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Hewlett-Packard Case Study

Essay by   •  April 2, 2016  •  Case Study  •  1,110 Words (5 Pages)  •  934 Views

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                              03/31/2016

Group      Name:          TER

Course Name:   BA452 (M) Operations Management

Group Members:

Huifen Chen                       150105005

Roisin Gonsalves              150105009

Tu Thi Thanh Tran           150105012

Case Study:       Hewlett-Packard Company

                        Deskjet Printer Supply Chain (A)

Introduction

Hewlett-Packard was established in 1939 and it constantly grew for over half century, with net income of $739 million in 1990. In particular, HP’s the most popular item, Deskjet printer was traded of $400 million. The current dominant market had shifted from electronic test and measurement equipment to computers and peripherals products. Specifically, the retail printer market had approximately 17 million units high sale in the same year. It was mainly sold as commodity products through superstores and consumer mass merchandisers. In addition, the retail market consisted of three portions: impact/dot matrix (40%), inkjet (20%) and laser (40%), while HP dominated the inkjet market in USA. The good quality products from company had widely spread around the world, especially in Europe, Asian Pacific and America. However, HP Company was facing some problems.

Problems

  • The company wasn’t able to maintain satisfactory product availability.
  • Didn’t reach agreement among the different parties when came to the right level of inventory.
  • European DC had run out of space to store Vancouver’s products.
  • The company didn’t have reliable forecast for sales
  • The supply chain was affected by uncertainties.
  1. Delivery of incoming materials
  2. Internal process
  3. Demand

HP Case Questions:

(1) What are the pros and cons of the following proposals mentioned in the case: European factory, better forecasting, more inventory

Pros

Cons

European Factory

  • Give responses to customers in Europe fast especially for the Western European market as it was mature in early 1990.
  • Increase satisfactory product availability
  • More efficient while delivering the products to distribution centers

 

  • May result in more costs like fixed and variable costs because they need to buy equipment and pay for the rent and wages etc.
  • Need to be well organized and managed for a factory.

Better Forecasting

  • Increase efficiency in terms of reducing demand uncertainties
  • Prevent additional costs from storing extra inventories.
  • The method of prediction may be not reliable so that further increase uncertainties

More Inventory

  • It enables to meet customer’s needs in time
  • Increase services
  • It’s more likely to grow in profits because of the higher availability
  • Decrease the probability in backorders
  • It may be costly for keeping the unsold stocks longer as they need to pay for the rent
  • More inventories are Probably being old-fashioned if the products cannot be sold in time.  

(2) Access quantitatively the airfreight option relative to current operation. Just consider the products for European market. Do not forget to consider pipeline inventory (since HP owns the pipeline inventory form Vancouver to Europe). Use the following assumptions:

       

      Assumptions

     

Inventory holding cost                       12%

Achieving at least a Fill rate              98%

Z statistic from table                           2.05

Leading time (airfreight)                   1 week

Airfreight Shipment cost                   25 $

Leading time (via sea)                        5 weeks

Sea shipments                                       10 $

On a weekly basis

(4.33weeks /month)

Printer Production Cost                     300 $

Dollar per printer

Printer sales price                                450 $

Exhibit 4 Monthly Demand Data by Region and Option Type

Europe

Monthly mean

Monthly

Std Dev

Fill rate 98%,  Z=2.05

Using the formula: Order Quantity :

 [pic 1]

From the standard normal distribution table, z=98% lie between 2.05-2.06, we take z=2.05 as it is more close to 98%.

A

42.3

32.4

42.3+2.05x32.4

=108.72

AA

420.2

203.9

420.2+2.05 x203.9

=838.195

AB

15830.1

5624.6

15830.1+2.05x5624.6=27360.53

AQ

2301.2

1168.5

2301.2+2.05x1168.5=4696.625

AU

4208.0

2204.6

4208+2.05x2204.6=8727.43

AY

306.8

103.1

306.8+2.05 x103.1=518.155

Total

23108.6

6244.0

23108.6+2.05x6244=35908.8

...

...

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