Case Study Analysis-W5 United Screen Printers

**please include introduction and conclusion for each as well as answer the following questions**

 

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W5 United Screen Printers

United Screen Printers (USP) produces a wide range of decals for displaying promotional messages on

fleet vehicles (including delivery vans, eighteen-wheelers, and aircraft). 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 deposits of ink onto a surface resulting in more vibrant

and longer lasting finishes. Screen printing works by blocking out areas 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 penetration 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 use of fleet graphics as a form of advertising, it is speculated that

organizations will increasingly exploit this form of advertising. In addition, as organizations become better

aware of this advertising medium, it is likely they will want to change their message more frequently.

According to managers at USP, this may be one of the major factors apparently driving the competition to

focus more on short lead times and prices, and less on decal durability.

USP is about to begin its annual evaluation of proposed projects. Six projects have been proposed as

described below.

1. Purchase new large press.

Currently a three- and-half to four-week backlog exists in the screen printing department. This results in

USP’s total lead- time of 4 to 6 weeks in comparison to an industry average lead-time of 3.5 to 4 weeks.

In a typical month, USP ships 13% of its orders early, 38% on-time, and 49% late. It has been estimated

that 75% of the backlog is waiting for press 6, the largest press in the shop. Furthermore, press 6 is in

dire need of replacement parts but USP has could not, thus far, locate a source for these parts. Given the

problem of finding replacement parts and that the press is somewhat outdated, this proposal calls for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 process

jobs 50% to 100% faster than press 6, it is calculated that the payback period for a new large press would

be one year.

2. Build new headquarters.

USP’s 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 headquarters. Analysis of

the new headquarters indicated that although it would improve operating efficiencies, the savings

generated would not pay for the new building (estimated to cost $4 million). Many of the board members

viewed the project as too risky because it would increase the company’s debt as a percent of capital from

almost zero to 50%.3. Pursue ISO 9000 certification.

This proposal also comes from USP’s 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 or service the domestic

automobile industry. It was less clear what competitive advantage pursuing ISO 9000 would provide USP

at this time. On the other hand, the process alone would help it document and perhaps improve its

operations. The cost of this initiative was estimated to be $250,000 to $300,000 and would take one year

to complete.

4. Develop formal procedure for mixing inks.

This proposal comes from USP’s plant manager. At present, mixing inks is a highly specialized skill that

consumes 2-3 hours of the team leader’s time each day. This project would focus on developing ink

formulas to make the task of mixing inks more routine, less specialized, and subjective. The team leader

is paid $25,000 annually. The cost of pursuing this project is estimated to be $10,000.

5. Purchase and install equipment to produce four-color positives in-house.

The lead time to have positives made by an outside supplier is typically one week and costs $1,500 to

$6,000. According to this proposal, the cost of purchasing the equipment to produce four-color positives

in-house would be approximately $150,000 plus $25,000 for installation and training. The variable costs

of producing positives in house 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 inkjet printers.

An alternative to purchasing a new screen printing press is to add capacity based on newer technology.

Given the inkjet’s production rate, six inkjet printers at a cost of $140,000 would be needed to provide the

equivalent capacity of a new large screen printing press. The major disadvantage of the inkjet printers is

that compared to the screen printing process, the outdoor durability is more limited. 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% of sales to

these types of projects.

Questions:

1. Construct an aggregate project plan tor 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?

4. Are there any types of projects you would recommend USP pursue that were not proposed?

5. What, if any, additional information would you want in making your recommendations?

6. How would you go about obtaining this information?

Justify your answers by referring to the case study and other online (only) sources.

 
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