Hewlett-Packard:

DeskJet Printer Supply

Chain
SUBMITTED BY: Group 7
Avani Rajpal
Pratik Bidwaikar
Devik Kaul
Mriganka Sarin
Tanvi Apte
Yogita
  This case study deals with Hewlett-Packard (HP),
a famous manufacturer of computers and
peripherals.
 In the early 1990s, HP faced a so-called
“Inventory/Service-Crisis” concerning one of
Case Facts their high volume products, the DeskJet printer.
 Despite growing inventory levels at the
distribution centers in Europe and Asia-Pacific,
customer service levels were unsatisfactory.
Affected by growing competition this problem
had to be handled quickly.
 Brent Cartier, Manager for Special Projects in the
Materials Department of HP Company’s Vancouver
Division, had tried his best to find the possible
solutions of the issues related with inventory of
DeskJet printers that were arisen at world level
especially, at Europe.
 He had short time for these tasks because
preparation was needed to be done for Monday’s
meeting with Group Management on worldwide
inventory levels for the DeskJet Printer product
line. 
 Finally opinions and reactions of different company
divisions concerning the implementation of DC
localization are analyzed. The solution of problems
is the reconfiguration of key strategies related with
channel’s management.
BACKGROUND
 HP was founded in 1939.
 William Hawlett and David Packard
 In 1990, 50 operations, Revenues of $13.2 billion and
Net income of $739 million
 Six Products Groups
 The Peripheral Group was the 2nd largest
 Printers, Plotters, Magnetic Disks, Terminals
PRINTER
MARKET
 In 1990, 17 million units of workgroup and personal
printers, $10 billion
 40% impact/dot matrix
 40% laser
 20% inkjet
 By 1990, customers became aware of inkjet printers
(cheap and high quality)
 HP and Canon pionereed ink-jet technology
 Strengths: Weaknesses:
   
 Brand Valuation:  HP ranks  Weak Financials: they
50th amongst the top 100 recorded a decrease of 7.3%
brands around the world.  in revenues compared to FY
 Production excellence: HP 2014. The operating profits
had a market share of also decreased by 23.9%
nearly 20% in PC compared to FY 2014.
equipment. In the printer  Poor after sales service in
segment, they hold a computers
market share of 40.5%.  Declining Demand: The
 R&D: HP Labs research is demand for printing
focused on key growth systems and personal
areas that include computers have decreased
advancing technologies like by 8.3% during FY 2015.
SWOT sensing, natural language
detection, audio/video
Net revenue declined by a
17% in desktop PCs, 2% in
analytics, and new notebook PCs, 9% in
information displays. workstations and 8% in
 Differentiated products other net revenue.
 Marketing: Hewlett Smartphones are fast
packard is known to be a overtaking laptops and
smart marketer and its ads Hewlett packard is far
are always colorful, behind the others in
showing the capabilities of Smartphones.
its printer and giving off an
elegance of its own.
 Opportunities: Threats:
   
