HP Case Study - Deskjet Printer Supply Chain.

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HEWLETT-PACKARD: DESKJET PRINTER SUPPLY CHAIN

Case Analysis

Presented to

Professor D. Krishna Sunder

Indian Institute of Management, Bangalore

On

November 07th, 2005

 In Partial Fulfilment of the

Requirements of the course

Operations Management

By

Agila Reddi K (0511072)

Arjun Gaur (0511075)

Clare Kurian(0512004)

Minu Rachel Philip(0511101)

Nikhil Menon (0511105)

Section B

HEWLETT-PACKARD

Introduction

        DeskJet Printer was becoming one of Hewlett-Packard (HP) Company’s most successful products. Sales had grown steadily reaching around 600,000 units in 1990. Uneven distribution of inventory was one of the key issues which needed to be addressed since in spite of having distribution centres (DC) filled with printers, organisations in Europe claimed that inventory levels needed to be raised to maintain satisfactory product availability. Also there seemed to be an issue of requiring the buy-in of the various parties on what was the right level of inventory to be maintained.

        Worldwide sales were about 17 million units which amounted to $10 billion. The US-Western Europe markets were mature while that in Eastern Europe and Asia-Pacific were developing markets. The ink-jet printer (DeskJet was one of the products in this category) had around 20% of the retail printer market. HP was the market leader in US while Cannon was in Japan and Europe had competitors like Epson, Manisman-tally, Siemens and Olivetti.

        The Vancouver Division of HP (the personal printer activities were consolidated) introduced the Kanban process and converted to stockless production which also reduced cycle time and reduced inventory time from 3.5 months to 0.9 months.

The Supply Chain

The network of suppliers, manufacturing sites, distribution centres (DCs) dealers and customers for the DeskJet product comprised the supply chain. Manufacturing which involved two stages- Printed Circuit Assembly (PCAT) and Final Assembly and test (FAT) was done at HP in Vancouver.  The components needed for the manufacturing process was sourced from other HP divisions as well as from external suppliers. Currently localisation of the printer which meant customising to the specific region was done at the factory. Outgoing products were shipped to the three DCs by ocean. No significant buffers were maintained between the PCAT and FAT stages.  

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There were three major sources of uncertainty that could affect the supply chain:

  • Dealing with the delivery of the incoming materials
  • With regard to the internal processes
  • Demand of the product.

The first two resulted in delays in manufacturing lead time to replenish the stocks at the DCs. Demand uncertainties lead to inventory build-up or backorders at the DCs.

Inventory and Service Crisis:

Though the supplier management was worked on to reduce uncertainties in delivery variability of incoming materials, and also other factors such as improvement in internal processes had happened, ...

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