Hewlett-Packard:

DeskJet Printer Supply

Chain
Coordinated Product and Supply Chain Design

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

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.

The DeskJet Supply Chain

Supplier,

manufacturing facility, distribution

centers, dealers, and customers
Manufacturing is done by HP, in Vancouver
Two stages of manufacturing
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 Supply Chain

The

Distribution Process

Perfomance Measures: Inventory Level and Distribution

Cost per gross shipment dollar
Major Costs: Outbound Frieght and Salaries

Distribution Centers 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

Problems and Issues

Forecast

errors, especially in Europe

Product shortages and piled up inventory

Safety Stock Rules fail a lot, not meet the target
inventory
Inconsistent inventory level causes unsatisfied 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

Solutions
Make

the forecast more accurate

Collecting related data month by month for every single

product, and also examine aggregate demand
To be prapared to manufacture customized power supply and
manual

Anaylze HP and competitors 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

Solutions
Making

the forecast more accurate provides

some benefits
More accurate forecast provides more reliably safety
stock level and reduce amount of unnecessary products
stocked in inventory
Reduce the replenishment lead time
Reduce unsold products, it is crucial because products
technologic clock speed is high
Reduce inventory holding cost and cost of unsold products

Avoid stockouts, unsatisfied demand, loss of customer

Solutions
Increase

the capacity of inventory

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
Establishing

a new facility

Since the transportation lead time is long, in order to

satisfy customers 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

Solutions
Transportion

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