATH CHANDER SHEKHAR SIBAL SUROJEET SADHU .