Hewlett-Packard (HP) is one of world famous electronic company. This US based company perform electronic test, and produce variety products including measurement equipment, computers and peripherals products. Peripherals group is the second largest group, which introduced the most successful product – The DeskJet printer. HP has enjoyed a steadily sales growth. By using KANBAN the manufacture reaches stockless production. However, worldwide three distribution centers’ inventory level is rising. Especially Europe faces the serious stock out problem but meanwhile overstock undemanding products. Within HP, each department has different approach to the problem. In this highly competitive industry, HP had to find way to solve the problem. David Arkadia, the material manager at Vancouver division, had made clear about group management perspective that they can’t run the business with this level of unproductive assets, and they had to meet customer needs with fewer inventories. An inventory expert team had been formed from HP Corporate to help them. And the team felt that they had developed the safety stock methodology and good sample of demand data to solve the inventory and service problem. Brent Cartier, the manager for special project in the materials department, must quickly prepare the solution for the meeting with worldwide representative from the production, materials and distribution organizations in Europe, Asia and North America. The conflict goals of each organization made the problem even more difficult to solve. By analyzing HP’s case, I have made an 8-month project to solve HP’s problem. My plan involve the whole supply chain improvement, including integration distribution centers, accuracy forecasting system, computer networking system and online selling system. I believe that project team in my plan will lead HP to a new stage.
Part 2: Immediate Issue
HP is facing the severe inventory issue. Some countries’ demanding the models are shortages, while the inventory of other models are kept piling up. This particular happened in Europe. Meanwhile, within HP, each department had difficulty to agree with each other about inventory issue. This immediate issue is just the symptom of the following system issues.
Part 3: System Issue
The inventory issue is caused by the following reasons:
Poor forecast accuracy
Each DC had decided to use “make-to-order” mode to provide the high level availability for the dealer. The target inventory level equals to the forecasted sales plus some safety stock. But they didn’t get the accurate forecast from dealers or resellers. The inventory will be some model stock-out, some over stock. Bullwhip effect
Starting from the poor forecasting, the bullwhip effect will amplify the problem; eventually cause inventory issue getting more serious. Long lead time
All the HP products were shipped to the three DCs by ocean. For Europe and Asia, the shipment needs 4-5 weeks. The long lead time will reduce the response of demanding fluctuations. The wrong models had been shipped; the right models had not been produced or arrived. Variety
HP printers have many varieties to meet the customers need, and all products are produced in Vancouver, US. More variety will cause more inventories. Different goals of each department prevent their agreement
Production complained the variety of models and options. Distribution centers complained Vancouver division didn’t build right products in right quantities; each department doesn’t have same goal to reach.
Part 4: Qualitative Analysis
In inkjet industry, HP led the US market, while Canon led Japan market. But, HP pioneered inkjet technology and had introduced its first disposable print head model in the late 1980s, while canon had introduced one in 1990, and Olivetti had just introduced one in 1991. This made HP had a good reputation in printer industry. With the solution to solve the inventory issue, HP has great...
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