ETPI Case Information Very Brief Consulting Company Background In 1984, Kim Bigfour founded the company that would become Bigfour Consulting (BC).

ETPI Case Information

Very Brief Consulting Company Background

In 1984, Kim Bigfour founded the company that would become Bigfour Consulting (BC). This

company initially operated from Kim's apartment while at the College of William and Mary. Bigfour

was a first-year MBA student at the time. BC was started with $1000 in startup capital.

The company was an immediate success. In less than a year after starting the company was grossing

about $80,000 per month. At that point, Bigfour decided to drop out of school and devote full attention

to the company. In 1991, BC became the world's leading consulting brand in terms of sales and profit.

In the quest for continued growth, BC has broadened their product line to include Accounting and

Financial consulting services. Recent acquisitions also provided BC with the ability to offer business

process outsourcing services such as call center operations and claims processing.

In 2015, Fortune magazine ranked BC as number 41 on the Fortune 500 list [1], with $61.5 billion

revenue and $2.635 billion profit.

Department Background

The Consulting Services division at BC offers expertise in a number of consulting areas. Strategy

consulting is the area in which BC would help a company identify opportunities to improve efficiency

and effectiveness, and manage change to ensure project success. Enterprise consulting involves the

use of ERP solutions to standardize processes and make decisions based on standardized business

data. Technology consulting helps companies develop solutions that support their business

strategies, within a budget. In addition, BC consulting services offers business intelligence programs

and change management consulting.

A Potential Client Calls

Recently, a company named Epic Tome Publishing, Inc. (ETPI) called enquiring about the availability

and cost of consultants. They described their needs as a "tune-up" of the current processes and well

as a need to prepare, plan and develop the capability of delivering a line of eBooks.

Client Company background

ETPI is primarily an academic publisher, publishing titles of academic interest, but not textbooks.

ETPI currently has 14,101 titles in print, with a title turnover rate of about 25% per year, well above

the general publishing industry average of 8%. There are about 300 employees working for ETPI,

indicating an average productivity for a publishing house.

The following table provides a breakdown of book sales and revenues. ETPI finds it useful to group

titles in to three categories, A, B and C. The "A" category, sometimes referred to as the "front-list",

has titles that are hot sellers (at least by ETPI standards). "A" titles constitute about 21.3% of total

titles and just over 73% of revenues. The A titles contribute more than 80% of profits because the

inventory carrying costs are less. "B" titles make up about 33.65% of the titles in the catalog and

22.7% of revenues, contributing about 17% of the profits for the company. "C" titles are 45% of total

titles and about 4.3% of revenues, contributing 3% of profits. The "B" and "C" categories together

constitute the "back-list". Titles typically move from A to B to C over their lifetimes, or from B to C.

ETPI's goal is to have all titles start as A titles, although about 27% start as B titles and about 4%

start as C titles.

Typically, a title will go through at least two printings, perhaps more depending upon demand. A

typical book length for ETPI is 257 pages. A title printing run can be from 500 to 10,000 copies,

although usually is about 1,000. Estimates for the sales of new titles and delivery dates are made by

the title's acquisitions editor and the title's marketing manager. These two people pass a spreadsheet

back and forth until they are happy with the sales estimates, delivery dates, and list of titles. An order

to print is generated by a Marketing & Sales administrative assistant, Kerry Steffen. Kerry calculates

the order quantity by multiplying the sales projections by 75%. This "compensation factor" was

introduced by the Accounting department in order to reduce finished goods inventory as a

compensation for the optimism of the editors and marketers. Due dates are not altered. Orders for

printing, consisting of book title, SKU, quantity and due date are approved by the publisher and are

transmitted monthly to the Production Department. Reprints are handled in a similar manner. For all

titles forecast to stock-out in the next quarter, based on current inventory and sales rate, a line is

generated in a spreadsheet with title, SKU and current sales rate. This spreadsheet is sent to the

title's acquisitions editor and marketer, who decide order quantity and due dates. Kerry applies a

compensation factor of 50% to reprints. Sometimes the editor will postpone any printing of a title if the

author is producing a new edition.

