utdallas.edu/~metin 1 HP DeskJet Printers Supply Chain A case on Basestock Levels and Postponement

utdallas.edu/~metin 2 HP DeskJet Printers Then and Now Photo printer Color printer Mobile printer The first DeskJet printer

utdallas.edu/~metin 3 History of HP –HP founded in 1939 by William Hewlett and David Packard –1990 revenues $13.2 B and profit $739 M –Then, a manufacturer of electronic test and measurement equipment –Now, mostly manufactures computers and peripherals –Peripherals is the second largest group among six product groups –Peripherals: Printers, Plotters, Magnetic disc and tape drivers, Terminals and Network products HP Radio Oscillator circa 1939

utdallas.edu/~metin 4 Printer Market –HP sold ?? M printers and made a revenue of $?? B in 1990 »Each printer about $??? »But prices has been dropping –Printers are becoming a commodity sold at supermarket –Market is composed of »??% impact/dot matrix, dropping »??% inkjet, increasing; HP is the market leader »??% laser

utdallas.edu/~metin 5 Vancouver Plant –Printer production at Fort Collins, CO, Boise, ID, Sunnyvale, CA and Corvallis, OR is consolidated to the Vancouver site –Vancouver plant uses a pull system »JIT, Kanban, Stockless production –Vancouver had the proper production system –DeskJet printer became its flagship product

utdallas.edu/~metin 6 Printer Supply Chain FAT PCAT IC MfgSupplier Print Mechanism Supplier Europe DC Far East DC Asia DC ?? Lead time

utdallas.edu/~metin 7 What is Brent Cartier’s problem?

utdallas.edu/~metin 8 Brent Cartier’s problem u Too much inventory in the DeskJet supply chain u Some suggest pumping up more inventory u European and Asian DCs cannot meet because of ????? mismatch.

utdallas.edu/~metin 9 DCs operate as a push or a pull system? FAT Europe DC Far East DC Asia DC

utdallas.edu/~metin 10 What is localization?

utdallas.edu/~metin 11 What is localization? u Customization of a printer to meet the language and power supply requirements of the local countries –Product manuals –Several power cords u Where is localization done?

utdallas.edu/~metin 12 Can a DC localize?

utdallas.edu/~metin 13 Can a DC localize? u DCs do not have a ???? ???? system for assembly operations u US DC manager To Beal says: –[At a DC] We have to decide what our core competency is …. If we want to take on manufacturing processes here, we have to put processes in place to support them u In conclusion, DC managers are for/against (??) localizing at DCs.

utdallas.edu/~metin 14 What is inventory imbalance?

utdallas.edu/~metin 15 Inventory imbalance u Start with an example: –There are 1000 DeskJet configured/packaged for France –Another 1000 for England –What is the shortage if the demand in France and England are both 1000 printers? –What is the shortage if the demand in France is 1500 while the demand in England is 500? u Inventory imbalance is having the correct amount of total inventory but the incorrect mixture

utdallas.edu/~metin 16 Can localization at a DC avoid inventory imbalance?

utdallas.edu/~metin 17 Can localization at a DC avoid inventory imbalance? u Continuing with the same example: –There are 2000 DeskJet ready for Europe –What is the shortage if the demand in France and England are both 1000 printers? »Shortage is ?? –What is the shortage if the demand in France is 1500 while the demand in England is 500? »Shortage is ?? u Not convinced yet, what is the effect of postponed localization on printer inventories?

utdallas.edu/~metin 18 To convince ourselves more NovDecJanFebMarAprMayJunJulAugSepOct AB AQ AU Consider options with monthly demand larger than 1000 in Exhibit 4. Compute the basestock levels for each product to achieve a fill rate of 98%. Note that basestock levels can be reduced if these options are aggregated into a single one. What would be the basestock level for this single product?

utdallas.edu/~metin 19 Postponing localization to the DCs u Is the US DC manager right? u What problems are possible with localization at DCs? u How to avoid these problems?