Supply Chain Management
ndex
1. What has caused the so-called Inventory/Service "Crisis"? 1
2. What are the important "drivers" of safety stock? 2
3. Recommend quantitative target inventory levels for the six European options, assuming a weekly periodic review replenishment. 4
4. Assuming a 20% gross margin for each printer, sea transportation costs of $1 per printer and air transportation costs of $10 per printer (air shipment lead-time is three days), evaluate the various alternatives available to Brent Cartier to address the inventory and service problem. 6
5. Bibliography 8
1. What has caused the so-called Inventory/Service "Crisis"?
In 1990’s, Hewlett-Packard faced several problems with inventory levels for the Deskjet Printer product line. This printer was produced in Vancouver’s facility and from there was shipped to a distribution center. HP has three distribution centers (DC), in North America, Asia Pacific and Europe that at the moment were filled of Deskjet stock. Each DC have a make-to-stock system to guarantee product availability and deal different with the problem resulting in problems to Vancouver Division that couldn’t build the right products in the right quantities. HP need to reach an optimal solution that balance the customers’ needs and keep a low inventory level, getting an agreement among the DC’s. Through this situation, HP faced an Inventory/Service “Crisis”. One of the main causes, mentioned as the “root of the problem” by a summer intern student from Stanford University, was the forecasting system. The demand oscillations and wide range of products due to localization often contributed to forecast errors. This innacurate forecasts were the basis for safety stock calculation creating high inventory levels and backorders. DC’s were discoordinated and divided in terms of inventory policys due to the lack of a scientific rule on this. The magnitud of demand helped to this Inventory/Services crisis because having such
1. What has caused the so-called Inventory/Service "Crisis"? 1
2. What are the important "drivers" of safety stock? 2
3. Recommend quantitative target inventory levels for the six European options, assuming a weekly periodic review replenishment. 4
4. Assuming a 20% gross margin for each printer, sea transportation costs of $1 per printer and air transportation costs of $10 per printer (air shipment lead-time is three days), evaluate the various alternatives available to Brent Cartier to address the inventory and service problem. 6
5. Bibliography 8
1. What has caused the so-called Inventory/Service "Crisis"?
In 1990’s, Hewlett-Packard faced several problems with inventory levels for the Deskjet Printer product line. This printer was produced in Vancouver’s facility and from there was shipped to a distribution center. HP has three distribution centers (DC), in North America, Asia Pacific and Europe that at the moment were filled of Deskjet stock. Each DC have a make-to-stock system to guarantee product availability and deal different with the problem resulting in problems to Vancouver Division that couldn’t build the right products in the right quantities. HP need to reach an optimal solution that balance the customers’ needs and keep a low inventory level, getting an agreement among the DC’s. Through this situation, HP faced an Inventory/Service “Crisis”. One of the main causes, mentioned as the “root of the problem” by a summer intern student from Stanford University, was the forecasting system. The demand oscillations and wide range of products due to localization often contributed to forecast errors. This innacurate forecasts were the basis for safety stock calculation creating high inventory levels and backorders. DC’s were discoordinated and divided in terms of inventory policys due to the lack of a scientific rule on this. The magnitud of demand helped to this Inventory/Services crisis because having such