CASE HP

DeskJet Printer Supply Chain

Introduction
In this case William Hewlett and David Packard with headquarters in Palo Alto, California founded
Hewlett-Packard Company in 1939. HP diversifies its production into electronic test, measurement
equipment and computers and peripherals products: in 1990, HP had over 50 operations worldwide
with revenues of $13.2 billion and net income of $739 million. In 1988, the Deskjet printer was
introduced and had become one of HPs most successful products, with sales of 600,000 units/$400
million in 1990.
Summary
This case study deals with Hewlett-Packard (HP), a famous manufacturer of computers and
peripherals. In the early 1990s, HP faced a so-called Inventory/Service-Crisis concerning one of
their high volume products, the DeskJet printer. Despite growing inventory levels at the distribution
centers in Europe and Asia-Pacific, customer service levels were unsatisfactory. Affected by
growing competition this problem had to be handled quickly.
Brent Cartier, Manager for Special Projects in the Materials Department of HP Companys
Vancouver Division, had tried his best to find the possible solutions of the issues related with
inventory of DeskJet printers that were arisen at world level especially, at Europe. He had short time
for these tasks because preparation was needed to be done for Mondays meeting with Group
Management on worldwide inventory levels for the DeskJet Printer product line.
Finally opinions and reactions of different company divisions concerning the implementation of DC
localization are analyzed. The solution of problems is the reconfiguration of key strategies related
with channels management.
Improvement during the early 1980s
-Manufacturing cycle time reduced
8-12 weeks ==> 1 week
-Average inventory reduced
3.5 months ==> 0.9 months
-All finished goods inventory eliminated
-Importance of response time and transportation time increased
-Further improvements should be made on supply chain
-Manufacturing cycle time reduced
8-12 weeks ==> 1 week
-Average inventory reduced
3.5 months ==> 0.9 months
-All finished goods inventory eliminated
-Importance of response time and transportation time increased
-Further improvements should be made on supply chain
-Time between order and delivery reduced

Linda Fierro Villafuerte

Logistics II

14/12/14

CASE HP
DeskJet Printer Supply Chain
Europe & Asia:
5.25 months ==> 1.25 months
North-America:
4.25 months ==> 0.2 months
-Importance of transportation time increased
Europe & Asia: 1% ==> 12%
North-America: 20% ==> 80%
The primary need of all consumers is to print something in the form of images or text; three options
are available for the customers of HP, dot Matrix Printer, Inkjet Printer, laser Printer.
Prior to 1989, most customers were not aware of inkjet technology. However, customers were
discovering that inkjet print quality was almost as good as laser print quality at a much affordable
price.Laser printer and other printer related products of HP dont necessary require the online
selling. Because customer were discovering that inkjet print quality was almost as good as laser
print quality at a much affordable price.
HP led the inkjet market in US. Means in USA, HP facilitate its customers and consumers needs
are met by current channel structure. But in other areas of the world especially in Japan and in
Europe HP faces certain issues while satisfying customers needs. The problem is only in terms of
product availability. Channel structure is poorly designed especially, in Europe there is no
information flow between channel members and lack of commitment.There is no product
availability in some countries while others have access inventory (in terms of finished goods;
printers).
Between 80s and 90s HP was the market leader of Inkjet printer but now days HPs DeskJet printer
in on sixth position in ranking. Waiting time is high in Europe and Asia and availability is low in
Europe.Physical possession and information flow dont function properly, now days every company
tries to sell their products directly as well as through third party distributors. Selling online is also
important factor and DELL is the example (most successful) of direct selling, there are many
advantages of selling online included: quick transactions, no physical space required for inventory,
higher product availability, no waiting time, no intermediaries required.
So HP should sell both printers and supplies direct (online). There is no such need of selling directly
in US because of high product availability because of functioning as a local company here, but in
Europe and Asia, HP must go direct. HP already has an online system for other product lines like
PCs and Laptops; deskJet printer is most successful brand or product of HP and generates high
volume of sales. So HP should sell DeskJet printer online, formulating marketing channel strategy,
designing marketing channels, selecting channel members, motivating channel members,
coordination channel strategy with members, evaluating channel member performance and
managing conflict in the channels.
HP formulates its channel strategy in a better way and choosing channel members properly. In its
channel members include: suppliers, manufacturer site (Vancouver Division), DCs, resellers, end
users. While designing channels HP focused on right level and right kind of channel members.
Basically HPs Vancouver division, products shipped to three DCs (distribution centers particularly

Linda Fierro Villafuerte

Logistics II

14/12/14

CASE HP
DeskJet Printer Supply Chain
located in US, Europe and Asia Pacific) then from DCs to resellers and retailers and finally to
consumers.
HP motivates its channel members and accepts the decisions from their side but there do not do too
much effort on motivating, there is no coordination with channel members at low end. Means
resellers and end users dont know what is HPs channel strategy. There is no evaluation or
feedback and finally HP sometimes fails to resolve issues. As we know from the case study that
representatives conflicting goals prevented them from reaching consensus on the issues.
There are some advantages like; no extra warehousing charges bear by Vancouver, the
transportation and inventory costs are reduced, millions are saved, the service level are increased,
air transportation mean is worth able, the freight cost is also reduced for better communication
between channel members is achieved resulted in better performance, in online selling reduce costs
and increase product availability, also HPs sales and revenues are increased ultimately, the business
portfolio maintenance will leads the business towards creativity, innovation, high service output
demand fulfillment and local procurement of localization materials
Also there are some disadvantages; Air transportation mean is expensive because there are costs of
product redesign and DC modifications, more staff is required to better forecasting and conflicts
arises between HP and channel members if HP goes direct.
HP DeskJet Printer Supply Chain

Conclusion
In conclusion HP should do work on value constellation rather than value chain.R&D staff should
visit all the market especially in Europe and Asia to better knowing the customer needs and for

Linda Fierro Villafuerte

Logistics II

14/12/14

CASE HP
DeskJet Printer Supply Chain
demand analysis, there is no coordination in channel members so HP must improve this deficiency
through information flow, providing downstream members some extra benefits for their better
performance for improve forecasting through different strategies and DC localizations.
Manufacturing site as Vancouver is also built in Europe and Asia, so HP should sell printers direct
(online) as well as through the current channel members and Air transportation mean is also used to
reduce lead time. Channel manager should perform its functions properly and resolve the conflicts
among channel members for special bar codes are applied to inventory (products) according to
specific regions and VMS should be introduced

Linda Fierro Villafuerte

Logistics II

14/12/14