Hewlett Packard:

Deskjet Printer Supply Chain

Group 2
Paritosh Gupta (0511026)
Sachin Bali (0511010)
Saurabh Gupta (0511040)
Venkatraghavan S (0511051)
Vikram Vaidyanathan (0511052)
Problems Faced

 Large fluctuations of demand

(standard deviation up to 76.6% of
individual product demand in Europe)
 Gross forecasting errors in demand
 Poor lead time due to usage of
shipping instead of transport by air
Implications
 Loss in revenues due to shortage of some
products
 Increase in warehousing costs due to pileup of
inventory of other products
 Locked up cash due to inventories
 Potential loss of customers as they switch to
other brands (as the product is increasingly
becoming a commodity)
Options
 Transport finished goods by air
 Set up a manufacturing facility in Europe on the
same lines as the Vancouver plant
 Use better forecasting models
 Maintain finished goods inventory at the Vancouver
plant (scrap JIT)
 Integration of the power module with the generic
printer at the distribution center in Europe
Evaluation of Options

1. Finished goods by air

 The lead time reduces from 42 days (7 + 35) to
14 days (7 + 7)
 The transport cost by air will be $739.5
thousand per month as compared to $208
thousand by ship
 Improvements in profit due to reduction in
inventory not known
Evaluation of Options
2. A manufacturing facility in Europe
 Will reduce lead time to 8 days (7 + 1)
 Will reduce average inventory from 27159 units to
16230 units
 Huge investments
 Will reduce benefits from economies of scale
 New suppliers will need to be found and MRP
systems will need to be implemented
Evaluation of Options

3. Use better forecasting methods (like the

Box Jenkins method) ; Eastern Europe?
4. Finished goods inventory at the
Vancouver plant
 Maximum reduction in lead time to 35 days
 Would reduce inventory in Europe to only 25350
units
 The holding cost of this cannot be evaluated by
given data
Evaluation of Options

5. Integration of the power module with the

generic printer
 Final assembly of the printer in the Europe DC
 Inventory of the power modules and manuals will be
maintained at a higher level (99%) than that of the
generic printer
 Will reduce the cash locked in
 Inventory level of the generic printer improves by
29.83%
 Response time will improve
Recommended Solution

 HP move the final assembly to the Europe

DC
 Coupled with a switch to air transport
 Improvement in the forecast system; long-
term option