Background
The HP Company has established in the year 1939 by Hewlett William and Packard David hence the name Hewlett-Packard or HP. It has its headquarters in California in Palo Alto. The company had a steady growth in the course of a period of fifty years engaging in diversifying its business operations into computers and peripheral products from electronic test and measurement equipment (Stanford graduate school of business 2).
This company was organized in part by product group and in part by function. The company had the Peripherals Group as its second-largest group among the six groups of the products. The divisions of the group each served as an SBU – strategic business unit for every set of the product that was specific. The group of the products consisted of network products, printers, plotters, tape drives, and magnetic discs.
Standards (technological) had been set by the Peripherals group, coming up with such innovations as the disposable print head in its moving-paper plotters and inkjet printers. As on one hand, these innovations contributed to the company’s success, on the other hand, the Peripherals Group made recognition of the ability it had for identifying and exploiting the opportunities. This was seen in the case of one of its most successful products which is the LaserJet printer.
The DeskJet Supply Chain
The introduction into the market of the DeskJet printer was carried out in the year 1988. This product was introduced in Vancouver and it was a product that was a new model having new letter-quality resolution using a standard paper. This product had turned out to be the company’s product that was much more successful. The sales had experienced growth constantly and steadily approaching a level of four hundred million U.S dollars. Unluckily, the growth in the inventory had to a close level tracked the sales.
The supply chain for the DeskJet composed of the manufacturing site, network suppliers, the centre of distribution or the DCs, the dealers as well as the customers. HP Company in Vancouver carried out manufacturing. Two main stages were there in the process of manufacturing; the first one was printed circuit assembly and test or what is simply referred to as PCAT and the other one was the final assembly test or FAT. Printed circuit assembly and test involved components assembling and testing and such components were like the application specific integrated circuits, ROM as well as raw printed circuits to produce print head driver boards and logic boards for the printers. Final assembly test involved assembling of the rest of subassemblies such as cables, plastic classics, motors plastic chassis as well as the printed circuits for the printer final testing. The components that were required for the two stages were obtained from other divisions of the company (HP) and also from external suppliers from all over the world.
DeskJet selling in Europe called for carrying out customizing of the printer in order to meet requirements in regard to the language and supply of power of the countries in the locality and this process is referred to as localization. More specifically, this process for the various countries involved carrying out the assembly of the power supply module that was appropriate which gave a reflection of the right voltage requirements as well as power cord terminator and carrying out of packaging with the working printer as well as the manual that was written in a relevant language that could be understood (Stanford graduate school of business 5).
The finished goods from the factory composed of the printers that were meant to be distributed for all of the various countries. In turn, sorting of these products or goods were carried out in distribution centers, three in number. These distribution centers included Europe, Asian Pacific and North America.
The products that were going out were shipped to the DCs or distribution centers by sea. In Vancouver, the maintenance, of the components’ inventories as well as the raw materials was carried out in order to meet the requirements of production. However, no significant level of buffer inventories between the Printed circuit assembly and test and the Final assembly test stages were kept. There had been continual preference for not maintaining the finished products inventory by the management at the factory and this was a practice that had been started in the year 1985. From the distribution centers, the goods or products were then transported to the distributors as well as the retailers and the resellers. In Europe, these products would at the start be transported to the individual country offices of the HP Company and these country offices were under the management of the managers from these individual countries.
There was high competitiveness in the printer industry. HP’s customers for the computer products or the resellers had a willingness to carry the minimal inventory possible but at the same time maintaining a level that was high of the availability of the products to the consumers was very crucial to them. As a result, there was mounting pressure for the HP Company as a company that engaged in manufacturing to offer high levels of the availability of the products at the various distribution centers for those who engaged in reselling of the products. As a way of responding to this, the management of the HP Company made a decision to carry out the operation of the distribution centers in a mode of make-to-stock so that it could offer the levels that were very high of the product availability to the dealers. There was setting at the three distribution centers of the target levels that were equal to the sales that were forecasted and added to it some safety stock level.
There existed some main sources of uncertainty that could have some effects on the supply chains. These main sources of uncertainty were three in number which included the delivery of the materials that was coming in and these consisted of wrong parts and late shipments among others, the internal process and this consisted of machine downtimes as well as process yields and third the source of uncertainty is the demand.
The first two of the above mentioned sources brought about delays in the lead time in regard to manufacturing to fill up on the stocks at the delivery centers. The uncertainties that stemmed from the demand could bring about backorders or even inventory build-up at the distribution centers. For those distribution centers in Europe and Asia, because the finished products were transported by sea from Vancouver, what resulted from the lead time that was long was the distribution centers capability to have a response to the demand that was fluctuating for the various product versions was under limitation (Stanford graduate school of business 6).
So as to make sure that there was high availability of the products to the customers, the distribution centers in Europe as well as in Asia had to ensure there was the maintenance of high levels of safety stocks. For those distribution centers in North America, here the situation was relatively less complex for the reason that the vast demand majority was for the US version. There existed minimal fluctuation in the localization-mix.
