HewlettPackard : DeskJet Printer Supply Chain

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Hewlett-Packard DeskJet Printer Supply Chain

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• Kaushal Kishore (KK)

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Team Members
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KK
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Contents
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Introduction

• In 1990s, Hewlett-Packard faced several
  problems with inventory levels for the DeskJet
  Printer product line. This printer was produced
  in Vancouvers facility and from there was
  shipped to a distribution center. HP has three
  distribution centers (DC), in North America, Asia
  Pacific and Europe that at the moment were filled
  of DeskJet stock.

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Introduction

• HP need to reach an optimal solution that
  balance the customers needs and keep a low
  inventory level, getting an agreement among the
  DCs.

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ZERO inventory

• The Vancouver division and its quest for zero
  inventory.
• Just-in-time (JIT)
• Reduced inventory from 3.5 months to 0.9 months.

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The DeskJet Supply Chain
Supplier
Manufacturing sites
The DeskJet Supply Chain
Distribution centers
Dealers
Customers
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The DeskJet Supply Chain

• There were two key stages in manufacturing
  process
• Printed circuit board assembly and test (PCAT)
• ASICs (application-specific integrated circuits)
• ROM (read-only memory )
• Final assembly and test (FAT)

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The Deskjet Supply Chain
No significant buffer inventories
Two key manufacturing process
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The Deskjet Supply Chain
Localization
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The Deskjet Supply Chain

• These products were then sorted into three groups
  destined for the three distribution centers
• North America, Europe, and Asia-Pacific

PCAT
FAT
Vancouver
1 week
1 day
U.S. DC
45 weeks
Asia
Europe
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The DeskJet Supply Chain

• The management change
• DCs make-to-stock mode
• inventory levelforecasted sales safety stock
  level
• Manufacturing pull mode
• 3 major sources of uncertainty that could affect
  the supply chain
• Delivery of incoming materials
• Internal process
• Demand

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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.

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Distribution process

• Inventory level
• Safety stock (12 60)
• Service level (98)
• Distribution cost
• Outbound freight
• salary

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Distribution process
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The inventory and service crisis

• Europe Problem
• Contained issues
• Safety stock
• Forecasting system
• Make-to-stock system
• Multiple products
• Long lead time

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The inventory and service crisis

• Safety Stock
• Great variations in market demand, keeping the
  firms target service level (98 in this case),
  i.e., meeting consumers requests with a higher
  probability.

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The inventory and service crisis

• forecasting system
• Localization
• Inaccurate forecasts
• Uncoordinated and divided in terms of inventory
  policy

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The inventory and service crisis

• Make-to-stock system
• Due to all the lacks in forecasts and to long
  lead times, creates high levels of inventory in
  the DCs resulting in carrying costs.
• By using push system, HP has to calculate at
  great length its inventory levels avoiding
  stock-out and overstock.

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The inventory and service crisis

• Multiple products
• This variety in products contributes to high
  levels of inventory because theres more products
  to keep in safety stock and to forecast expected
  demand.

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Issues to be discussed

• Long lead time
• Reduction in lead time, the standard deviation of
  demand during lead and review time is reduced.
• This is due to the fact that smaller lead-times
  imply an absolute variation in demand, smaller
  than with larger lead-times.

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Issues to be discussed

• Air Shipment
• Asian and European distribution centers receive
  orders more frequently, they wont need to keep
  higher safety stocks when compared to sea
  transportation.

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Issues to be discussed

• New Plant
• Another alternative would be to install a new
  plant somewhere between Europe and Asia. This
  would allow for smaller transportation costs and
  lead times.

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Issues to be discussed

• ERP System
• Another proposal has to do with the
  implementation of an Enterprise Resource Planning
  (ERP) system

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Conclusion

• Improve forecasting system
• Reduce the lead time and safety stock
• Air shipment
• New Plant
• ERP system

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Thank You !