WALD PRESS

Written Analysis and Communication- I

KUMAR ABHISHEK AIIM -PGPIM-2012-24 03-09-2012

Letter of Transmittal

To: Manager, Wald Press From: Abhishek, Executive, Wald Press Date: 03/09/1946 RE: Analysis of current problems faced by Wald Press & recommendations

Wald Press is under tremendous pressure from Campbell Brothers to drop the outside contracts and concentrate all production on its orders only. But Wald Press does not want to drop outside contracts and also cannot afford to displease or loose Campbell brothers. The purpose of the report is to find the suitable solution that will help Wald Press in maximizing profit, and strengthening companys image in the market, keeping in mind all the constraints. The contents of the report concentrate on the recommendations supported by data along with the action plan to realize the purpose.

Sincerely, Kumar Abhishek Executive-Production

Executive Summary
Campbell Brothers, a Manhattan publishing house is pressurizing Wald Press to drop outside contracts, which it has obtained during the depression of 1930 s, when Campbell brothers was unable to supply Wald Press with sufficient work. Wald Press does not want to drop outside contracts, and also capacity expansion and overtime are not feasible. Several options have been considered in order to deal with this intricate issue, and after analyzing each option, the option which suits the best is considered. Action plan for implementation of the selected option supported by data has also been developed. (Words: 94)

Table of Contents
Situation analysis ........................................................................................................................ 5 The Problem ............................................................................................................................... 5 The Options ................................................................................................................................ 6 Criteria for Evaluation ................................................................................................................. 6 Evaluation of Options .................................................................................................................. 6 Recommendation ....................................................................................................................... 7 Action Plan ................................................................................................................................. 7 Short Term Action Plan ........................................................................................................... 7 Long Term Action Plan ............................................................................................................ 8 ANNEXURE-1............................................................................................................................... 9 ANNEXURE-2............................................................................................................................... 9 GRAPH-1 ................................................................................................................................... 10

Situation analysis
Wald Press is a large New York printing firm, and has been closely associated with Campbell Brothers, a Manhattan publishing house, which supplies it with a major portion of its work. During the depression of 1930s, Campbell Brothers was unable to supply Wald Press enough work. Wald Press sought and obtained contracts from several other publishing firms in order to stay afloat. Now in 1946, with sales again at high level, Campbell Brothers require more printing capacity than the Wald Press is providing. Campbell Brothers is unable to find other printers to do part of their work and is thus pressurizing Wald Press to drop outside contracts and concentrate all its facilities on production for them. In order to reassure the press, Campbell brothers stresses that their sales are high and will continue to remain high for a considerable period of time. Also, as their inventory is very low in 1946, they can keep the Wald Press working at near full capacity for at least two and a half years even if a depression like 1930 happens. The manager of Wald Press is not in favor of dropping outside contracts as according to him, Wald Press has a moral obligation to continue outside contracts, because of the promise to not abandon them when the business conditions improve. Also if they break their promise, their image in market will get tarnished and they will not get outside contracts again. The manager has thought of increasing the plant capacity by working overtime or putting on a second shift, but none is viable due to monetary and labor constraints respectively. Purchasing of new machinery has also been considered but since delivery could not be possible for one or two years, this idea has also been scrapped.

The Problem
The problem faced by Wald Press in this case is how to meet the increase in demand of Campbell brothers and also whether to drop outside contracts and concentrate its whole capacity for Campbell Brothers product.

The Options
Wald Press has got three options in front of them, 1) 2) Dropping outside contracts to meet Campbell Brothers demand. Sticking to outside contracts and keep producing for Campbell Brothers as per the trend without getting pressurized. 3) Meeting the demands of both the customers by applying innovative ideas.

