HP Deskjet Case Study

By:
Mohd. Zubair Saifi (32237)
 Introduction
In 1990’s, Hewlett-Packard faced several problems
with inventory levels for the DeskJet Printer product
line. This printer was produced in Vancouver’s facility
and from there was shipped to a distribution center.
HP has three distribution centers (DC)
North America
Asia Pacific and
Europe

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 Deskjet Supply Chain

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 Cycle time for production and distribution

Factory Cycle Time

1 Week

US DC

4 – 5 Weeks
Europe Asia

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 Problem
Satisfy customer requirements by holding minimum
inventory
Bring a consensus amongst various division about
inventory levels
Marketing wants 98% product availability
Distribution wants minimum inventory
Sources of uncertainties
Delivery of incoming material
Internal Processes
Demand

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 Bad Solution - Forecasting
Forecasting is generally not reliable
Longer forecasting horizon makes forecast worse
Aggregate forecasts are much accurate
In case of HP deskjet case the problem is more serious
because
Higher Inventory carrying costs in case of HP case
varying from 12% to 60%
In technology products, chances of obsolescence are
higher

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

AB 15830.08 5624.58 27381.56

AQ 2301.17 1168.49 4700.96
AU 4208.00 2204.58 8735.66
AY 306.83 103.12 518.62

Europe TOTAL 23108.58 6243.96 35932.11

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 Asia Pacific
Asia-Pacific Average Std dev Average Inventory to support 98% sales

A 114.67 281.63 693.06

AB 331.58 265.83 877.52

AG 1005.92 604.49 2247.39

AK 31.00 23.49 79.25

AU 448.50 555.71 1589.78

APAC TOTAL 1931.67 750.27 3472.53

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 North America
North America Average Std dev Average Inventory to support 98% sales

A 26432.17 7377.06 41582.79

AB 146.33 130.38 414.11

AG 14.67 30.27 76.84

AK 16.17 23.52 64.47

AU 2.67 4.56 12.03

NAM
9 TOTAL 26612.00
Mohd. Zubair Saifi, SIBM-Pune 7384.12 41777.12
 Inventory Costs

Inventory Costs
total with 98%
market
availability 2,886,214
Inventory Costs
total with 90%
market
availability 1,849,329

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 Postponement
Postponement means delay in product differentiation
Supply Chain costs can be divided into two parts
1. Physical Costs
 Cost of Production, Transportation, Inventory storage etc.
2. 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
Basic product should be made at Vancouver plant in
USA
Final Assembly and differentiation to be done at DCs
DCs should be provided with complete processes for
assembly of products
It will help company fight demand variations in a
better way
HP can now support more number of models

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 References
“Postponement project work paper” – MIT center for
transportation and logistics, Version: Feb 23, 2005
http://www.business-around-the-globe.com/freecartoo
ns/freecartoons.html
, retrieved on 16th Dec, 2009

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