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Colorscope, Inc. is a small company engaged in the graphic arts business. The company has been tackling fierce competition when it comes to pricing. This case study looks into how Colorscope, Inc. can change its pricing strategy and improve its operations.
V.G. Narayanan and Joseph Cha
Harvard Business Review (197040-PDF-ENG)
December 09, 1996
Case questions answered:
- How can Colorscope improve its operations?
- How can it change its pricing strategy?
- What accounting and control system should his company install?
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Colorscope, Inc. Case Answers
This case solution includes an Excel file with calculations.
1) How can Colorscope improve its operations?
Looking at the five core processes, we identify Scanning, Assembly, and Output as main avoidable cost drivers in operations due to high reworking costs. Therefore, additional quality control should be implemented by Colorscope, Inc. at those processes to reduce the amount of reworking costs.
We found that employees in job preparation seem to have significant idle time (73,1% capacity utilization) whereas scanning (95,6% capacity utilization) and assembly (90% capacity utilization) processes of Colorscope, Inc. seem to be working close to full capacity (see Tab Total cost overview).
We see a connection between the full capacity and the many mistakes that require rework in those areas. To tackle this issue we recommend people from job preparation to support employees in scanning and assembly. This will reduce pressure and thus mistakes that lead to additional rework.
Besides, we see the idle capacity of the floor space is a big cost factor (13k USD) that needs to be solved as this cost is not allocated to any job and impacts the profitability of Colorscope, Inc. significantly. Therefore we suggest moving to a smaller space to increase space utilization and decrease rent costs accordingly.
2) How can it change its pricing strategy?
We did a customer profitability analysis. From that analysis, we gathered that Colorscope, Inc.’s customer 20 and 13 are actually…
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