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Hewlett Packard Company

Deskjet Printer Supply Chain


Camelia Indah Murniwati
Jejen Nugraha
Muhammad Yuriansyah Putra
Nasrul Nabil Sangadji

1406513376
1406589114
1406514100
1406589303

LOGISTIC & SUPPLY CHAIN MANAGEMENT | MO 141 | 14 SEPTEMBER 2015

About HP
Hewlett Packard Company was founded in 1939 by William Hewlett and

David Packard.
Headquarters in Palo Alto, California.

In 1990, HP had over 50 operations worldwide, with revenues of $13.2 billion


and net income $739 million.

DeskJet Printer
Hewlett-Packard introduced the DeskJet Printer in 1988 and it had become one of
HPs most successful products.

DeskJet Printer Supply Chain

Bill of Material for Deskjet Printer

Manufacturing Process
Printed Circuit Assembly and Test (PCAT)
* ASICs (Application Spesific Integrated Circuits).
* ROM (Read Only Memory)
FAT (Final Assembly and Test)

The total factory cycle time through the PCAT and FAT stages was about a week.
Manufacturing of the deskjet printer operated in a pull mode.

The Distribution Process


Products from FAT sorted into three groups destined : US DC,
Europe DC, and Asia DC.
The transportation time from Vancouver to the US DC in California =>
1 day.
Long shipment time about 4-5 weeks to ship the printers to Europe
and Asia => due to ocean transit and the time to clear customs and
duties at port of entry.

The Distribution Process


Line item fill rate (LIFR) calculated as the total number of customer order line items
filled on time divided by the total number of customer line items attempted.
Order fill rate (OFR) based on orders completed, where an order contains multiple
line items.

Four Process Steps in DC

Receive (Complete)
products from
various suppliers
and stock them

Pick the various


products needed
to fill a customer
order

Shrink wrap the


complete order
and label it

Ship the order via


the apropiate
carrier

Problem Identification
Inventory growth had tracked sales growth closely.
The Organization in Europe was claiming that inventory levels there needed to
be raised even further to maintain satisfactory product availability.
Two main issues:
To find the best way to satisfy customer needs in terms of product availability while
minimizing inventory.
How to get agreement among the various parties that they had the right level of
inventory

Problem Identification
Three major sources of uncertainty that coukd affect the supply chain:
Issue of internal process: Safety Stock Rules
Issue of demand uncertainties: Sample of Demand Data
Issue of delivery of incoming materials: Air Shipment vs Ordinary Shipment
What level of change the model would recommend?

Design Options for a Distribution


Network

Manufacturer Storage with Direct Shipping


Manufacturer Storage with Direct Shipping and In-Transit Merge
Distributor Storage with Carrier Delivery
Distributor Storage with Last Mile Delivery
Manufacturer or Distributor Storage with Consumer Pickup
Retail Storage with Consumer Pickup
Selecting a Distribution Network Design

Options

Redesign distribution network


Recalculte Safety Stock & Improving forecast accuracy
Setting up sister plant
Using air shipment

Redesign Distribution Network


Previous Design

Supplier

Supplier

Supplier

Asia
DC

IC Mfg

PCAT

Print
Mechanism

FAT

Supplier

Europe
DC

Far East
DC

Redesign Distribution Network


New Design

Supplier

Supplier

US
DC

IC Mfg

PCAT

FAT

Supplier
Europe
DC

Supplier

Print
Mechanism

Supplier
Far East
DC

Supplier

Redesign Distribution Network


Localization process performed in each DC except the US DC
Vancouver is not far from US DC so it is easy to face uncertain demand in US
Vancouver produce two type of printer, fully localized US option and generic product
without manual and power supply module

Recalculate Safety Stock & Improving


Forecast Accuracy
Create MRP and BOM explosion system to get better fill rate and lower inventory
level.
Review actual inventory level and inventory in pipeline periodically (Monthly or
weekly) to anticipate change in demand.
Create an integrate system that can be used by supplier so the supplier can do their
own forecasting with better accuracy.

Setting Up Sister Plant in Europe

High investment cost.


Need long time to create new plant.
Lead time can be reduced.
Uncertain demand. Is the volume high enough to create new plant?
Where the plant should be located?

Using Air Shipment


Reduce lead time
Very expensive cost

Proposed Solution
Recalculate Safety Stock & Improving forecast accuracy
The root of the problem is bad forecasting system. By investing in to new sistem, HP
can get better forecasting accuracy and lower inventory level
Redesign Distribution Network
Higher quantity can be shipped with same volume.
Reducing high safety stock in each DC by keeping generic safety stock printers and
customizing the printers as demand is realized in their area.

Lesson Learned
There are 3 major sources of uncertainty that could affect supply chain:
1.
2.
3.

Delivery of incoming materials (late shipment, wrong parts, etc)


Internal process (process yield, machine downtime)
Demand

Distribution is a key driver of the overall profitability of a firm because it affects both
the supply chain cost and the customer value directly.
Performance of a distribution network should be evaluated along to dimensions:
1.
2.

Customer needs (response time, product availability, etc)


Cost

Refference
HP Co.: DeskJet Printer Supply Chain (A) Stanford Graduate School of Business Case #
GS-3A

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