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AKSHAY BANSAL AMIT AGARWAL ANKIT SURI ANKUSH VED ANUBHAV KUMAR JAIN BIKRAMJIT DE
BNATH CHANDER SHEKHAR SIBAL SUROJEET SADHU

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

000 10.Situation Description Wages Depreciation Rent Others Total Overhead Labour hours Overhead Rate or Absorption Rate or Driver Rate (Rate / Labour Hour) Floor Space Job Preparation $ 8.280 $ $ $ $ $ Output 10.500 92 15.000 $ 500 $ 2.440 $ 74 1.000 $ 86 500 $ 6.311 $ 13.246 640 $ $ $ $ $ Assembly 64.000 $ 72 4.000 2.000 2.000 50.000 4.000 14.000 5.000 10.000 1.000 $ 100 1.639 29.000 $ 500 $ 1.246 64.000 225.000 Note: A simplified activity-based costing system was used to measure customer pr ofitability.811 $ 13 .492 92.000 $ 13.000 30.000 $ 148 2.000 8.000 25.492 1. Cost of Activity Drivers: Output > Scanning > Assembly > QC > Job Preparation .000 $ 1.000 160 $ $ $ $ $ Total 125.639 200 Quality Control Idle Space $ 11.000 20.311 $ 11.811 160 $ $ $ $ $ Scanning 32.000 $ 1.

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

Questions Based on the information provided in the case. Pricing Strategy should be in sync with its Operational Costing . the firm has to decide on questio ns such as:  Customer pricing. 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. The problem required i nternal quality management and closer interaction with customers. it needed to control costs while maintaining quality and to manage customer profitability.

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 Control 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 Profit 61202 61203 61204 61601 61003 61101 61102 61201 61902 61501 61405 61702 61401 61 404 61801 61502 61701 61602 62001 61002 61402 61603 61901 61403 61301 61001 $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ 23.640 1. 100 1.000 8.210 975 771 647 417 (73) (207) (753) (1.500 10.464 2.132 ) 50.000 9.500 1.900 2.000 9.100 1.554) (4.500 9.600 3.6 00 315.000 11.000 9.800 2.100 600 200 3.000 1.405) (1.400 2.512) (2.600 2.191 $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ 10.200 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 1.000 11.900 400 300 4.700 18.000 $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ 19.0 00 7.900 1.300 4.200 9.400 3.400 7.487 5.400 75.176 3.500 1.500 2.500 1.000 20.800 8.900 13.451) (1.000 20.958 1.800 7.637 4. 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 32 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 2.416 7.000 4.000 1.000 12.700 3.000 2.278 7.800 16.000 11.600 16.427) (1.000 2.500 6.000 8. 000 6.200 2.040 .800 9.800 7.000 12.000 22.100 37.200 $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ 3.800 1.300 3.000 4.000 23.275 5.000 50.600 8.200 2 40.500 9.200 2.500 3.000 5.153) (1.193 4.163 8.700 18.400 (200) 6.200 3.000 11.400 5.800 10.100 4.

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.

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

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

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100 6.487 5.637 4.487 5.416 $ 7.500 2.427) (73) 1.163 8.153) 5.163 $ 8.35 $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ (4.464 (753) (21.200 $ 75.210 647 (1.500 9.451 ) 3.416 7.840) 37.275 $ (207) $ (1.600 9.124 887 771 1.200 9 .176 10.038) $ 936 $ 5.193 4.176 $ 10.554) 975 (1.840) 37.800 7.000 4.618 $ 7.000 6.000 .512) 771 1.416 7.112 $ (988) $ 3.278 ( 1.275 (207) (1.000 50.900 7.275 (207) (687) (73) 1.000 12.500 19.640 $ 1.000 € € € € € € € € € € € Customer 10 Customer 10 Customer 10 Customer 11 Customer 11 Customer 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 Customer 16 Customer 16 Customer 17 Customer 17 Customer 18 Customer 19 Customer 19 Customer 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 62001 Idle T ime Capacity $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ 9.400 16.132) (1.464 $ (753) $(21.176 10.700 1.655) 975 1.600 23.700 18.640 417 7.200 6.600 16.163 8.765 Net Profit (without any rework) $ 315.500 10.27 8 (2.193 $ 4.637 4.132) (1.958 $ 2.210 $ 1.400 400 5.464 (753) (21.958 2.193 4.000 7.427) $ (73) $ 1.800 (200) 2 0.405) (1.840) 3 .000 20.210 647 (1.405) $ ( 1.800 8.000 11.900 4.400 300 9.637 $ 4.800 37.512) $ 771 $ 1.35 Net Profit (with error rework + demanded rework) $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ (4.200 $ (1.000 11.000 23.800 8.000 22.153) 5.278 $ (713) $ 975 $ (1.900 7. 487 $ 5.451) 3.640 417 7.958 2.100 18.Analysis Customer # Job Revenue Material Expenses Gross Margin Net Profit Net Profit (with error (with rework) demanded rework)2 $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ 4.

500 3.112 (988) 3. 200 .000 1.000 11.416 7.000 12.400 8.700 2.400 3.200 200 $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ (1.000 4.487 5.840) 28.000 9.210 1.0 00 $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ 5.038) 936 5.000 10.000 2.618 7.600 3.176 10.100 3.800 11.600 1.400 3.500 1.640 1.637 4.300 600 1.464 (753) (21.000 2.800 1.000 9.000 2.8.000 20.124 887 771 1.300 3.100 2.200 13.900 2 .500 1.193 4.000 1.000 2.200 3.100 2.275 (207) (687) (73) 1.500 1.500 4.163 8.800 3.278 186 975 1.9 58 2.

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

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

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

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

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