Bussiness Control

Case Overview

The Hewlett-Packard Managers from each department had a meeting to discuss about whether using a universal power supply for the next generation of network laser printer called “Rainbow” is beneficial or not. They have the authority to make the decision while strong justification should be provided to defend their proposal.

HP is developing its new generation network printer while it has been struggling from 3 main issues –

• The power specification for the printer is different in North American (110 volt) and European (220 volt). This differences brings a big challenge in HP’s market forecasting and the subsequent stockout and transshipment between regrions;

• HP needs to provide the specifications to its major partner in Japan at least 14 weeks ahead due to the abovementioned different power standard issue;

• The specification readiness time can be postponed for 2 months if a universal power supply is used, however an extra cost of $30 for each printer will be needed.

Case Questions

1. In what way is a universal power supply a postponement strategy?

HP has two specifications for its printers, 110-volts for North American region and 220-volts for European region. One of the crucial part of the printer is engine. It is built by one of HP’s manufacturing partner in Japan who needs the specification 14 weeks in order prepare for production. However production period only takes four weeks. The dilemma is that should HP were to develop universal power supply, it can have the flexibility of postponing the specification requirement to its partner by 2 months. On the other hand, should the universal power supply strategy is implemented, HP can respond the demand in the individual market by optimizing is inventory and reducing its indirect cost that hits is SG&A.

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2. What are the costs and benefits of a universal power supply (feel free to make assumptions)?

Costs

• If HP incorporate the universal power supply and sell 450,000 units of...