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HP DeskJet Case: Background

HP DeskJet Case: Background. High volume, high speed manufacturing in Vancouver Many different models, all completed in Vancouver Three distribution centers North American Asian European Manufacturing time one week Transportation lead times: Europe: 4-5 weeks US

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HP DeskJet Case: Background

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  1. HP DeskJet Case: Background • High volume, high speed manufacturing in Vancouver • Many different models, all completed in Vancouver • Three distribution centers • North American • Asian • European • Manufacturing time one week • Transportation lead times: • Europe: 4-5 weeks • US • At distribution centers, simple standardized process

  2. HP DeskJet Case: Analysis • Problems • High inventory levels • Inventory imbalance in Europe • Causes • Uncertainty about correct inventory levels • Many geographic options (localization) • Long lead times • Uncertain market • Difficulty at getting divisions to work together • What are HP’s options?

  3. HP DeskJet Case: Options • Short Term • Rationalize safety stock • Long Term • Air shipment • European factory • More inventory • Better forecasting • DC localization

  4. Safety Stock Rationalization:Example Europe AB • Recall: Safety Stock = z  STD * LT

  5. Evaluating Alternatives • Air Shipment -- Expensive • European Factory -- Not sufficient volume • Better Forecasting -- How? • More Inventory -- More problems • DC Localization -- What will savings be?

  6. Evaluating DC Localization • In DC localization, risk pooling can be used to reduce total inventory while maintaining service levels • To evaluate inventory, compare total safety stock held if individual localized units are held in inventory or if generic units are held • Other costs must also be evaluated

  7. Evaluating DC Localization

  8. DC Localization • Safety Stock Reduction • Current 19,089 units (3.55 weeks) • With localization 12,792 units (2.4 weeks) • Other benefits • Lower value of transit inventory • Freight reductions • Local presence of “manufacturing” • Customs implications • Local procurement of localization materials • But there are costs • Product redesign • DC modifications

  9. Implementation • R&D Support • “The product is working, so why bother?” • DC Support • “Not our core competency” • New packaging • Capital investment

  10. Results • Successful implementation • Millions saved • Service levels increased • Packaging won awards • Best practice spread to other HP divisions

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