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Hewlett Packard:DeskJet Printer Supply Chain
Group 1Anubhav JalanChitale Mahadeo Ganesh
Devendra RajoraKinshuk MishraMohit Kumar
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Market Description17 mn units amounting to USD 10 bnCurrently
Dot Matrix - 40%Ink-Jet - 20%Laser - 40%Trend towards ink-jet from dot matrix
Market Leaders
North America - HPJapan - CannonEurope - Lots of players
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ObjectivesSatisfy customer in terms of productavailability
Minimize inventorySynchronize the supply chainMarket changing to commodity
No product loyaltyHigh reliability and quality and low cost
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Supply Chain (simplified)
Suppliers VancouverFactory
US DC
AsiaDC
EuropeDC
Customer
Customer
Customer
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Sources of VariabilityLate delivery of incoming materials bysuppliersInternal process delays (process yields andmachine downtimes)Demand uncertainty, resulting in improperforecastingManufacturing
Made-to-orderPull mode
DistributionMade-to-stock
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Some Important FactsPrinters assembled and tested atVancouver for ALL countries
Vancouver FactoryCycle Time - 1 weekInventory - 0.9 months
Lead times
US DC - 1 dayEurope DC - 4 - 5 weeksFar East DC - 4 - 5 weeks
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Problem AreasLarge Forecasting errors in Europe
Shortages for demanded product
Inventory pileup of other productsAppears like an immature marketwith large fluctuation in demandLead times in European & AsianMarkets
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Option 1 Use of Air transportLead time reduces to 14 days from 42 days
34% reduction in safety stock of each modelAverage Inventory reduces from 27159 units to18711 unitsExtra air fare = USD 6.378 mn per annum
But...............it still does not solve non-localizedproduction problem
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Option 2 Manufacture in EuropeAll models except A, AG and AKReduction in Lead Time from 42 days to 8
days44.6% reduction in safety stock of each modelAverage Inventory reduces from 27159 units to16230 units, nearly 44%.Solves non-localized production problem
New manufacturing unit cost unknownNeed for new suppliers and other issues tooExcess capacity, which can be utilized by demand
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O ption 3 Reliable Demand
Forecasting SystemBetter ability to predict and meet thedemand accurately
Reduction in safety stock resulting forsudden uncertainty of demandReduction in the inventory holdingcosts due to the reduction ininventory
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Option chosenO ption number 2 is chosen, because
1. Cost savings are higher (about 40%)2. Lead time is also reduced by a
significant amount (reduction of 4
weeks)3. Lack of information about the sector
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THANK Y O U
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