Hewlett Packard CompanyDeskjet Printer Supply Chain

Prepared by :Ali Yudhi

Azhar HarrisIrawati Cipto

Dame Reiny Manalu

About HP

� Hewlett Packard Company was founded in 1939 by William Hewlett and David Packard.

� Headquarters in Palo Alto, California.� In 1990, HP had over 50 operations

worldwide, with revenues of $13.2 billion and net income $739 million.

DeskJet Printer

• Hewlett-Packard introduced the DeskJet Printer in 1988 and it had become one of HP’s most successful products.

DeskJet Printer Supply Chain

Bill of Material for Deskjet Printer

Manufacturing process

� Printed Circuit Assembly and Test (PCAT) * ASIC’s (Application Spesific Integrated Circuits).* ROM (Read Only Memory)

� FAT (Final Assembly and Test)

� The total factory cycle time through the PCAT and FAT stages was about a week.

� Manufacturing of the deskjet printer operated in a pull mode.

The distribution process

� Products from FAT sorted into three groups destined : US DC, Europe DC, and Asia DC.

� The transportation time from Vancouver to the US DC in California => 1 day.

� Long shipment time about 4-5 weeks to ship the printers to Europe and Asia => due to ocean transit and the time to clear customs and duties at port of entry.

Distribution process

� Line item fill rate (LIFR) calculated as the total number of customer order line items filled on time divided by the total number of customer line items attempted.

� Order fill rate (OFR) based on orders completed, where an order contains multiple line items.

Four process steps in DC

Design Options for a distribution

network

Manufacturer Storage with Direct Shipping

•Manufacturer Storage with Direct Shipping and In-Transit Merge

•Distributor Storage with Carrier Delivery

•Distributor Storage with Last Mile Delivery

•Manufacturer or Distributor Storage with Consumer Pickup

•Retail Storage with Consumer Pickup

•Selecting a Distribution Network Design

Problem Identification

� Uncertainty about how to set the correct inventory level.

� Different localization options make inventory difficult to manage.

� Long lead times due to transport using shipsand this in turn adds difficulty to the forecasting process.Shipment by ocean not by air takes four to five weeks to ship the printers to Europe and Asia, the long lead time means cannot faster reaction time to unexpected changes in product mix.

� High demand fluctuations in European markets leading to higher levels of safety stocks.

� Uncertainty in many local markets makes forecasting difficult.

Uncertainty

� Uncertainties in manufacturing processThe uncertainties in manufacturing process included the delivery variability of incoming materials, process yields and downtimes at the plant. The uncertainties may increase the lead time and cause the shortage of inventory at Distribution Center. Also, manufacturing process don’t take into account in the product design process, so the process not efficient enough.

Uncertainty

� Demand Uncertainties Demand uncertainties could lead to inventory buildup or back order at the Distribution Centers, especially at European and Asian Distribution Centers. It is because the transportation time from Vancouver to there requires four to five weeks. Thus, the European and Asian Distribution Centers’ ability to respond to fluctuations in the demand for the different versions of the product is limited. In order to assure high availability to customers, high levels of safety stocks were set up. Therefore, it will increase the inventory holding cost.

Recommendations

� Improve forecasting system� Reduce lead time :

* Shipment by air freight* Make a new plant between Asia and Europe to reduce leadtime from FAT into DC.

� ERP system implemented in DC to support manufacturing.

� Empowering e-Commerce� Using multiple facility location

Conclusion

� Optimum inventory level can be obtained by estimate the forecast more accurately.

� Safety stock is important for each DC to ensure the availability stock in each DC depends on the leadtime to each DC.