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HP DESKJET PRINTER SUPPLY

CHAIN
GROUP 10 (SEC F)
HIMANSHU TANDON (1411372)
ARNAB MAJI (1411360)
S SHAHZAD ANJUM (1411396)
SOURAV DAS (1411408)
NITESH JAIN (1411384)

Group 10

Market Scenario

17 mn units amounting to USD 10 billion


Printer Type

Market Share

Impact/Dot Matrix

40%

Ink-Jet

20%

Laser

40%

Trend towards ink-jet from dot matrix


Competition in the industry

North America - HP
Japan - Cannon
Europe - Several Players

Objectives

Satisfy customer in terms of product


availability
Minimize inventory
Synchronize the supply chain
Market changing to commodity
No

product loyalty
High reliability and quality and low cost

Supply Chain
Suppliers

Suppliers

Suppliers

IC Mfg.

PCAT

Print Mech Mfg.

FCAT

Suppliers

US DC

Customer

Europe
DC

Customer

Asia
DC

Customer

Problems

Supply chain failure


Large

forecast errors in Europe


Shortages for demanded product
Inventory pileup for others

Appears like an immature market with large


fluctuation in demand
Large lead times for Europe and Asia

Inventory/Service Crisis

Huge variation in the demand


Amount of localization for the various
category of deskjet printers
Ineffective method of forecasting
Long shipment time to distribution centres via
ocean
Make-to-Stock mode to provide high
availability

Parameters for evaluating


alternatives

The total factory time (PCAT and FAT) = 1 week


Transportation time from Vancouver factory to US DC = 1 day
Transportation time from Vancouver factory to Europe DC by sea = 5
week
Transportation cost from Vancouver factory to Europe DC by sea =
$1 per unit
Transportation time from Vancouver factory to Europe DC by air = 1
week
Transportation cost from Vancouver factory to Europe DC by air =
$11 per unit
Reorder interval, R = 1 week
Total lead time, L = review time at factory i.e. 1 week + transportation
time
Cost of production = $660 per unit
Inventory carrying cost (50% of product cost) = 0.50 660 = $330

Average inventory and inventory


level in current scenario
Option

A
AA
AB

Monthly Monthly Lea Revie


Daily
Std Dev
Mean
Std.
d
w
(units/mo
Dev.
Tim Period
nth)
(units/m
e
(days)
onth) (day
s)
42.3
32.4
42
7
41.4
420.2
203.9
42
7
260.6
15830.1
5624.6
42
7
7188.3

Safety Average
Stock Invento
(units)
ry
(units)

Inventory
Holding
Costs ($)

84.9
89.8
24695
534.2
583.2
160380
14736.
16583
4560325
1
AQ
2301.2
1168.5
42
7
1493.4 3061.4 3329.9
915722.5
AU
4208
2204.6
42
7
2817.5 5775.9 6266.9 1723397.5
AY
306.8
103.1
42
7
131.8
270.1
305.9
84122.5
Averag 23108.6
Total
27158.6 7468642.5
Transportation Costs = Mean Monthly Inventory * $1 = (23108.6 * 1) = $
e
23,108.6
Total Inventory Holding Costs = Total Average Inventory*0.5*(660/1.2) = $
7,468,643

Alternative1: Use of freight for all models


dispatched to European DC
Option

Monthly
Mean
(units/month
)

Monthly Std.
Dev.
(units/month
)

Lead
Time
(days
)

Revie
w
Perio
d
(days
)

42.33333

32.41305

14

15830.08

5624.579

14

4208

2204.583

420.1667

Daily

Safety
Stock
(units)

Average
Inventory
(units)

Inventory
Holding
Costs ($)

27.11871

55.59335

60.53224

16646.36

4705.86

9647.013

11493.86 3160810.83

14

1844.487

3781.197

4272.131 1174835.83

203.9268

14

170.6174

349.7657

398.7852

109665.92

2301.167

1168.493

14

977.6317

2004.145

2272.614

624968.92

306.8333

103.1229

14

86.27881

176.8716

212.6688

58483.92

Std Dev

A
AA
AB
AQ
AU
AY
Average

Transportation Costs = Mean Monthly Inventory * $1 = (23108.6 * 11) =


23108.58
Total
18710.59 5145411.78
$254,194.6
Total Inventory Holding Costs = Total Average Inventory*0.5*(660/1.2) =
$5,145,412

Alternative 2: Setting up factory in


Europe
Option

A
AA
AB
AQ
AU
AY
Averag
e

Monthly
Mean
(units/mont
h)

Monthly Std.
Dev.
(units/month)

Lead
Time
(days
)

Review
Period
(days)

Average
Inventor
y (units)

Inventory
Holding
Costs ($)

Std Dev

42.33333

32.41305

22.91949

46.98495 51.92384

14279.058

15830.08

5624.579

3977.178

8153.214 10000.06

2750015.8

4208

2204.583

1558.876

3195.695 3686.628

1013822.5

420.1667

203.9268

144.198

295.606

2301.167

1168.493

826.2496

1693.812 1962.281

539627.25

306.8333

103.1229

72.9189

149.4838

185.281

50952.26

Total

16230.8

4463468.91

23108.58

Daily

Safety
Stock
(units)

344.6254

Total Inventory Holding Costs = Total Average Inventory*0.5*($660/1.2) =


$4,463,469

94772

Results
Reduction of inventory holding cost is more in the
alternative 2

Caveat:
The set up cost for the new factory is not mentioned in the
case