HP Deskjet Case Study

Algirdas Staigvila

Introduction
y In 1990s, Hewlett-Packard faced several problems with

inventory levels for the DeskJet Printer product line. This printer was produced in Vancouvers facility and from there was shipped to a distribution center. y HP has three distribution centers (DC)
y North America y Asia Pacific and y Europe

Deskjet Supply Chain

Cycle time for production and distribution

Factory Cycle Time

US DC

Europe

Asia

Problem
y Satisfy customer requirements by holding minimum

inventory y Bring a consensus amongst various division about inventory levels

y Marketing wants 98% product availability y Distribution wants minimum inventory

y Sources of uncertainties
y Delivery of incoming material y Internal Processes y Demand

Bad Solution - Forecasting

y Forecasting is generally not reliable y Longer forecasting horizon makes forecast worse y Aggregate forecasts are much accurate y In case of HP deskjet case the problem is more serious

because
y Higher Inventory carrying costs in case of HP case varying from

12% to 60% y In technology products, chances of obsolescence are higher

Europe
Europe A AA Average 42.33 420.17 Std dev Average Inventory to support 98% sales 108.90 838.98 32.41 203.93

AB AQ AU AY

15830.08 2301.17 4208.00 306.83

5624.58 1168.49 2204.58 103.12

27381.56 4700.96 8735.66 518.62

Europe Mohd. Zubair Saifi, SIBM-Pune TOTAL 23108.58 7

6243.96

35932.11

Asia Pacific
Asia-Pacific A AB AG AK AU Average Std dev Average Inventory to support 98% sales 693.06 877.52 2247.39 79.25 1589.78 3472.53 114.67 331.58 1005.92 31.00 448.50 281.63 265.83 604.49 23.49 555.71 750.27

Mohd. APAC TOTALZubair Saifi, SIBM-Pune 1931.67 8

North America
North America Average A AB AG AK AU 26432.17 146.33 14.67 16.17 2.67 Std dev 7377.06 130.38 30.27 23.52 4.56 7384.12 Average Inventory to support 98% sales 41582.79 414.11 76.84 64.47 12.03 41777.12

Mohd. SIBM-Pune NAM TOTAL Zubair Saifi,26612.00 9

Inventory Costs
Inventory Costs total with 98% market availability Inventory Costs total with 90% market availability
10

2,886,214

1,849,329

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Postponement
y Postponement means delay in product differentiation y Supply Chain costs can be divided into two parts
1.
y

Physical Costs
Cost of Production, Transportation, Inventory storage etc.

2.
y y

Market Mediation Costs

When supply exceeds demand then product is marked down and sold When demand exceeds supply then it results in dissatisfaction and lost opportunities

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In HP deskjet case study

y Basic product should be made at Vancouver plant in USA y Final Assembly and differentiation to be done at DCs
y DCs should be provided with complete processes for assembly

of products
y It will help company fight demand variations in a better way y HP can now support more number of models

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