Hp Deskjet

This report 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 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.

In the first part of the report, possible causes of the observed crisis as well as short-term and long-term solutions are developed. Besides extremely long lead times going along with the chosen transportation mode of ocean freight, one of the main reasons for the accumulation of inventory at the distribution centers (DCs) was the early “point of differentiation”. The necessary adoptions of the printer for the different countries were conducted at the production site in Vancouver instead of the local level where demand is predictable more exactly. As possible solutions for the problem the change of the transportation mode, the implementation of a rational inventory policy, the setup of sister plants in the respective countries and DC localization (postponement) are considered.

To emphasize the benefits of lead time reduction and postponement, a mathematically based comparison of different scenarios is conducted in the second part of the report. Using a periodic-review, order-up-to model the impact of shorter lead times and a later “point of differentiation” become obvious. Cost savings of about 1.7 million dollars can be achieved in comparison to the initial position.

Part three deals with the changes necessary for operating the supply chain more efficiently under DC localization. To enable postponement the printer first has to be redesigned. The DCs are forced to take over some parts of former manufacturing tasks. Furthermore the supplier structure can be changed: The material necessary for localization can be sourced directly in...