Questions on Operations Management in Hewlett Packard

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Why did the Europe division of HP require in order to maintain satisfactory product availability?

Answer 1: The European distribution center of HP demanded higher supply and inventory to manage satisfactory product availability because of the declining sales of HP printers in the European market. The reason was unavailability of product at the European DC.

What did David Arkadia say in regard to inventory? What were the two main issues Brent saw in accomplishing this?

Answer 2: David Arkadia was the materials manager at the Vancouver division he put his view of group management in a meeting and said that the world is falling from the corporate and their business cannot survive the market in the absence of productive assets of the company and customers' needs cannot be fulfilled with such kind of fewer inventories. If done so then it will be impossible for the company to run business.

Brent looked into the matter and he identified two main issues. First issue is to find out a way to satisfy customers' requirements by making them products available even with minimized inventory. The second issue was to make other parties agree that the level of inventory was right in the company.

Question3: What is the trade off in Brent's first main issue?

Answer 3: Brent's first issue creates a trade off between satisfying customers' requirements and minimal inventory. Customers' demand may change very frequently and to fulfill those demands the inventory has to be large.

Question 4: Concerning Brent's second issue, what is the contradiction he mentioned concerning the European Distribution Center?

Answer 4: The sales manager of the European DC has reported several times that the DC is running out stock so the second issue of Brent is contradicting the situation of European DC.

Question 5: How was HP organized?

Answer 5: Two genius minds William Hewlett and David Packard established a company named Hewlett-Packard in 1939. Headquarters of the company was in Palo Alto, California. The business of HP was ranged from electronic test and measurement equipments to computers and computer accessory products. In the past 50 years the company has grown at a steady pace and till 1990 the operations count was more than 50. It had two basic groups to organize the company: The product group and the function group. The product group had six segments of which the peripheral group was the second largest group. The other segments of the product group were printers, plotters, magnetic disks and drives and network products. The performance of the product division was increased by innovations in the technology. These innovations has contributed in the success of the company by availing market opportunities profitably.

Question 6: What did customers discover about ink-jet print quality?

Before 1990 customers were unaware of the ink jet printing technology and when the came to know about it they discovered that the printing quality of ink jet printer is as good as the printing of laser jet printer and that too at much more cheaper price and the sales of ink jet printers drastically increased.

Question 7: What does the Vancouver division exactly do? What happened between 1982 and 1985 to the divisions?

Answer 7: The Vancouver division of HP was established in 1979 in Vancouver, Washington. The division was established because of the new emerging opportunities for personal printers in the personal computer market. Personal printer activities from the four division of HP (Fort Collins, Colorado: Boise, Idaho: Sunnyvale, California: and Corvallis, Oregon) were merged and shifted to Vancouver. This new division at Vancouver became a part of HP peripheral product group and was dedicated for designing and manufacturing of ink-jet printers. The management staff from all over HP was selected and dropped at the Vancouver division which enabled execution of new ideas in the divisions. Between 1982 and 1985 executives from all over the organization and outside the organization visited the kanban process of manufacturing at the Vancouver division. The visitors were impressed by the fast printer manufacturing process.

Question 8: What is the Difference between PCAT and FAT and who supplies their components?

Answer 8: Desk jet printers were manufactured at the Vancouver division of HP. PCAT and FAT were the two major steps of the manufacturing process of printers. Assembly and testing of electronic components like ASIC (Application Specific Integration Circuits), raw printed circuit boards, and ROM (Read Only Memory) was done in PCAT (Printed Circuit Board Assembly and Test) process whereas assembly of other sub products and accessories like motors, cables, plastic chassis, gears, keypad and printed circuit assembly was done in FAT process of manufacturing. Raw printed circuit boards for logic boards and print head driver boards of the printers were made in the PCAT process whereas assembly for final product printer and final testing was done in FAT process. The FAT process was the next step of the PCAT process of manufacturing. PCAT was a pre requisite for the FAT process as the product from PCAT were assembled for the final working printer. The components for both the processes were supplied from other divisions of HP and some external suppliers as well.

