GR602 Case Analysis #1

Name:___Lefei Tong _____________________________________________ Date: _1/27/2015_____

Case Analysis #1
GR602 Business Process Management
Prof. Tomasino, Spring 2015

Overview
Colorscope is a very small company in the pre-press business. As the prices of computers keep falling, so
does the entry barrier in this industry. Colorscope is operating on wafer-thin margins and prices are
getting squeezed. Prices have dropped in half over the last five years. Colorscope is the quality leader in
the industry but Colorscope has to cut costs, eliminate waste, drum-up new business, and find a way to
differentiate itself.
You are supposed to work on this case individually.
The case is an abridged version. A few facts that may be relevant to your analysis that have been omitted
from the abridged case are as follows,
 Colorscope guarantees error-free work to its customers
 Colorscope promises rapid turnaround time and has never missed a deadline.
 Pre-press is the last activity in the process of creating a catalog or “book”.
 Colorscope does not charge for customer initiated re-work. Because of the rapid turn-around
required of pre-press Colorscope assumes customer initiated re-work will always be small.
 All Colorscope employees are paid on an hourly rate.
 Pre-press involves skill and is considered an art. For example, producing a catalog with the
correct model skin-tone (per the customer) requires artistic expertise.

Assignment Instructions and Questions

DO NOT ANSWER THE QUESTIONS ON PAGE 4 OF THE CASE. Answer the following questions
based on the information presented in the case. Answers should not be a simple re-statement of the case
content. Case content should be used to support your perspective, impressions, analysis, and conclusions
about the business problem in the case.
Rename this file to “last-name_GR602_SP15_Colorscope_Case_1.docx” (where last-name is your last
name) and insert your answers to each question after each question. Submit this file and any additional
files (i.e. Excel) on Blackboard. Do not submit a printout of your case analysis.

1. Why would any customer, let alone large advertising agencies and departmental stores, go
to Colorscope rather than go to the large printers and horizontally integrated national pre-
press houses? (20%)

Large printers seem more reliable to customers because the quality of work may be more ensured.
However, Colorscope possesses a number of competitive advantages over large printers in the
industry. For one, a smaller pre-press company with artistic expertise can better customize each
customer’s needs, including creating unique models, handling multiple reworks, etc. For large

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printers, they may simply use the same model for similar customers, and their work may lack
creativity and innovation. For another, the quick turn-around time also adds value to Colorscope,
which means that not only Colorscope completes and presents their work fast, but they also
quickly reacts to customers’ changing needs. Their free initiated re-work can be attractive to
customers as well. This fast turn-around can be the key of customer satisfaction.

2. Calculate the profitability of each job completed in June 2012 at Colorscope (Exhibit 1).
(30%) Rent is allocated to production centers on the basis of floor space. “Others” costs are
allocated on the basis of labor hours.
Based on the number of working hours in different work station in exhibit 2 and the expenses in
the financial report in Exhibit 4, I allocated the expenses to the corresponding hours and work
stations to obtain the total expense of each individual job (See Spreadsheet for detail).
Job # Pages Revenue Expense Profitability
601 32 $ 19,200 $ 15,623 $ 3,577
602 32 23,000 13176 9824
603 32 23,000 10312 12688
604 112 76,000 33103 42897
605 128 50,000 37785 12215
606 48 26,600 16902 9698
607 32 16,000 12194 3806
608 16 11,000 6909 4091
609 16 11,000 7631 3369
610 32 20,000 9879 10121
611 8 3,400 4363 -963
612 32 18,000 12542 5458
613 8 6,000 4434 1566
614 17 12,000 7553 4447
Total 545 $ 315,200 $ 192,407 $ 122,793

3. What is the financial consequence of rework? What should Colorscope do about rework?
How? (10%)

As rework involves more labor hours, higher work station rent and higher material costs and
depreciation, the consequence of rework will definitely hurt Colorscope financially if they do not
charge enough money for that. Since the stages, including assembly, output and quality control,
need to be redone when a job is rescanned, Colorscope can settle down the scanning work as
much as possible before they move on to the following stages. Therefore, Colorscope may reduce
those reworks that are only due to the changes in the previous stage.
Colorscope does not charge customers for initiated rework. This can attract a number of
customers, but at the same time, this can also cause unnecessary financial loss of the company.
When customers are fairly satisfied with Colorscope’s initial work, they may still take advantage
of the free rework and add more expenses to the company bill. One thing Colorscope can do is
rewarding customers who never request a rework, such as coupon or cash back, so customers may

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not request a rework that they might have requested when the work fulfills 80% of their
expectations. This zero-rework reward may effectively reduce rework expenses and attract more
customers to come back for new products.

4. Should Colorscope do anything about its incentive system? (10%)

Currently Colorscope employees are paid on an hourly rate, which I believe may not be the best
way to motivate the employees. When an employee receives a job, how much he or she earns
from this job simply depends on how much time he or she spends, so the employee intends to
spend longer time than they should on a job, or the employee may not at least try to finish a job as
fast as possible. If Colorscope pay their employees based on how many pages each of them
finishes, employees can be much more motivated to finish jobs faster so that they can work on
more pages.

5. Using the concept of the “Process Enterprise”, as discussed in class and in the Hammer and
Stanton reading, characterize the problems at Colorscope and suggest a solution(s). (30%)
Operating on wafer-thin margins, Colorscope is facing the challenge of reducing costs and
developing new business that can distinguish themselves from their competitors. Currently
Colorscope has several problems in their business process. One problem is that different people
are in charge of different steps in each job’s work flow. Customer representatives interact with
customers to complete job preparation. Then another group of people performs scanning,
assembly and output, the result of which is passed to the QC team for rework decision. This
requires extensive supervision by Cha and involves a higher possibility of rework. Another
problem of Colorscope’s current business process is the product pricing. The price per page does
not reflect different organizational resources used throughout the work flow. A solution to these
problems is creating an integrated process, in which a number of process teams work on the entire
processes of certain jobs rather than focusing on the fragmented tasks. According to Hammer and
Stanton, each process team has a process owner, who oversees the work flow of each job. In this
way, everyone on the same process team will be on the same page for each job, and the conflicts
that existed between people working on different steps of the work flow will vanish as well, as
these people will be working to complete the same job. In addition, with process enterprise,
product pricing can be dynamically performed by each process team. Since each group is
responsible for an entire job, they can completely determine every single resource they used to
finish the final product.

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