Submitted by: Group- 4 Chetan Mehta (12EX-013) Himanshu Shekhar(12EX-021) Madhumanti (12EX-023) Nitin Gera (12EX-030) Sreekant Sukumar

(12EX-049) Vivek Kumar (12EX-056)

Founded in 1939 by William Hewlett & David Packard Headquarters in Palo Alto, California Started with electronic test & measurement equipment Now into computers & peripherals 50 worldwide operations with $13.2 billion revenue and $739 million net income in 1990 Organized partially by product group and partially by function The peripherals group is HPs 2nd largest among six product groups with $4.1 billion revenue at 1990 The peripheral group identifies new market opportunities and exploits it like disposable print-head in Ink-jet printers & moving paper plotters

Production Materials Distribution

I-Word

Europe Asia-Pacific North America

Customer needs Product Availability

Agreement on right level of Inventory

Small workgroup/ personal printers worldwide sales about 17 million units in 1990 amounting $10 billion HP introduced Desk-Jet in 1988 and in 1990 it reached 600K units about $400 million
Three major markets: United States Europe western & eastern Asia Pacific

Company HP (ink-Jet)

Market United States

Year of launch Late 1980s

Canon
Epson, MannesmannTally, Siemens and Olivetti

Japan
Europe

1990
1991

Established in 1979 HP consolidated personal printer activities from four sites, Collins, Boise, Sunnyvale & Corvallis) to Vancouver At 1979 manufacturing cycle time was 8- 12 week and inventory level was 3.5 months
Came out with Kanban Justin-Time Reduced inventory from 3.5 months to 0.9 months Early models were not using the total designed capacity In 1988 with Desk-Jet Vancouver reached excellence

Supplier

IC Mfg

US DC

Customer

Supplier

PCAT

FAT

European DC

Customer

Supplier

Print Mech Mfg

Supplier

Far East DC

Customer

IC Mfg = Integrated Circuit Manufacturing PCAT = Printed Circuit Assembly & Test FAT = Final Assembly & Test Print Mech Mfg = Print Mechanism Manufacturing

Localization

Raw Wafers

ASIC

Print Mechanism

Power Supply

Raw PCB

PCB

DeskJet Printer

Finished Product

Raw Head Driver Board

Cables Keypad Motors Plastics

Manuals

Versions: A, AA, AB, AQ, AU, AY, AK

Inventories were kept for the components & raw materials No inventories between PCAT & FAT and no finished goods inventories were kept Total factory cycle through PCAT & FAT was about a week Transportation time from Vancouver to US DC at San Jose, California was about a day whereas for Europe & Asia it was four to five weeks Transportation was through ocean to Europe & Asia Resellers were not willing to carry high level of inventory DCs had to keep Target Inventory Levels ( forecasted demand + safety stock) Europe & Asian DCs had to maintain more safety stock to keep their product available at any point of time

Delivery of Incoming materials(late shipments, wrong parts)

Delays in manufacturing lead time to replenish the stocks at DC

Internal Process

Demand

Inventory buildup or back orders

Peripheral Group Manager

Distribution Services Physical Distribution DC Operations Manager Marketing Quality MIS Finance

Vice President Marketing HP

Worldwide Distribution Manager

Two main performance measures Line Item Fill Rate Total number of customer order multiple line items Order Fill Rate filled in time/total number of customer sales attempted Secondary performance measures included inventory levels & cost per gross shipment dollar Two major costs were freight & salaries Freight and Percentage of Effort to support a particular product line were charged back to that product line DeskJet fit well into standard process whereas other products require integration

Total number of customer order line items filled in time/total number of customer line item attempted

The process has four steps: 1. Receive complete products & stock 2. Pick various products as per customer order 3. Shrink-wrap the order & label it 4. Ship the order through appropriate carrier

DCs material management system supported only distribution Integration needed assembly processes like Material Resource Planning & Bill Of Materials This hampered standard process and created confusion

Vancouver worked on supplier management, improving process yields and reducing downtimes at the plant The main problem was demand forecasting especially in Europe Calculation of safety stock to be revised to make it responsive to forecast errors and replenishment lead times A team was formed to calculate safety stock scientifically Two major issues Company Std.: Choice of inventory carrying cost to 12% to 60% be used in Safety Stock Company Std.: Choice of target Line Item Fill Rate
98% (marketing)

Option Nov.

Dec. 0 255

Jan. 60 408

Feb. 90 645
11052 1953 4908 306 18954

Mar. 21 210
19864 1008 5295 219 26617

Apr. 48 87
20316 2358 90 204 23103

May 0 432
13336 1676 0 248 15692

June 9 816
10578 540 5004 484 17431

July 20 460
6096 2310 4385 164 13405

Aug. 54 630
14496 2046 5103 384 22692

Sep. 84 456
23712 1797 4302 384 30735

Oct 42 273
9792 2961 6153 234 19455

A AA
AB AQ AU AY Total

80 400
20572 4008 4564 248 29872

20895 19252 2196 3207 450 4761 7485 378

27003 32344

Vancouvers setting up a sister plant in Europe Would the volume in Europe large enough to justify a new site? Where should it be located? Let us have required levels of inventory as it does not come into P&L statement when converted to sales; but loss of sales decreases revenue Use of air transportation to Europe to reduce lead time to respond to customer need of availability of product mix Air freight is expensive, would it worth? How to address the problem in demand forecasting?

Thank You..
Presented to: Prof. K. K. Sharma IMT Ghaziabad