To maintain Europe satisfactory product availability, Europe wants more inventory but HP Distribution centers are full of inventory of pallets of Desk Jet printer.
Market is mature in US and Western Europe but developing in Eastern Europe and Asia-Pacific.
As printers became commodity products to computers in US, they started to be sold in superstores, consumer mass merchandisers (K-Mart) rather than computer dealers.
For customers; printers’ quality, price, speed, sustainability and availability are the matrices to decide on a printer.
Inkjet: HP leads in US but Canon leads Japan.
Vancouver, Washington Division & Zero Inventory Goal
* Mission: Low Cost, Premium Quality Printers
* Vancouver is in Peripheral Group and in charge of designing & manufacturing Ink Jet * Manufacturing Department
* In 1979 (doomed to fail!):
Fast High volume process needed, because now there is:
* 8-12 week cycle time
* 3.5 months of inventory
* In 1981
By using Kanban methodology (newly tested Japanese methodology in US), InkJets: * Conversion to stockless production
* 0.9 months of inventory
* Reduction in cycle time
* 1 printer every 1.5 hours
Missing key element:
* No trial on a new product
* In 1988
* DeskJet was produced with the latest methodology &near letter quality resolution – Huge success DeskJet Supply Chain
* Chain: Suppliers, Manufacturing sites, Distribution Centers (DC), dealers, customers * Manufacturing in Vancouver Factory:
* 2 key stages:
Components are sourced from other HP divisions & worldwide external suppliers * Print circuit assembly & Test(PCAT)
* Final Assembly & Test (FAT)
* Selling Desk Jet in Europe required customization to meet language and power supply of local countries (localization done within factory) * After localization & FAT, finished products are shipped to 3 Distribution Centers (DC) by ocean (Exhibit 3: Bill of Materials) * North America DC
* Europe DC
* Asia-Pacific DC
* From DC’s, Products shipped to:
* If Europe:
* HP’s Individual Country Office, then managed by individual country managers * Distributors
* Inventories in Vancouver:
* Raw Materials & Components for production
* No buffer inventory between PCAT&FAT
* No finished goods inventory preferred
* Total Factory Cycle Time through PCAT & FAT:
* 1 week
* Transportation from Vancouver, DC to
* Within US: 1 day
* To Europe/Asia: 4-5 weeks
* Demands of Resellers (customers of HP)
* Carrying little inventory
* Maintain high level of availability to consumers (at DCs of HP) * HP’s Action:
* DC’s started to operate in make to stock mode. * Target Inventory Levels=Forecasted Sales + Safety Stock Level are set to 3 DCs. * Vancouver is stockless, operated in pull mode. * To fill DC’s “just-in-time” needs, production plans changed. * Safety stocks were set up for incoming materials at the factory to ensure material availability. * 3 uncertainty to affect supply-chain :
First 2 effected manufacturing lead time to replenish stock at DCs. 3rd leads to inventory buildup/backorders at DCs. 1. Delivery of incoming materials (wrong/late)
2. Internal process
* European/Asian DCs had to manage fluctuations in demands and long lead-times because of transportation. * For availability to customers, high stock levels. * US DCs are better since little localization-mix fluctuations in place. *...