Deskjet Printer Supply Chain
Professor D Krishna Sundar
Indian Institute of Management, Bangalore
October 29, 2010
Partial Fulfilment of the Requirement for the
Operations Management in the
Post Graduate Programme
Printer Retail Market3
The Supply Chain4
Inventory Model for Existing Supply Chain5
Evaluations of Alternatives5
Have higher levels of Inventory5
Use Air Shipment to reduce lead time5
Build another factory in Europe7
Hewlett Packard has its printer manufacturing plant in Vancouver, Washington from where it supplies Distribution Centres in the United States, Europe and in Far East. It does not maintain any inventory on its factory but instead maintains it on the Distribution Centres. The Distribution Centre in Europe has been facing a huge variation in demand for printers and is facing issues of stock-outs and over-stocking. This report describes the problems faced by Brent Cartier, the Manager for Special Projects in the Materials Department and prescribes potential solutions.
The Hewlett Packard Company (HP) was founded in 1939 as an electronic test and measurement equipment manufacturer. Over the next fifty years it diversified into computers and peripherals which now dominate its sales. The Peripherals Group was the second largest of HP’s six product groups with revenues of over 4 billion USD. The group’s divisions acted as Strategic Business Units for a specific set of products and its products included printers, plotters, magnetic and tape drives, terminals and network products.
Printer Retail Market
Worldwide market for small workgroup/personal printers in 1990 was about 17 million units amounting to 10 billion USD. The retail printer market had three technology segments: dot matrix, inkjet and laser. Dot matrix was the oldest technology increasingly considered obsolete and its market share was expected to fall 10% and be replaced by either laser or inkjet printers. Of these two, inkjet was perceived by customers as delivering nearly the same quality as laser at a much more affordable price. HP led the market share in United States while Canon led the market in Japan. In Europe, these two competed with Epson, Manisman-Tally, Siemens and Olivetti.
Inkjets were becoming commodity products and this had a two-fold impact. The first one being the introduction of computer peripherals into superstores and consumer mass merchandisers apart from the usual resellers and the second was eroding brand loyalty – the end customer in choosing between two inkjet printers of equal quality increasingly used business criteria like cost, reliability and availability.
HP consolidated its printer activities from its four major divisions into a newly created division at Vancouver which was a part of the Peripherals Group. HP had expertise in using batch processes to build low volume, highly customized products but by introducing the Japanese kanban technique of production management, they were able to reduce the cycle time from 8-12 weeks to one week and the inventory from 3.5 months to 0.9 months. In 1988, the Vancouver Division started producing the Deskjet series of inkjet printers. HP’s knowledge in Inkjet printer technology combined with this streamlined manufacturing process gave it the edge required to capture the largest market share.
Despite having a technological edge and a streamlined manufacturing process, HP was suffering from inventory problems in its European Operations. We will describe the Supply Chain Model of HP and the customer...