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HP DeskJet Printers Supply Chain

A case on Basestock Levels and Postponement

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HP DeskJet PrintersThen and Now

Photo printer

Color printer

Mobile printerThe first DeskJet printer

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History of HP

– HP founded in 1939 by William Hewlett and David Packard

– 1990 revenues $13.2 B and profit $739 M

– Then, a manufacturer of electronic test and measurement equipment

– Now, mostly manufactures computers and peripherals

– Peripherals is the second largest group among six product groups

– Peripherals: Printers, Plotters, Magnetic disc and tape drivers, Terminals and Network products

HP Radio Oscillator circa 1939

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Printer Market

– HP sold ?? M printers and made a revenue of $?? B in 1990» Each printer about $???

» But prices has been dropping

– Printers are becoming a commodity sold at supermarket

– Market is composed of » ??% impact/dot matrix, dropping

» ??% inkjet, increasing; HP is the market leader

» ??% laser

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Vancouver Plant

– Printer production at Fort Collins, CO, Boise, ID, Sunnyvale, CA

and Corvallis, OR is consolidated to the Vancouver site

– Vancouver plant uses a pull system » JIT, Kanban, Stockless production

– Vancouver had the proper production system

– DeskJet printer became its flagship product

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Printer Supply Chain

FATPCAT

IC MfgSupplier

Supplier

SupplierPrint

Mechanism Supplier

EuropeDC

Far EastDC

AsiaDC

?? Lead time

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What is Brent Cartier’s problem?

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Brent Cartier’s problem

Too much inventory in the DeskJet supply chain Some suggest pumping up more inventory European and Asian DCs cannot meet because of ?????

mismatch.

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DCs operate as a push or a pull system?

FATEurope

DC

Far EastDC

AsiaDC

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What is localization?

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What is localization?

Customization of a printer to meet the language and power supply requirements of the local countries– Product manuals

– Several power cords

Where is localization done?

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Can a DC localize?

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Can a DC localize?

DCs do not have a ???? ???? system for assembly operations

US DC manager To Beal says:– [At a DC] We have to decide what our core competency is ….

If we want to take on manufacturing processes here, we have to put processes in place to support them

In conclusion, DC managers are for/against (??) localizing at DCs.

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What is inventory imbalance?

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Inventory imbalance

Start with an example:– There are 1000 DeskJet configured/packaged for France– Another 1000 for England

– What is the shortage if the demand in France and England are both 1000 printers?

– What is the shortage if the demand in France is 1500 while the demand in England is 500?

Inventory imbalance is having the correct amount of total inventory but the incorrect mixture

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Can localization at a DC avoid inventory imbalance?

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Can localization at a DC avoid inventory imbalance?

Continuing with the same example:– There are 2000 DeskJet ready for Europe

– What is the shortage if the demand in France and England are both 1000 printers?

» Shortage is ??

– What is the shortage if the demand in France is 1500 while the demand in England is 500?

» Shortage is ??

Not convinced yet, what is the effect of postponed localization on printer inventories?

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To convince ourselves more

Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sep Oct

AB 20572 20895 19252 11052 19864 20316 13336 10578 6096 14496 23712 9792

AQ 4008 2196 4761 1953 1008 2358 1676 540 2310 2046 1797 2961

AU 4564 3207 7485 4908 5295 90 0 5004 4385 5103 4302 6153

Consider options with monthly demand larger than 1000 in Exhibit 4.

Compute the basestock levels for each product to achieve a fill rate of 98%.

Note that basestock levels can be reduced if these options are aggregated into a single one.What would be the basestock level for this single product?

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Postponing localization to the DCs

Is the US DC manager right? What problems are possible with localization at DCs? How to avoid these problems?