HP: Supplying The Desk Jet Printer to Europe

7/23/2019 HP: Supplying The Desk Jet Printer to Europe

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MM5004HP: Supplying The DeskJet Printer in Europe


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Outline

List of Fact(s)&Issu(es)

Possible Solution(s)Focus Problem(s)

Recommendation(s)

Theory(s)


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Facts DeskJet printer was introduced in 1988 One of Hewlett-Packard`s (HP`s) most successful products 600,000 units in 1990 HP 3 distribution centers (DC):

1. North America2. Europe3. Asia Pasific

HP in Vancouver does manufacturing DC`s role as warehouses need to focus and do their best on

distribution Target inventory levels equals to one month average sales in the

DC PC, monitors and other products require integration processwhile Deskjet printer fits well into the standard process for thedistribution.


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Issues Pallets of DeskJet printer at HP`s distribution centers

Inventory levels in Europe need to be raised Inventory models for European DC supply chain:

5 weeks for transportation time through seashipment

Weekly shipment to European DC Management costs decisions:

to use 25% for warehouse expenses (range from 12to 60%) for carrying cost

250$ each to produce and ship to Europe 98% safety stock probability

Safety stock system to reduce forecasts errors andreplenishment lead times

Integration proccess to be applied to DeskJet printer at


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HP DeskJet Supply Chain (exhibit 17.14)

Focus Problem

Supplier

Supplier

IC Mfg

PrintMechMfg

Supplier

PCAT FAT

Supplier

European DC

US DC

Far EastDC

Customer

Customer

Customer

Shipment System:1. Transportation Type (Air vs Sea)2. Cost effectiveness

3. Time efficiency

6 Models

for Europe:(A,AB,AU,AA,AQ,AY)Product Shortages

from some countries

Inventory forecastingerrors


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Theories

Postponement is delaying any modifications orcustomization to the product as long as possible in theproduction process (Heyzer and Render, 2008)

HP is able to hold centralized inventories of the generic

printer for shipment as demand changed HP is successfully adopt the postponement supply chain

method Localization process for selling DeskJet: customizing the

printer to meet the language and power supplyrequirements of the local countries (Jacobs, Chase,Aquilano, 2009)


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Supplier

Supplier

IC Mfg

PrintMechMfg

Supplier

PCAT FAT

Supplier

European DC

US DC

Far EastDC

Customer

Customer

Customer

Postponement at Vancouver (manufacturing place)

Localization base to specific countriesdestination


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HP DeskJet Demand Data for EU (exhibit 17.16)

EUOptNOV DEC JAN FEB MAR APR MAY JUN JUL AUG SEP OCT

A 80 - 60 90 21 48 - 9 20 54 84 42

AB 20,572 20,895 19,252 11,052 19,864 20,316 13,336 10,578 6,095 14,496 23,712 9,792

AU 4,564 3,207 7,485 4,908 5,295 90 - 5,004 4,385 5,103 4,302 6,153

AA 400 255 408 645 210 87 432 816 430 630 456 273

AQ 4,008 2,196 4,761 1,953 1,008 2,358 1,676 540 2,310 2,046 1,797 2,961

AY 248 450 378 306 219 204 248 484 164 363 384 234

Tot. 29,872 27,003 32,344 18,954 26,617 23,103 15,692 17,431 13,405 22,692 30,735 19,455

Item to be considered:1.EU Opt

AB

which has the best demand comparing to other Opt.2.JAN & SEP reach the two highest total demand


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Focus ProblemSupplier

Supplier

IC Mfg

PrintMechMfg

Supplier

PCAT FAT

Supplier

European DC

US DC

Far EastDC

Customer

Customer

Customer

Options:1. Final Product per area in PCAT & FAT site EU DC Customer 2. Generic Product in PCAT & FAT site Finali product in EU DC

Customer

5 W1 W


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SolutionsInventory Model + Inv. Investment

Generic ProductsReduce time < 1W

PCAT FAT European DC Customer

Localize Products

Vancouver (US) EU

5 D

?

Private Plane Public Plane

Private Ship Public Ship(Existing Method)Inventory Model EoQ with Safety Stock


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TC = Total Annual CostD = Demand (annual)C = Cost per unit

S = Setup cost or cost of placing an order H = Holding cost

Q = Quantity to be ordered where optimalamount is termed the EOQ or Q opt or Q*,with :

R = Reorder point in unitsL = Lead time in daysz = Number of Standard deviations for aspecified service probability.SS = Service Stock, with:

Where P = Probability the unit will not be soldCu = Underestimating DemandCo = Overestimating Demand



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Data provide from case:

Annual Demand (D) = ExCost per Unit (C) = $250Holding cost (H) = 12% - 60 % ; using 25% from Cost per Unit (C)Lead Time (L) = based on delivery scenarioOrdering Cost (S) = based on delivery scenarioStd deviation for specified Service probaility (z) = 2.10 G(z) = 98% = 0.98Cu = $250

Average Daily Demand (d) =

Data to be assumed:

Co = $ 400


Based on delivery scenario related to Lead Time (L)


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ScenarioDeliveryVancouver to EU

Est.Cost/unit(S)

Est. TimeDelivery(L)+ 5 D(PCAT -FAT)

Q* TC R P

PublicPlane

$80 12 Days842.55 69,378,410 54,539.21 0.38

PrivatePlane

$100 7 Days942.00 69,384,625 39,520.98 0.33

PublicShip

$30 40 Days515.96 69,357,997 113,990.38 0.45

PrivateShip

$70 26 Days788.14 69,375,009 78,241.75 0.42

Considered 1 Considered 2


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Solutions


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SolutionsFor Shipment by sea

C/C c = (3000.675 (3000.675)0.5/(5336.952*5*1.9) C/C c = 0.058

For Shipment by air

C/Cc

= (3000.675

(3000.675)0.5/(5336.952*2*1.9) C/C c = 0.145

From the result above;1. shipment by air gives more flexibility in terms of

redesigning of the product and production process:2. for shipment by sea choice the additional cost of finalassembly can not exceed 5 % of the cost of commoncomponent; for the shipment by air that cost can be upto 14%.


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Supplier

Supplier

IC Mfg

PrintMechMfg

Supplier

PCAT FAT

Supplier

European DC

US DC

Far EastDC

Customer

Customer

Customer

Postponement at Vancouver (manufacturing place)

Localization base to specific countriesdestination


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Recommendations

1. Shipment by air gives more flexibility in terms of redesigning of the product and production process

1. DC localization is the most economic factor andtherefore final assembly product is in DC as it savetime and cost for PCAT & FAT section

1. Based on TC (total inventory cost) and Probabilitythe unit will not be sold, scenario shipment by(air/sea?) recommended to HP case.


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References

Jacobs, F Robert, Chase, Richard B, and Aquilano, Nicholas J(2009) Operations and Supply Management, 12th Ed, New York:McGraw-Hill Education

Jay, Heizer and Render Barry (2008) Operation Management, 9thEd, Pearson Education International

Shim, Jae K, Siegel, Joel G, Shim, Allison L (2011) The VestPocket MBA, 4th Ed, New York: Penguin


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Thank You

Documents

HP: Supplying The Desk Jet Printer to Europe