The production scheduler, Madison Selmar, receives the spreadsheet with the orders to print.

Madison sorts the orders by due date, calculates expected production time, and produces a tentative

production start date for each title. If there are too many titles that start on the same date, the title(s)

with the smaller quantity are postponed until the next available day. All title design details are stored

the Editorial department. The data includes number of pages, page size, binding type, as well as all

the pages ready for pre-press. The data is stored on paper and computer as appropriate.

The ETPI Organization

ETPI utilizes a functional organizational form. As seen in the abridged org chart there are four VP

level executives.

The CFO, Yoshi von Sheckle, and six staff perform all day-to-day bookkeeping and accounting

activities. In addition, the Director of IS, Kai Jordan, and the other two IS staff members report to the

CFO.

The Publisher, Stevie Speare, is responsible for the all content ETPI publishes, developing ETPI

publications standards, the publication/title budgets as well as participating in strategic and

operational planning as appropriate. The Publisher manages three primary areas, acquisitions,

manuscript editing and project/production editing. The acquisitions editors are responsible for finding

authors who have already or will produce manuscripts for ETPI publication. A manuscript editor

provides copy editing to improve an author's work and also applies the ETPI publishing standards

(APA, MLA or Chicago) to the manuscript. The project/production editors manage the title from initial

manuscript through bound title stages, and are responsible for budget and schedule. There are

approximately 25 acquisitions editors, 25 project/production editors and 50 manuscript editors on

staff. Additional needs for manuscript editing capacity are met by using freelance copy editors.

Kelly Jones, the VP of Production has two primary responsibilities, book production and book

distribution as well as participating in strategic and operational planning as appropriate. The

responsibilities of the Director of Production, Skylar Barnes, include scheduling, acquiring raw

materials, all steps in the production process, maintaining accurate inventories and delivery of books

to the warehouse. 98 employees are involved in the production of books. Once the books have been

delivered to the warehouse, the Director of Distribution, Taylor Arden, is responsible for stocking the

books, picking orders, shipping orders, and maintaining accurate inventories. In all, the distribution

organization has 63 people.

The VP of Marketing and Sales, Pat Wile is responsible for all marketing and sales, and has a staff of

17. He and his staff produce the printed catalog, market to institutional buyers, and create a presence

at trade shows. In addition, they produce and distribute brochures about new and recently published

titles.

Getting a Title Into Print and to the Customer

The process of producing a title for sale has several steps. First, a decision to produce a title must be

made. This happens in two ways; an acquisitions editor will identify a good title for which they

advocate for publication or a marketer will identify a market opportunity for a title for which they will

advocate for publication. Once the decision to produce a title has been made an acquisitions editor

will acquire the title or find an author to write the title. Once the title content has been acquired, a

production editor will manage the process of manuscript editing and pre-production. Once the editing

and pre-production is complete the title and ancillary materials to the production department for

production.

ETPI uses offset presses to produce the titles in their catalog. The particular presses employed by

ETPI use roll of paper and print on both sides at once. The book production process has several

steps. First, a set of "plates" for each page and each color are produced in what is called the "prepress

production." These plates have the image of the book page and are used in the press to

transfer ink to the rollers for printing. The plates used are made of aluminum.

The second step in the production process is the press run. During this step all the pages for the book

are produced using the offset press, several pages, but not the entire book, can be printed at once.

Plates must be changed to produce the next set of pages. A typical book requires 16 sets of plates,

each with 16 pages. The paper is cut into "plate" sized rectangles by the press.

Once the press run is complete for the book the third step can begin. The sheets of paper and binding

materials are moved to the bindery where the pages are stitched and glued together, trimmed, and

assembled into the book. After assembly, the books are sent to the warehouse.