 3D printing: The 3D  Product Challenges:
market will reach a The growth of
value of $30.2 billion personal computer
by 2022 with a CAGR product line has
of 28.5%. Worldwide slowed down. The
shipments of 3D printing line also has
printers grew by many competitors
103% in 2016. and is facing a
 Managed Print growth decline.
Services (MPS)  Smartphones: Due
Market: The MPS to rising in the
market is forecasted demand and
to become $94.9 popularity of the
billion by 2024 from smartphones the PC
$26.2 billion in 2015 is taking a
at a CAGR of 14.8%. slowdown. 
 Tough Competition:
from Lenovo, Dell,
Acer, Canon.
Lexmark
The DeskJet
Printer  Introduced in 1988
 In 1990, sold 600,000 units, $400 million
 Mission statment:
 To become the recognized world leader in low cost
premium quality printers for offices and homes
 Main division is located Vancouver
 Consolidating four divisions
 Colorado, Idaho, California, Oregon
Manufacturing
Printer  In 1979, Manufacturing Cycle is 8 to 12 weeks
 3.5 months of inventory
 In 1981, Just-in-Time strategy had been
introduced
 Reduced inventory from 3.5 months to 0.9 months
 However, this strategy and production system
were not used efficiently.
 Bob Foucoult: “We were all dressed up but no
one to take us to the dance””
Manufacturing
Printer
 In 1988, this innovetive product line was used
effectively, with new model “DeskJet printer”
 With this new model, nearly-letter-quality
resolution is obtained and standard paper was
used.
 HP has already had knowledge and
implementation for the ink-jet technology and also
streamlined manufacturing process
 All these capabilities gave the HP chance become
the market leader in the ink-jet printer market.
  Supplier, manufacturing facility, distribution
centers, dealers, and customers
The DeskJet  Manufacturing is done by HP, in Vancouver
Supply
 Two stages of manufacturing
Chain
 Printed circuit board assembly and
test (PCAT)
 Final assembly and test (FAT)
 Three Distribution Centers
 US, Europe, Far East (shipping to Europe
and Far East by ocean)
 Localization
 For Europe and Far East, printer has to be
customized (language and power supply
req.)
The DeskJet
Supply Chain  Factory Cycle Time
 Through PCAT and FAT, about a week
 Transportation
 From Vancouver to US DC, about a day
 From Vancouver to Far East DC and Europe DC, 4-5 weeks
 Just-in-Time strategy
 Make-to-Stock
 Target inventory level=Forecasted Sales+Safe Stock
The DeskJet
Supply Chain  Three major sources of uncertainty affecting
supply chain
 Delivery of incoming materials (late shipment,
wrong part)
 Internal process (Equipment Efficiency,
Machine Downtimes)
 Demand
 Delivery of incoming materials and internal process
have an impact on manufacturing lead time
 Demand has an impact on inventory
The DeskJet  The Distribution Process
Supply Chain  Perfomance Measures: Inventory Level and
Distribution Cost per gross shipment dollar
 Major Costs: Outbound Frieght and Salaries
 Distribution Center’s Process
 Receive final products from supplier and
store them
 Retrieve products which is needed to satisfy
the orders of customer
 Arrange and pack the order, make it ready to
be sent to customer
 Ship the order with proper transportation
vehicle
 The Main issue is if the DC is operated as
warehousing or integration
Problems
and Issues  Determine the right level of inventory (best safety
stock amount) and provide high level of service is a
big challenge
 Find the best way to satisfy customer while
minimizing inventory
 Reduce the uncertainty caused by delivery of
incoming materials, impoving manufacturing and
equipment efficiency, reduce downtimes
 Improve the forecast accuracy
  Forecast errors, especially in Europe
 Product shortages and piled up inventory
 Safety Stock Rules fail a lot, not meet the
target inventory
Problems  Inconsistent inventory level causes unsatisfied
and Issues customer and loss of sales
 Various demands from the three regions (US,
Europe and Far East) and
analyze/consolide/interprate demands and
customer behaviour
Problems
and Issues  Transportation
 It takes long time to ship products from US to
Europe and Far East
 If there is a shortage in Europe and Far East, it is
hard to fix it
 Reduce transportation lead time in order to
diminish long replenishment lead time
 Inventory
 Increase or utilize the current capacity
 Similar to establishing new inventory, analyze
whether a plant is set up in Europe or not
 What crisis: inventory imbalance, i.e., some
product options having excess inventory while
some others have shortages.
What caused it:
 many product options due to geography,
 long DC replenishment lead time,
Inventory-  highly uncertain market,
Service Crisis  inflexible design : not easy to rework one
 option to make it into another,
 out of control inventory system,
 uncoordinated functional interests
(manufacturing, distribution, marketing,
engineering )
Solutions
 Improving forecasting method
 Collecting related data month by month for
every single product, and also examine
aggregate demand
 To be prepared to manufacture
customized power supply and manual
 Anaylze HP and competitor’s sales of previous years
 Define an average sale of each month, calculate
standard deviation, be aware of trends
 Similarly, data loss of sales, stock outs, and
backorders have to be examined
 This research has to be done especially for Europe
Market and European customer behavior
 Customer surveys and analyze
expectation/satisfaction
Advantages:
 reduce demand uncertainty
 create a buffer against circumstances that could
delay the arrival of raw materials
Disadvantage:
 cost and time of calculating a forecasting system is
inestimable
 hard to implementing new system
 effects of a new forecasting system are uncertain
Solutions

 More Inventory/Buffer Stock

 Analyze the cost of lost sales
 European DC runs out of space to store as DC
tells and complains
 If investing on a new inventory diminishes the
lost sales and it is more profitable
 Revise safety stock rules, so the target inventory
levels that is sum of safety stock and forecast
Solutions  European Factory
 Since the transportation lead time is long,
in order to satisfy customer’s demand,
setting up a plant might be a solution,
similar to set up a new inventory
 Since the forecast is not good in Europe, to
decide whether factory is opened or not,
European sales and market have to be
examined precisely and volume of
production should be worth it
 It is possible to revise the DC that is
operated to complete the integration of
printers, not to manufacture a printer from
a rough
Advantages:
 less transportation costs
 less Lead and shipping times
 Increase customer satisfaction
 reduce costs of in-transit inventory and holding
costs
Disadvantages:
 Cost of building new plant
 Cost for operating the new plant
 More human capital cost
Solutions

 Air Shipment
 It is very long time to transport products from US
to Europe and Far East
 Vessels are chosen as transportation vehicle
 Air transportation would shorten the lead time
and make the company ready to satisfy customer
THANK YOU!