Question 9: Looking at figure 11.1, how is this related what you have learnt in the class (can you identify suppliers, manufacturers and DCs)?

Answer 9: Figure 11.1 is the diagram of supply chain at the Vancouver division of HP. The supply chain of a company involves various links according to the requirements of the business. The supply chain of Desk jet printers is a chain of suppliers, manufacturing sites, distribution centers, dealers and customers of the printers. The suppliers are the subsidiaries of the company or some external firms which used to supply raw material for the production of desired product or a supplement product. In the case of desk jet printers the suppliers are either other divisions of HP or some external suppliers from all over the world. The manufacturer is the unit where using the raw material final product is developed through various processes. Vancouver division is the manufacturer of desk jet printers where the printers are manufactured via different processes like PCAT and FAT. After the product is manufactured it is sent to various distribution centers from where the product is supplied to the customers. The desk jet printers of HP were distributed to three locations worldwide: North America, Europe and Asia Pacific.

Question 10: What is Localization at HP?

Answer 10: Localization is process at HP in which the printers are customized according to the requirements of different countries. HP printers are supplied worldwide from the distribution center so the certain features of the printers need to be changed according to the requirements of those countries. Like the manual of the printer should be made in appropriate language, putting appropriate power supply module according to the requirements because the voltage requirements and power cord terminators may vary from country to country. Localization also involves the final assembly and test process of the printers at the factory. The localization process prepares the final product destined to different countries.

Question 12: How did HP management decided to operate the DCs? What was the target inventory with respect to the forecasts? Is it a pull or push system, explain?

Answer 12: Because of the increased pressure for improve level of availability of printers at the distribution centers for the retailers the management decided to operate the distribution centers in a make to stock mode. In this method the demand of printers was forecasted and production was made according to that forecast. The target inventories of the three distribution centers were set to some additional safety stock other than the forecasted sales. To ensure the availability of material at inventories safety stocks were also setup at factories. The distribution channels were operated in the push mode.

Question 13: What did the long lead time in shipment between North America and Europe/Asia cause?

Answer 13: The final product, printer were shipped from Vancouver to the distribution channels via ocean. Thus there used to be a delay in shipment to the European and Asian distribution channels. Because of the delay in the shipment these distributions centers were not able to respond to the frequently changing demands of the customers in those regions. The fluctuation in the demand was majorly in the different versions of the product. So to provide high availability of products those distribution centers had to manage heavy safety stocks. The North American distribution channel did not have to do any major changes as the version which was in heavy demand in the region was the US version of the printers. So the North American distribution center had less fluctuation in the localization mix.

Question 14: What has your group learnt about BOM and Safety Stock?

BOM is the list of assemblies, raw materials, and components of the final product. Safety Stock is the buffer of products kept at the inventory of distribution centers. The safety stocks are helpful in reducing the risk of exhausted stocks due to fluctuating demands.

Question 15: At the end of the case, what options does Brent have? Justify which option should Brent go with?

Answer 15: At the end of the case Brent had several options in mind about inventory management other operational issues. Following are the issues proposed by different group of people:

Setting up an alternate plant in Europe was the first option that was being talked about in the company. He liked the idea a new plant in Europe as it would solve the problem of inventory management and service in the region.

Another plan was to increase the inventory in the two Distribution centers. People advocated the thought because the cost of inventory does not effect the P&L statements of the company but declining sales do affect the revenues of the company.

A traffic supervisor suggested that instead of using ocean for shipments of product from manufacturer to distribution channels use of air cargo will be a better option. As the objectives higher availability of products and lower inventory can be achieved by spending a few extra dollars on transportation of product.

Brent had another option of solving the root of the problem that is the poor forecasting system of the company. According to this approach the system of the company can be improved by using Box-Jenkins method.

Brent should go with the last option of changing the system by improving the forecasting methods of the company. All the other methods do not provide a substantial solution to the problem. This approach will help in getting to the root of the problem which will be a better solution to the problem.