Orders for books come from libraries, booksellers and individuals. Orders are accepted by phone,

mail, fax, and web. Payment may be made by credit or debit card, check or purchase order. Phone,

mail and fax orders are manually entered into the accounting system which verifies payment where

possible, and schedules billing for those orders that cannot be verified. All non-verified-payment

orders must be approved before the order is transmitted to the warehouse. All orders with verified

payment are automatically transferred to the warehouse. Occasionally an order for an out-of-stock

title is received. If this happens, the warehouse notifies the marketing department of the expected

production date of the title and marketing contacts the customer to determine what the customer

wants to do. If the customer wishes to cancel the order, a refund is made, otherwise a backorder is

entered, and the payment re-verified at shipment.

Interview with Casey Phillips, CEO

Consultant: What is it that you want the consulting engagement to accomplish?

Phillips: My main goal is to increase productivity in order to reduce costs and improve profits. In this

environment, with the advent of eBooks, the Kindle, Print on Demand and so forth, unless we get

better, we won't survive. My informal "walking around" observations tell me that we have some glaring

inefficiencies. Our attempts at improvement of those problems have not been particularly effective. I

think we don't have the right kind of knowledge or thoughts to drive the improvements.

Consultant: What kind of knowledge do you think is needed?

Phillips: I have met some CEOs from other industries who made some huge improvements in their

operations through a program called Lean Six Sigma. After reading a couple books, I'm not sure we

have anyone here that understands the ideas behind Lean Six Sigma.

Consultant: Other than those you have already mentioned, what problems do you see with the

company?

Phillips: We have some problems delivering to customers...I'm not sure that we have the right

processes to deliver the product the customer wants at the right time for an acceptable price. I know

we don't have the right metrics to drive customer satisfaction and internal improvement. I worry about

the strikingly divergent opinions and actions between the functions in the company, such as between

marketing and production. In the same vein, it also seems to me that we don't coordinate demand

and supply very well.

Consultant: What do you see as the reasons that people and institutions purchase books from

ETPI?

Phillips: In my talks with organizations and libraries that purchase our books, the content of our titles

seems to be the driving motive for purchase. To be sure, I have heard these same customers joke

that while the descriptions of the content look great, it would be even better if they could actually

purchase the books. It makes me think that backorders are common. I've asked for a report on

backorders, but have not received it.

Phillips: Recently I have been reading the books The Long Tail [2] and Anything You Want [3] on the

Kindle. They have some very interesting ideas. Have you read them? They make me think that

eBooks could be a viable alternative for us. Or perhaps we need to be looking more seriously at print

on demand technology [4]. But that's why you're here.

Consultant: What type of information do you need?

Phillips: I get most of the information I need from reports that I ask for. The CFO provides many of

those reports. Most of them are special purpose, one-off reports. I do wish there was an online

reporting mechanism I could use to get daily indications of how we are doing.

Interview with Pat Wile, VP Marketing and Sales

Consultant: What is it that you want the consulting engagement to accomplish?

Wile: Our customers are screaming that we don't deliver on time, that we never have the titles they

want in stock, and that the orders that do get filled take forever. So I want this consulting project to

identify the problems in production and distribution, so that they can fix them and so that we have

more satisfied customers. I am really sick and tired of all the customer complaints my department

gets. Sometimes I call distribution and ask about an order, no one seems to know anything about it. It

is really frustrating.

Consultant: Other than those you have already mentioned, what problems do you see with the

company?

Wile: I have brought these issues to our weekly senior management meetings. Jones initially took

some responsibility for the problems, but lately has been trying to blame my department for

unreasonable promises to customers, and unreasonable requirements for customer service levels.

That is a bunch of BS, and they know it. But it sounds plausible and takes a little of the heat off them

and puts it on me. All the production and distribution department wants is more money. Does anyone

know what a reasonable customer service level would be? How long should it take to order a book?

These would be good things to know.

