Chap 1 - Homework Case #1 C AAS E United Screen Printers United Screen Printers (USP) produces a wide range of decals for displaying promotional messages on fleet vehi. cles (including delivery vans, eighteen-wheelers, and air craft). Its decals range from flat color designs to full-color photographic reproductions, Although it is one of the oldest forms of printing, screen printing is superior to most of the more modern approaches because it permits making heavier depos its of ink onto a surface, resulting in more vibrant and longer lasting finishes. Screen printing works by block. ing out are on a silk screen so that ink passes through only the unblocked areas to make an impression on the vinyl decal Many in the industry believe that the economics of fleet graphics makes them an extremely attractive form of advertising and should lead to their continued penetra: tion of a largely untapped market. One industry source estimated that the cost of fleet graphics works out to be $2.84 per 1,000,000 visual impressions. Given the highly cost effective nature of using fleet graphics a form of advertising, it is speculated that organizations will increasingly exploit this form of advertising. In addition, as orpanizations become better aware of this advertising medium, it is likely they will want to change theit, me Ne more frequently. According to managers at USC, this has been unable thus far to locate a source for these parts. Given the problem of finding replacement parts and the fact that the press is somewhat outdated, this proposal calls for purchasing a new large press for $160,000. Based on estimates that a new large press could proces jobs 50 percent to 100 percent faster than pres 6, it is calculated that the payback period for a new large press would be one year. 2. Build new headquarters. USPS CEO fervently believes that the company needs to have a strong corporate identity. He therefore purchased land and had plans drawn up for the construction of a new corporate headquarten. Analysis of the new headquarters indi- Cated that although it would improve operating effi ciencies, the savings generated would not pay for the new building (estimated to cost $4 million). Many of the board members viewed the project is too risky since it would increase the company's debts a per cent of capital from almost ter to 50 percent. 3. Pursue 1S0 9000 certification. This proposal also comes from USP CEO, ISO 9000 is a set of standards that provides customers with some assurance that a supplier follows accepted business practices. In some industries, obtaining ISO 9000 certification is essential, such as in industries that export to Europe and the domestic automobile industry. It was less clear what competitive Many in the industry believe that the economics of ciencies, the swing generated would not pay for the flect graphics makes them an extremely attractive form new building (estimated to cost $4 million). Many of advertising and should lead to their continued penetr of the board members viewed the project is too risky tion of a largely untapped market . One industry source since it would increase the company's debts a per estimated that the cost of fleet graphics works out to be cent of capital from almost zero to 50 percent $2.84 per 1,000,000 Vinul impression. Given the highly 3. Persae ISO 9000 certification. This proposal also comes cost effective nature of using fleet graphics as a form from USPS CEO, ISO 9000 is a set of standards that of advertising, it was speculated that isations will provides customers with some arance that supplier increasingly exploit this form of advertising. In addition, follows accepted business practices. In some industries opinitions become better aware of this advertising obtaining ISO 9000 certification is essential, such medium, it is likely they will want to change their mer in industries that export to Europe and the domestic se more frequently. According to make a USE this automobile industry. It was less clear what competitive may be one of the major factors that is apparently driving advantage punuing ISO 9000 would provide USP at the competition to focus more on short lead times and this time. On the other hand, the proces alone would prices, and less on decal durability, help it document and perhape improve its procenen USP about to begin its annual evaluation of pro- The cost of this initiative was estimated to be $250,000 posed projects. Six projects have been proposed to $300,000 and would take one year to complete. described below 4. Develop formal procedure for mixininke. This proposal 1. Purchase now long press. There is currently three comes from USP plant manager. At present, mixing and-a-half to four week backlog in the screen print inks whichly specialized kill that consumes 2-3 ing department. The result of this is that USP total hours of the team leaders time each day. This project lead time is 4 to 6 weeks in comparison to an inde would focus on developing ink formulas to make the try werage lead-time of 35 to 4 weeks. In s typical task of mixing inks more routine, and low specialised month, USP ships 13 percent of its orden ently, 18 and objective. The team leader is paid $25,000 annu percent time, and 49 percent lite. It has been esti ally. The cost of pursuing this project is estimated to mated that 75 percent of the backlog is waiting for be $10,000 preu 6, the largest pren in the shop. Furthermore, 5. Purchase and install equipment to produce four color post- preu 6 is in dire need of replacement parts but USP mwa w.house. The lead-time to have positive made by an outside applier is typically one week and cows $1.500 to $6,000. According to this proposal, the cont of purchasing the equipment to produce four color positives in-house would be approximately $150,000 plus $25,000 for installation and training. The vari ble costs of producing positives in one are estimated to be $375 per job. If produced in-house the lead time for the four-color positives would be approximately an hour-and-a-half 6. Purchase inkjetprinters. An alternative to purchasing a new screen printing press is to add capacity based on newer technology. Given the inkjet's production rate, vix inkjet printers at a cost of $140,000 would be needed to provide the equivalent capacity of a new are creen printing press. The major disadvantage of the inkjet printers is that compared to the screen printing process, the outdoor durability is more line ited. In general, inkjet printers are more economical for small orders, while screen printing presses are more economical for large orders USP currently has annual sales of approximately $7 million. It typically allocates up to 10 percent of sales to these types of projects Questions w 1. Construct an aggregate project plan for USP. 2. What criteria would you recommend USP use in selecting its projects this year? 3. Based on your recommended criteria and the aggregate project plan, what projects would you recommend USP fund this year? Are there any types of projects you would recommend USP pursue that were not proposed? 4. What, if any, additional information would you want in making your recommendations? How would you go about obtaining this information