Major Problem
It reached a point where the DeskJet printer, despite the former steady growth in sales, inventory growth tracked sales growth closely. Worse yet, claims came from the organization in Europe that the levels of the inventory in the place were required to be increased even more in order to maintain availability of the product that was satisfactory. The major problem that were identified in this case was concerned with coming up with the best way possible to meet the needs of the customers in regard to the availability of the product and at the same time having minimal inventory. The question is: How can the HP Company be able to satisfy customers in terms of availability of the products and at the same time be able to minimize the inventory?
Solutions
The problem this company needs to deal with is ensuring the availability of the products to the customers and at the same time having a minimal inventory possible. It is very important for any business organization to ensure a balance between the availability of the product and the inventory it holds. Acquiring proportional inventory remains the major aim of the (inventory) management, which is usually driven by the demand. The basic optimal result is having the equal days or hours, or any other time measure worth of inventory that is there across the total products in order for the time of run-out of the all the products would go together. In a case like this, no surplus inventory comes about; no inventory will be left over that was intended to be sold. Having a surplus or an excess in the inventory can be termed as being sub-optimal since the finances that are spent on this could have been utilized in a better way on something else.
The purpose that is secondary to the aforementioned is about minimization of the inventory. By having the forecasting of the demand in an accurate way carry out by the management of the inventory, the giving out of the inventory can be planned in such a manner that it arrives just in time (JIT) to stock up the goods or products that are deemed to run out first and at the same time having a balance in the inventory supply of all the goods to ensure their inventories are much more proportional, and by doing this ensures the achievement of the primary or basic objective.
Undertaking demand prediction in a rather accurate way provides room for those inventories (proportions) that are thought to turn dynamic in the much near future: this actually crates an avenue for more precise results i.e. being proportional to the short-run anticipated sales rather than the precedent averages. Bringing in demand prediction in the inventories (management) in such a manner offers an opening for the estimating of “can fit” point at the time there is a restraint in the inventory storage (on the center of per product).
Among the strategies that are supposed to be adopted by the HP Company is Just in Time (JIT) strategy. This strategy would help the company to be able to minimize the inventory and at the same time be able to provide satisfaction to the customers in terms of product availability. By employing this approach to stock and product handling, the HP firm can be in a better position of curtailing costs to a noteworthy level. The costs that are associated with the inventory make a big contribution to the expenses that any company may incur and in most cases, those companies that are involved in manufacturing. By ensuring the minimization of the inventory a company holds, space in the company is saved, the cash resources are freed and wastage is brought down to a significant level which results from obsolescence (Lorefice, p. 3).
In order for this approach of just in time to be facilitated, various systems need to be put in place. Kanban emerges as the most distinguished system. This is a Japanese-born approach whose major target is ensuring continuity in the stock provision. This approach was put in place to offer support the philosophy of just in time.
The approach (Kanban) is visual gesture that gives a guide on the precise time to offer stock, formulate or meet up another order. Just in time do exist in performance with the improvement systems that are continuous. By employing the application of just in time, a company is carrying out the monitoring of the process of production on a continuous basis. This provides a good chance to the firm in ensuring that production (process) runs in the right and well-organized way possible.
Since just in time is meant to spread in all the sections of the company, there is likelihood that the adoption of this approach will have some impacts on several sections through process improvements. If the firm stresses on lean production then there may be a trend in the systems to be made to be trouble-freer and they are also made to be more knowable.
Having JIT in place, it is quite essential that the HP Company set up ties that are stronger with its supply chain. In so doing, the firm will be assured of constant supply at any time of need. The advantage of having this in place is the company will be in a position to get a warning in advance of likelihood of the shifts in supply that may have a negative impact on the company.
The idea of the organization obtaining secure and reliable supplies, the firm will achieve a lot in its undertaking of advancing the (systems) inventory and the general production process. This will serve to bring up the level of the company’s responsiveness to the demands of the customers. If there is need to bring up the level of production, the company will have confidence in carrying out with an assurance that they have to obtain help from its suppliers.
By employing the just in time approach, custom orders are much easier. The customer’s widget may be prepared and availed when needed/ ordered rather than arranging for it in a much earlier time so that it can just wait there. By making the delivery of the goods /products just in time, the company can be able to be allowed to follow for the last-minute changes. In general terms, just- in- time method allows an organization to obtain the right produce to the right shoppers and at the suitable time. This can offer a company a big competitive advantage while enabling the company to save a huge amount of money.
However, this approach of just in time has its own short-comings. One of these shortcomings is that very little room does exist for the mistakes because there is keeping of the minimal stocks possible. This brings in difficulties in working again on those products that may turn out to be faulty. More so, another disadvantage of this approach is that the production of the goods is very much reliant on the suppliers. In the case where a shortage of the supplies or if the supplies are not carried out in time, delays in regard to the schedule of production may come up. Another disadvantage of the just in time approach is that, after production, there are no extra finished products that are available. This unavailability of extra finished goods may cause the company not to be able to meet the orders that are unexpected for the reason that all the goods that would have been produced are produced with an intention of meeting the actual orders.