Another problem we have is that some of our C titles go out of print, and we can't truthfully forecast

enough sales to justify a printing. We need a forecast of at least 1,000 to justify a printing. Some of

our customers have been very disappointed, not to mention our authors.

Consultant: What do you see as the reasons that people and institutions purchase books from

ETPI?

Wile: The customers like the quality of writing and the production quality of our books. Our editors do

an excellent job of selecting titles for publication, readying them for production, and specifying the

books components like bindings, paper, typefaces, and etc. It certainly isn't availability or delivery

speed that draws our customers in.

Consultant: What type of information do you need?

Wile: And that's another thing! I can't get any data about anything at any time. I feel like I'm flying

blind. I'd like to be able to capture contact information from customers and their preferences for the

types of books they read. Somewhat like profile information and be able to see what they have

purchased in the past to be able to better market to them. We need a web presence like the larger

organizations...something like Barnes and Nobles or even as simple as a Facebook page. Speaking

of which, WHERE IS OUR WEBSITE? Even if we don't get a fully functional website right away, I still

want to know how the customer contacted us for orders (call in directly, mail, and or online) to see

where we need to put more marketing resources. We really don't know our customer (who they are,

what they like, how they find us) and to survive as a competitor in this market, we need to get more

intimate with our customer. Unfortunately, Amazon has set the bar very high. The challenge is we

don't have the systems in place that help capture the data we need so that we can easily access it

and make decisions.

Interview with Yoshi von Sheckle, CFO

Consultant: What is it that you want the consulting engagement to accomplish?

von Sheckle: Our costs are out of control, which hurts our profitability. We have lots of capital tied

up in book inventory, which really strains our credit line. In addition to the inventory carrying costs, our

flexibility in meeting market demand and the opportunity to acquire best-selling authors has been

compromised. We are also seeing overtime costs from Production and Distribution. They say that the

orders they get are requiring overtime, but I'm not sure. I'm going to send an accountant to

investigate.

Consultant: Other than those you have already mentioned, what problems do you see with the

company?

von Sheckle: At times, accounting has had to work overtime to refund customer payments for books

they ordered because we thought we had them in stock, but we really didn't. Our inventory records

were in error. Quite embarrassing, as well as painful to correct.

Consultant: What do you see as the reasons that people and institutions purchase books from

ETPI?

von Sheckle: I'm not sure. But the refund situation I mentioned certainly can't help. I wonder how

many other screw-ups we make.

Consultant: What type of information do you need?

von Sheckle: I really get all the information I need from the accounting system. All I need are the

balance sheet and income statement, with the ability to drill down as required. The CEO asks me for

reports frequently, so it would be nice to have a system that allowed me to create these reports

easily. I wish I could generalize about the kind of data that the CEO requires, but I can't. I have

suggested that we go through the process of developing a balanced scorecard for each one of the

senior executives, but I haven't been able to get much traction for that idea.

Interview with Kelly Jones, VP Production

Consultant: What is it that you want the consulting engagement to accomplish?

Jones: I want some help determining what sort of capacity we need. We have several offset presses

as well as all the machinery in the bindery. We get constant complaints from marketing and sales that

we don't have a particular title in stock. We do the research we find out that there is slow demand for

the title. Not enough demand to warrant a press run, at least with the machinery that we have. I have

asked whether we could supply those titles as eBooks. Marketing says that there might be a market

for that, but they would like to wait and see. My staff is very nervous about eBooks, as it might put

them out of a job. I need to know which way to go.

We seem to be very busy, we run a lot of overtime. Lots of new titles come at us every week. Our

current offset presses take on the order of three hours to changeover from one set of plates to a new

set of plates. Since there are 16 sets of plates in a book, usually, you can see that we spend a lot of

time setting up to produce a book.

Consultant: Other than those you have already mentioned, what problems do you see with the

company?

