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8/7/2019 Hewlett_Packard1

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Hewlett Packard:Deskjet Printer Supply Chain

Group 2Paritosh Gupta (0511026)

Sachin Bali (0511010)

Saurabh Gupta (0511040)

Venkatraghavan S (0511051)

Vikram Vaidyanathan (0511052)


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Problems Faced

Large fluctuations of demand

(standard deviation up to 76.6% ofindividual product demand in Europe)

Gross forecasting errors in demand

Poor lead time due to usage ofshipping instead of transport by air


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Implications

Loss in revenues due to shortage of someproducts

Increase in warehousing costs due to pileup ofinventory of other products

Locked up cash due to inventories

Potential loss of customers as they switch toother brands (as the product is increasinglybecoming a commodity)


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Options

Transport finished goods by air

Set up a manufacturing facility in Europe on thesame lines as the Vancouver plant

Use better forecasting models

Maintain finished goods inventory at the Vancouver

plant (scrap JIT) Integration of the power module with the generic

printer at the distribution center in Europe


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Evaluation of Options

1. Finished goods by air The lead time reduces from 42 days (7 + 35) to

14 days (7 + 7) The transport cost by air will be $739.5

thousand per month as compared to $208thousand by ship

Improvements in profit due to reduction ininventory not known


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2. A manufacturing facility in Europe Will reduce lead time to 8 days (7 + 1) Will reduce average inventory from 27159 units to

16230 units Huge investments Will reduce benefits from economies of scale New suppliers will need to be found and MRP

systems will need to be implemented


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3. Use better forecasting methods(like theBox Jenkins method) ; Eastern Europe?

4. Finished goods inventory at theVancouver plant

Maximum reduction in lead time to 35 days

Would reduce inventory in Europe to only 25350units

The holding cost of this cannot be evaluated by

given data


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5. Integration of the power module with thegeneric printer

Final assembly of the printer in the Europe DC Inventory of the power modules and manuals will be

maintained at a higher level (99%) than that of thegeneric printer

Will reduce the cash locked in Inventory level of the generic printer improves by

29.83% Response time will improve


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Recommended Solution

HP move the final assembly to the Europe

DCCoupled with a switch to air transport

Improvement in the forecast system; long-

term option

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