Choice and the rationale
Following the claims which came from the organization in Europe that the levels of the inventory in the place were required to be increased even more in order to maintain availability of the product that was satisfactory, this brought in a problem. Since the HP Company is having a problem of having minimal inventory and the same time ensuring that the customers are satisfied to the highest level position, it needs to come with a solution with urgency.
Undertaking demand prediction in a rather accurate way provides room for those inventories (proportions) that are thought to turn dynamic in the much near future: this actually crates an avenue for more precise results i.e. being proportional to the short-run anticipated sales rather than the precedent averages.
The choice to be made here is to adopt the just in time approach. This is seen as the best weapon that this business organization can use to deal with the problem it is going through. This strategy would help the HP Company to be able to minimize the inventory and at the same time be able to provide satisfaction to the customers in terms of product availability. By employing this approach to stock and product handling, the HP firm can be in a better position of curtailing costs to a noteworthy level. The costs that are associated with the inventory make a big contribution to the expenses that any company may incur and in most cases, those companies that are involved in manufacturing. By ensuring the minimization of the inventory a company holds, space in the company is saved, the cash resources are freed and wastage is brought down to a significant level which results from obsolescence
By the HP Company adopting the just in time approach, it will be able to set up ties that are stronger with its supply chain. In so doing, the firm will be assured of constant supply at any time of need. The advantage of having this in place is that the company will be in a position to get a warning in advance of likelihood of the shifts in supply that may have a negative impact on the company. In this will in turn enable appropriate measure will help the company to come with the best ways to ensure product availability to the customers is not so much affected.
The idea of the organization obtaining secure and reliable supplies, the firm will achieve a lot in its undertaking of advancing the (systems) inventory and the general production process. This will serve to bring up the level of the company’s responsiveness to the demands of the customers. If there is need to bring up the level of production, the company will have confidence in carrying out with an assurance that they have to obtain help from its suppliers.
Custom orders from the customers will have to very much simpler in the case where the HP Company will have to employ the just in time strategy. By employing the just in time approach, custom orders are much easier. The customer’s widget may be prepared and availed when needed/ ordered rather than arranging for it in a much earlier time so that it can just wait there. By making the delivery of the goods /products just in time, the company can be allowed to follow for the last-minute changes. In general terms, just- in- time method allows an organization to obtain the right produce to the right shoppers and at the suitable time. This will have to offer this company a great competitive advantage and at same time enabling the company to save a huge amount of money.
As it has been looked at earlier, the Just in Time approach is not without its own weaknesses. The weaknesses include the unavailability of extra products for sale after manufacturing, no room for mistakes and heavy reliance on the suppliers. However, these weaknesses of the approach can not out-weigh the benefits that the HP Company can derive from it given the fact that the Company is in a dilemma and needs to take immediate step.
The company is in a position to counter this problems that may arise from the adoption of the just in time approach. The Company has its own strengths and that is why in has been in the business operations. For instance, the company the company has a stable resource base that can enable it to take appropriate measures to implement this plan. The company has also great innovative power and this has always enabled the company to come up with products that the customers appreciate. The HP Company has great business opportunities since it operates in various geographic locations which offer a larger number of customers.
It the present, the threat this company faces is the potential loss of customers that may result from the supply chain in regard to ensuring product availability to the customers and at the same time having to maintain minimum inventory. However, through the implementation of JIT, this threat will have to be countered. The weakness in the company is how to obtain agreement among the various parties that the company has the right level inventory. This is going to be cleared away is the JIT approach is adopted.
Implementation
The implementation of the “just in time” approach will require the company to take some measures. For instance, the company will have to ensure that it has the suppliers that reliable in order for the company carry out production of its products with no any inconveniences to satisfy the customers. The company is also supposed to ensure that it is aware of the orders of the customers have so that it can engage in the production and distribution of the products to the customers. In general terms, the appropriate measures are supposed to be taken in order that the company engages in the production and delivery just in time as there will be need.
Conclusion
As it has been looked at, the HP Company is having a problem stemming from the supply chain and specifically the problem of having customer satisfaction in terms of product availability and at the same time having a minimum inventory. This problem will have to be solved by employing the just in time approach. Putting this approach in place will enable the company to meet the customers’ needs by ensuring that the products are available to them in the right quantities at the right time. The company will be able to implement this because it has strengths as well as opportunities that can enable it to do so. This will serve in enabling this company to gain a competitive advantage in the market.
Works Cited
- Lorefice, Alejandro. Just in Time manufacturing: Introduction and major components. 1998.
- Stanford graduate school of business. Hewlett-Packard Company, DeskJet printer supply chain. Stanford: Stanford Graduate School, 2005.