Criteria for Evaluation

The following four criteria are to be taken into account to arrive at a choice. 1) 2) 3) 4) Profit maximization Capacity utilization Image in market Future market scenario

Evaluation of Options
Wald Press cannot drop outside contracts, as that would tarnish its image in the market and it will never be able to get outside contracts again if downturn happens again. It also cannot stick to the current practice without getting pressurized by Campbell Brothers, as it may find some other printing firm in near future which Wald Press cannot afford as Campbell Brothers is its major customer. The percentage of books published for Campbell Brothers in 1944 and 1945 was 81% and 87% respectively (Annexure-1). Also outside contracts make little or no profit and full capacity utilization is not possible only from the orders of outside contracts. Thus we are left with only the third option of keeping the outside contracts in force and also meeting Campbell Brothers increased demand.

Recommendation
After evaluating all the options it is quite evident that Wald Press should go with the 3 rd option with full conviction and commitment.

Action Plan
Wald Press needs to form a dual strategy, one catering to short term goal and other for the long term goal.

Short Term Action Plan

1) Sub-Contracting:- As the requirements of outside contracts are less exacting, their orders are easier to produce and create fewer difficulties, their orders can be outsourced to some other firm whose labors are not much skilled. 2) Just in Time:- JIT strategy can also be used for outside contracts, as average outside book take 15% less time to produce as compared to average Campbell Brothers book. This will also reduce the inventory cost. Better communication network need to be established between Wald Press Manager and outside contractors in order to reduce inventory. 3) Negotiations with outside contracts:- should be done on pricing and inventory. As the outside contracts are generating little or no profit, costing should be remodeled. 4) No-Panicking: Wald Press should not give into the demands of Campbell Brothers very quickly fearing the loss of orders from them. The number of books produced by Wald Press and those sold by Campbell Brothers are highly correlated, having correlation coefficient 0.97(Annexure-2, Graph-1). Thus Campbell Brothers are not going to leave Wald Press in haste.
the correlation coefficient range between -1 and +1, with a correlation coefficient of +1 indicating that the two variables have a perfect, upward-sloping (+) linear relationship and a correlation coefficient of -1 showing that the two variables are perfectly related in a downward-sloping, (-) linear sense. A correlation coefficient of 0 demonstrates that the variables have no relationship, and are independent.

Long Term Action Plan

1) Capacity Expansion: Wald Press should increase its plant capacity by purchasing new machines, setting up new sheds, hiring more skilled workers etc in order to accommodate both Campbell Brother and outside contractors in long run. Wald Press is only producing about 29-34% (Annexure-2) of total sales of Campbell Brothers. 2) Phasing out non- profiting outside contracts: Wald Press should also gradually phase out the loss- making or less profit generating or non-performing outside contracts. The criteria on which they can be phased out should be those set in the short- term plan. This will also save Wald Press image in market. 3) Look for other big publishers: Wald Press should reduce its dependency on Campbell Brothers and look for other big publishers who can provide bulk orders as depression like 1930s may happen again. 4) Product basket expansion: As business is all about diversity, Wald Press should also broaden its product basket like foraying into news-paper and magazines as it has already got infrastructure for printing books.
(Words: 946)

ANNEXURE-1
Year 1944 1945 Bills to Bills to outside Campbell contracts Brothers 277625.1 1172862.1 242348.6 1555944.3 % 0.81 0.87 Year 1944 1945 Bills to Campbell Brothers 1172862 1555944 Sales of Campbell Brothers 4040000 4590000 % 0.29 0.34

ANNEXURE-2
Year 1928 1929 1930 1931 1932 1933 1934 1935 1936 1937 1938 1939 1940 1941 1942 1943 1944 1945 Books manufactured by Wald Press 2330333 2400000 2340000 2060000 1400000 1180000 1450000 1540000 1660000 1790000 1570000 1510000 1570000 1580000 1640000 1700000 1890000 2060000 Sales by Campbell Brothers 4730000 4800000 4820000 4230000 3270000 2770000 2960000 3210000 3330000 3470000 3200000 3170000 3210000 3260000 3180000 3600000 4040000 4590000

Coefficient of Correlation- 0.97

GRAPH-1
SCATTER PLOT

Sales by Campbell Brothers as function of books manufactured by Wald Press

6000000
5000000 4000000 Sales by Cambpell 3000000 Brothers in $ 2000000 1000000 0 0 1000000 2000000 3000000 Books manufactured by Wald Press in No. Sales by Campbell Brothers