Hp Case Study
MBA 533
Advanced Operations Management
Fall, 2010
Case: Hewlett-Packard: DeskJet Printer Supply Chain A and B
What are the pros and cons of the following proposals mentioned in the A case: a European factory, better forecasting, more inventory. • European factory Pros: (1) Shorter delivery time, which means less pipe line inventory, less inventory cost. (2) Faster response to market requirement. Cons: (1) Need to build another factory, which means lots of fixed costs. (2) Complex management (3) May need to follow local law requirements. • Better forecasting: Pros: (1) Better forecast always reduce uncertainty, reduce inventory while maintaining same service level, or increase service with the same amount of inventory. Cons: (1) May not doable (2) Better forecast might lead to wild mistakes in some special years, which leads to huge missing sales or reduced service levels. • More inventory: Pros: (1) Better probability of satisfying customer demands, higher fill rate, less lost sales or back orders. Cons: (1) Higher inventor cost (2) More inventory may become obsolete, which costs money.
Assess quantitatively the air freight option relative to current operations. Just consider the products for the European market. Do not forget to consider pipeline inventory (since HP owns the pipeline inventory from Vancouver to Europe). Use the following assumptions: - HP wants to minimize inventory while still achieving at least a 98% fill rate. - The lead time from Vancouver to Europe is 5 weeks by the current method (ocean) but 1 week by air. - HP orders and received inventory on a weekly basis. - There are 4.33 weeks per month and demand is independent across time. - The product sells for $450 and marginal production cost is $300.
Advanced Operations Management
Fall, 2010
Case: Hewlett-Packard: DeskJet Printer Supply Chain A and B
What are the pros and cons of the following proposals mentioned in the A case: a European factory, better forecasting, more inventory. • European factory Pros: (1) Shorter delivery time, which means less pipe line inventory, less inventory cost. (2) Faster response to market requirement. Cons: (1) Need to build another factory, which means lots of fixed costs. (2) Complex management (3) May need to follow local law requirements. • Better forecasting: Pros: (1) Better forecast always reduce uncertainty, reduce inventory while maintaining same service level, or increase service with the same amount of inventory. Cons: (1) May not doable (2) Better forecast might lead to wild mistakes in some special years, which leads to huge missing sales or reduced service levels. • More inventory: Pros: (1) Better probability of satisfying customer demands, higher fill rate, less lost sales or back orders. Cons: (1) Higher inventor cost (2) More inventory may become obsolete, which costs money.
Assess quantitatively the air freight option relative to current operations. Just consider the products for the European market. Do not forget to consider pipeline inventory (since HP owns the pipeline inventory from Vancouver to Europe). Use the following assumptions: - HP wants to minimize inventory while still achieving at least a 98% fill rate. - The lead time from Vancouver to Europe is 5 weeks by the current method (ocean) but 1 week by air. - HP orders and received inventory on a weekly basis. - There are 4.33 weeks per month and demand is independent across time. - The product sells for $450 and marginal production cost is $300.