Hewlett-Packard:

DeskJet Printer Supply

Chain

Coordinated Product and Supply Chain Design

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
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
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 offices and homes
 Main division is located Vancouver
 Consolidating four divisions
 Colorado, Idaho, California, Oregon
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 efficiently.
 Bob Foucoult: “We were all dressed up but no one
to take us to the dance””
Manufacturing Printer
 In 1988, this innovetive product line was used
effectively, 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.
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
◦ 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.)
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
The DeskJet Supply Chain
 Three major sources of uncertainty affecting
supply chain
◦ Delivery of incoming materials (late shipment, wrong
part)
◦ Internal process (Equipment Efficiency, Machine
Downtimes)
◦ Demand
 Delivery of incoming materials and internal process have
an impact on manufacturing lead time
 Demand has an impact on inventory
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 final 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
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
efficiency, reduce downtimes
 Improve the forecast accuracy
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 unsatisfied customer
and loss of sales
◦ Various demands from the three regions (US, Europe
and Far East) and analyze/consolide/interprate demands
and customer behaviour
Problems and Issues
 Transportation
◦ 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 fix 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
Solutions
 Make the forecast more accurate
◦ 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
 Define 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
Solutions
 Making
the forecast more accurate provides
some benefits
◦ 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, unsatisfied demand, loss of customer
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 profitable
◦ Revise safety stock rules, so the target inventory levels
that is sum of safety stock and forecast
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
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