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Hewlett-Packard: DeskJet Printer Supply Chain  506
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Presentation on theme: "Hewlett-Packard: DeskJet Printer Supply Chain"—

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1 Hewlett-Packard: DeskJet Printer Supply

Chain
Coordinated Product and Supply Chain Design

2 BACKGROUND HP was founded in 1939 William Hawlett and David Packard

In 1990, 50 operations, Revenues of $13.2 billion and Net income of $739 million
Six Products Groups
The Peripheral Group was the 2nd largest
Printers, Plotters, Magnetic Disks, Terminals

3 PRINTER MARKET
In 1990, 17 million units of workgroup and personal printers, $10 billion
40% impact/dot matrix
40% laser
20% inkjet
By 1990, customers became aware of inkjet printers (cheap and high quality)
HP and Canon pionereed ink-jet technology

4 The DeskJet Printer Introduced in 1988

In 1990, sold 600,000 units, $400 million
Mission statment:
To become the recognized world leader in low cost premium quality printers for o ces and
homes
Main division is located Vancouver
Consolidating four divisions
Colorado, Idaho, California, Oregon

5 Manufacturing Printer
In 1979, Manufacturing Cycle is 8 to 12 weeks
3.5 months of inventory
In 1981, Just-in-Time strategy had been introduced
Reduced inventory from 3.5 months to 0.9 months
However, this strategy and production system were not used e ciently.
Bob Foucoult: “We were all dressed up but no one to take us to the dance””

6 Manufacturing Printer
In 1988, this innovetive product line was used e ectively, with new model “DeskJet printer”
With this new model, nearly-letter-quality resolution is obtained and standard paper was
used.
HP has already had knowledge and implementation for the ink-jet technology and also
streamlined manufacturing process
All these capabilities gave the HP chance become the market leader in the ink-jet printer
market.

7 The DeskJet Supply Chain

Supplier, manufacturing facility, distribution centers, dealers, and customers
Manufacturing is done by HP, in Vancouver
Two stages of manufacturing
Printed circuit board assembly and test (PCAT)
Final assembly and test (FAT)
Three Distribution Centers
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US, Europe, Far East (shipping to Europe and Far East by ocean)
Localization
For Europe and Far East, printer has to be customized (language and power supply req.)

8 The DeskJet Supply Chain

Factory Cycle Time
Through PCAT and FAT, about a week
Transportation
From Vancouver to US DC, about a day
From Vancouver to Far East DC and Europe DC, 4-5 weeks
Just-in-Time strategy
Make-to-Stock
Target inventory level=Forecasted Sales+Safe Stock

9 The DeskJet Supply Chain

Three major sources of uncertainty a ecting supply chain
Delivery of incoming materials (late shipment, wrong part)
Internal process (Equipment E ciency, Machine Downtimes)
Demand
Delivery of incoming materials and internal process have an impact on manufacturing lead
time
Demand has an impact on inventory

10 The DeskJet Supply Chain

The Distribution Process
Perfomance Measures: Inventory Level and Distribution Cost per gross shipment dollar
Major Costs: Outbound Frieght and Salaries
Distribution Center’s Process
Receive nal products from supplier and store them
Retrieve products which is needed to satisfy the orders of customer
Arrange and pack the order, make it ready to be sent to customer
Ship the order with proper transportation vehicle
The Main issue is if the DC is operated as warehousing or integration

11 Problems and Issues

Determine the right level of inventory (best safety stock amount) and provide high level of
service is a big challenge
Find the best way to satisfy customer while minimizing inventory
Reduce the uncertainty caused by delivery of incoming materials, impoving manufacturing
and equipment e ciency, reduce downtimes
Improve the forecast accuracy

12 Problems and Issues Forecast errors, especially in Europe

Product shortages and piled up inventory
Safety Stock Rules fail a lot, not meet the target inventory
Inconsistent inventory level causes unsatis ed customer and loss of sales
Various demands from the three regions (US, Europe and Far East) and
analyze/consolide/interprate demands and customer behaviour

13 Problems and Issues Transportation Inventory

It takes long time to ship products from US to Europe and Far East
If there is a shortage in Europe and Far East, it is hard to x it
Reduce transportation lead time in order to diminish long replenishment lead time
Inventory
Increase or utilize the current capacity
Similar to establishing new inventory, analyze whether a plant is set up in Europe or not

14 Solutions Make the forecast more accurate

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Collecting related data month by month for every single product, and also examine
aggregate demand
To be prapared to manufacture customized power supply and manual
Anaylze HP and competitor’s sales of previous years
De ne an average sale of each month, calculate standard deviation, be aware of trends
Similarly, data loss of sales, stock outs, and backorders have to be examined
This research has to be done especially for Europe Market and European customer behavior
Customer surveys and analyze expectation/satisfaction

15 Solutions Making the forecast more accurate provides some bene ts

More accurate forecast provides more reliably safety stock level and reduce amount of
unnecessary products stocked in inventory
Reduce the replenishment lead time
Reduce unsold products, it is crucial because product’s technologic clock speed is high
Reduce inventory holding cost and cost of unsold products
Avoid stockouts, unsatis ed demand, loss of customer

16 Solutions Increase the capacity of inventory

Analyze the cost of lost sales
European DC runs out of space to store as DC tells and complains
If investing on a new inventory diminishes the lost sales and it is more pro table
Revise safety stock rules, so the target inventory levels that is sum of safety stock and
forecast

17 Solutions Establishing a new facility

Since the transportation lead time is long, in order to satisfy customer’s demand, setting up a
plant might be a solution, similar to set up a new inventory
Since the forecast is not good in Europe, to decide whether factory is opened or not,
European sales and market have to be examined precisely and volume of production should
be worth it
It is possible to revise the DC that is operated to complete the integration of printers, not to
manufacture a printer from a rough

18 Solutions Transportion
It is very long time to transport products from US to Europe and Far East
Vessels are chosen as transportation vehicle
Air transportation would shorten the lead time and make the company ready to satisfy
customer

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