Jones: As I said before, I think we have a real mismatch between the kind of capacity we have and

the kind of capacity that we need. I've asked my staff to look at print on demand technology. No one

seems to know how to do the analysis. There are some pretty interesting ideas out there in the

industry. I have also asked my staff to look at outsourcing, but they don't seem to know how to do that

analysis either. I was hoping you could help.

Consultant: What do you see as the reasons that people and institutions purchase books from

ETPI?

Jones: I'm not sure. I'm not very close to the customers. We do seem to field a lot of complaints

about order fulfillment, particularly with regard to the time it takes to fulfill in order. Those complaints

generally are for backordered titles. It's probably a reason that people don't buy our books, although

in many aspects they don't have anywhere else to go, our content tends to be unique.

Consultant: What type of information do you need?

Jones: I wish I had reports that would just tell me what's going on. The reports I get are from

accounting, which are all financial based. I get beat up a lot about our costs. Costs don't tell me

everything I need to know about how to run production. I try to run such a lean staff that I don't have

someone that I can rely upon to produce the kinds of nonfinancial reports that would be useful to me.

I heard our CFO talk about a balanced scorecard, which sounded pretty good. But it also sounds like

a lot of work and I'm not sure that we have time. We seem to have to run a lot of overtime just to keep

up.

Interview with Stevie Speare, Publisher

Consultant: What is it that you want the consulting engagement to accomplish?

Speare: We have a great group of acquisitions editors. They have identified blocks of good, new

content that we could put in our catalog. The problem is that we can't produce titles economically in

small quantities, and lots of the new content would be "short" runs. Our marketing department tells us

that that sort of content would be salable and highly desired by that small group of individuals and

organizations that need or want that type of content. Of course when I say "that type" of content, I

mean that we have content that is useful for lots of different niches. I am hoping that what you will

accomplish is to provide us with a plan so that we can economically produce these short run titles.

The other thing that's an issue to me is that we have an antiquated pre-production system. It takes

much too much time for us to prepare the material to put it on the plates. I understand that for our

more popular content that running an offset press is the way to do it but that doesn't mean that we

have to have this antiquated system. Lots of other book publishers have more up-to-date systems. I

think we were state-of-the-art 25 years ago, but not anymore.

Consultant: Other than those you have already mentioned, what problems do you see with the

company?

Speare: I don't think we are as profitable as we ought to be. It seems like our costs are too high. But

I don't have any information that tells me exactly where we are or what we ought to be doing

differently. I think we're competitive when we purchase content, I think we spend too much time in

preproduction, which is costly. But I don't see that we have a choice. Marketing and Accounting seem

to beat up production regularly about costs. But I don't know that there's anything different they

should do. They are stuck with this 25-year-old technology, too.

Consultant: What do you see as the reasons that people and institutions purchase books from

Speare: I think the people buy from us because we produce high-quality books, from both a content

and physical product perspective. In addition, our content is unique and can't be found other places.

Consultant: What type of information do you need?

Speare: I need a good reporting system on our preproduction process. As you may know,

preproduction is rather like project management, and we have production/project editors to help

manage that process. But I don't have much visibility into what's going on. I don't know whether a

project is ahead of schedule or behind schedule, or above or below budget. It makes it difficult to

manage. Our CFO suggested that we develop a balanced scorecard something or another, and I've

heard about something called Earned Value Analysis, but I think that's just a bunch of BS, and a way

for them to avoid responsibility.

Using Porter's five forces model via questions 1-3

1.Identify the important drivers of competition in the industry within which ETPI competes

2.Assess ETPI's strengths and weaknesses relative to these important competitive drivers and draw conclusions about the likelihood of ETPI's competitive survival.

3. Does ETPI have an S&OP process? Give a brief description.

4. Suggestions for ETPI for improving its S&OP process?

5.Validate the new process with the order winning and order qualifying characteristics given in the case.

6.Justify how the new process will reinforce and improve the order winning and order qualifying characteristics.

7.Develop, describe, and justify appropriate process metrics.

• Attachment 1
• Attachment 2