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
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problem of finding replacement parts and that the press is somewhat outdated, this proposal calls for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
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
USP currently has annual sales of approximately $7 million. It typically allocates up to 10% of sales to
these types of projects.
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.