Hp Deskjet Supply Chain Essay Example

countries (localization done within factory) * After localization & FAT, finished products are shipped to 3 Distribution Centers (DC) by ocean (Exhibit 3: Bill of Materials) * North America DC * Europe DC * Asia-Pacific DC * From DC’s, Products shipped to: * If Europe: * HP’s Individual Country Office, then managed by individual country managers * Distributors * Retailers * Resellers * Inventories in Vancouver: * Raw Materials & Components for production No buffer inventory between PCAT&FAT * No finished goods inventory preferred * Total Factory Cycle Time through PCAT & FAT: * 1 week * Transportation from Vancouver, DC to * Within US: 1 day * To Europe/Asia: 4-5 weeks * Demands of Resellers (customers of HP) * Carrying little inventory * Maintain high level of availability to consumers (at DCs of HP) * HP’s Action: * DC’s started to operate in make to stock mode. * Target Inventory Levels=Forecasted Sales + Safety Stock Level are set to 3 DCs. * Vancouver is stockless, operated in pull mode. To fill DC’s “just-in-time” needs, production plans changed. * Safety stocks were set up for incoming materials at the factory to ensure material availability. * 3 uncertainty to affect supply-chain : First 2 effected manufacturing lead time to replenish stock at DCs. 3rd leads to inventory buildup/backorders at DCs. 1. Delivery of incoming materials (wrong/late) 2. Internal process (Machine downtimes) 3. Demand * European/Asian DCs had to manage fluctuations in demands and long lead-times because of transportation. * For availability to customers, high stock levels. US DCs are better since little localization-mix fluctuations in place. * Distribution Process: * DeskJet high volume * Organization: *

VP of Marketing-WorldWide Distribution Manager-Operations Manager of Regional DC (OM DC) * Operations Manager’s direct reports: Finance, MIS, Quality, Marketing, Physical Distribution, Distribution Services * Physical Distribution: physical process such as receiving through shipment. * Distribution Services :Planning, Procurement * DC performance measures: * Line Item Fill Rate (LIFR) : Total no. customer order line items filled / Total no. ustomer order line items attempted (that is each time a material is pulled for a line item) * Order Fill Rate (OFR): Similar to LIFR but based on orders completed. An order consists of multiple line items. * Inventory Levels * Distribution Cost per Gross Shipment dollar * Major Costs: Informal, Open to Negotiation on % Allocation * Outbound freight : Charged back to Product lines based on Actual No. of Pounds of Product Shipped. * Salary * Non-Freight: Percentage of Estimation of percentage effort to support a product line charged back to product lines * DC’s 4 process steps: 1.

Receive products from various suppliers and stock them 2. Pick various products needed to fill a customer order 3. Shrink-wrap the complete order and label it 4. Ship the orders via appropriate carrier * Desk Jet fits DC processes. * Disruption of Material Management: * PC & Monitors don’t fit in processes since they need “integration”. * DC’s support distribution but not manufacturing. No Material Resource Planning (MRP). No Bill of Materials (BOM). No trained personnel in component procurement. Main goal: warehouse & distribution * Frustration in assembly processes Inventory &Service Crisis * Limit Inventory & Provide High Level of Service * Challenge for Vancouver * Manufacturing group * increased supplier management to reduce uncertainties

caused by delivery variability of incoming materials * improved process yields * reduced downtimes of machines * Remained: Forecast accuracy improvement * Europe experienced shortage in some products, inventory in others * Past: DC’s target inventory levels based on safety stocks * Safety stock rules had to be revised * Responsive to demand uncertainties Replenishment lead times * Safety Stock Methodology (Exhibit 1) Issues: * Choice of inventory carrying cost to be used in analysis (Varied: %12 to 60) * Choice of target line item fill rate to be used (Company target: %98) * Suggestions: * Sister factory(Questionable) * Issue: Volume high enough to support a factory? * Pro: Takes care of inventory and service problems * More inventory (Negative) * Cons: Inventory costs don’t enter into P&L statements but lost sales hurt revenues. Leads to Inventory-Sales tradeoffs. Air transportation (Positive) * Cons: Shortening lead time: faster reaction to unexpected changes in product mix. Expensive * Pros: Means lower inventory, higher product availability * Forecasting system improvement: (Questionable) * Must reduce magnitude of demand uncertainties * Concerned about the level of change of the new model HP Meeting They meet up for inventory issue: *Brent works in Materials (Vancouver) HP Division Comments: Production – want no involvement. Materials issue” but wants proliferation (increase) of models, options Distribution – should have to track, store warehouses of inventory since Vancouver Division didn’t build right products in right amounts Europe Distribution – suggest charging cost of extra warehouse space rented back to Vancouver Division instead of allocating it to products they shipped. Materials (Vancouver) – Word comes from Group Management. Run with fewer inventories but satisfy customers HP

Case question 1 * What are the pros and cons of the following proposals mentioned in the case: A European factory, better forecasting, more inventory.

European Factory Pros * Since inventory buildup in Vancouver and products are customized there, Europe is now dependent on Vancouver. With a new factory, it can arrange its own schedule and not wait on Vancouver plant for customization purposes. * Inventory levels can be adjusted better without depending on lead times of Vancouver * Satisfactory service levels can be managed better for just-in-time needs of DCs. Cons * A factory is always costly * Might not have enough orders to cover factory costs. Better Forecasting Pros * Service will be affected less from fluctuations of demands Cons If forecasting fails in Vancouver or because of other suppliers, Europe might face problems because of product availability * Because of long lead time, maintenance of cooperation between various HP divisions forecasting is hard to manage * Might fail * Might need too many changes within company that will be costly. More Inventory Pros * Satisfactory product availability Cons * It will increase cost. * Different localization options, uncertainty in many local markets, maintaining cooperation between various HP divisions make inventory difficult to manage * Causes tradeoff between sales and service