358 DESIGNING AND MANAGING THE SUPPLY CHAIN completed within the time constraint
ID: 432539 • Letter: 3
Question
358 DESIGNING AND MANAGING THE SUPPLY CHAIN completed within the time constraints we have set for Hewlett-Packard Company: Network Printer Design for Universality delivering the product to market on time must make the decision within the next two weks so our Japanese partner can line up its design engi. neers to work on the project." Hooper summed up finance's position as follows, "I do not know what or benefits to the supply chain will be derived from this new change, but what I do know is that our lapanese partner quoted that universal power other costs Sarah Donohoe, manufacturing engineering manager of the network laser printer division at Hewlett supply would increase costs by $30 per unit." Packar As the conversation progressed around the room Hooper's words became more and more indicative d Company (HP), listened intently to her col. at the project review meeting for the lopment of their latest new product. With Sarah of the group's feelings as a whole. The only han at the meeting were Jane Schushinski, marketing number available for analyzing the costs and bene- fits of the change was the S30 increase as quoted by the Japanese partner. If the team was to implemen k, head of product design; and David Hooper, the controller of the division. or this meeting was the decision the change, they would have to convince manape. ment that the benefits outweighed the costs. tiea eneration of network iaer p te the advantages and disadvantages appeared of whether or not to use a universal power supply nfortunately, as the meeting went on, quantifying code-named Rainbow. Previously, printers in the North American and the European market have dis. and more difficult. tinct power supplies and the associated fusers in the main engine of the printer. For North American THE HEWLETT-PACKARD COMPANY printers, a 110-volt power supply was installed. For European print added. This printer engine was built by HP's manu- Established by two Stanford University graduales facturing partner in Japan. Due to the long lead time William Hewlett and David Packard, in 1939, the for engine manufacturing. HP had to specify the company initially prided itself on supplying superior requirements of the two types of printers at least 14 engineering tools, designed for engineers by weeks ahead. The time that it takes the Japanese neers, As the company grew and diversified, the partner to commit the printers for shipment, the strong belief in technological innovation as the key transportation times, and customs clearance totals to competitive advantage persisted about four weeks. Hence, if a universal power sup. Innovation was the key to HP's strategy. In I ply is used, then HP would have the flexibility of Packard expressed his belief in the importanco postponing the specification of the printer engine by this capability at least two Consequently, the production team believed that a techeiques, better machinery and equipment ans hby n universal power supply can enable HP to better continually finding better ways to do their jsbs ters, a 220-volt power supply was Hewlett Packard was one of Silicon Valley's legends of onths in the planning process. Improvement is accomplished by better methodh, be nd to the changing demand in the individual work together as a team. I will never ee the day w markets and reduce its inventory costs there is not yet room for improvement Linbeck had begun the meeting by reviewing a fax he had received from the Japanese partner. "We Soure Copyright 19 have been asking our partner for a universal power Stanford Panior Univesity All richts sed with penine supply and fuser for a long time, and now, when we wwn by Professoe Has . Lee, bsed on an original ca are about to finalize our design of the next generation ten boy Steven Pous and Toni Cupal It is intended as the a t network printer, they are telling us t new power supply is finally feasible and can be sames have been dguined by the Board of Trustees of the Leland werfrom the Stanford Univenity Geuluate School of B This c class dscsssion rather can to illustrate either effective a hatslling of an adminivtrative situaion. The prExplanation / Answer
In what way is a universal power supply a postponement strategy?
Universal power supply gave HP a new and better business strategy in trying to meet the demand characteristics of the printing market all over the world. As a marketing strategy Universal power supply enables HP to make an individual market determination later and by doing so, they prevented localized areas that are expensive and helped in making accurate forecasts. In marketing HP printers they had several challenges, especially in determining market demand that is where, when and how much is needed. To accurately forecast mix demands of HP printers in various geographical regions has always been an inability in their part. For example, while in production, we might anticipate that Europe will need an approximate of 10000 units and North America about 2000 units, while in turn, the numbers might be 150000 and 5000 respectively. The market conditions in different geographical region's influence market demand and these conditions can change drastically within a few weeks. Demand predictions become increasingly harder, these reasons, thus the need to be ahead of time and specify market demand for HP printers four and half months before delivery (Lee &Billington, 1995). With the universal power supply, HP is able to solve this issue and does not need to know the exact numbers for each particular market since with it HP just needs to estimate market demand worldwide for a period of four months ahead of delivery time.
What are the costs and benefits of a universal power supply?
The initial costs of incorporating a universal power supply and ultimately sell about 450000 units of the Rainbow HP printers will be about $13.5 million material costs added to the initial costs of material costs. And this is an issue because if the additional cost is not compensated either in an increase in prices in their products or to the retailers. The benefit of the universal power supply is that it will make the company not miss a sale, which will have adverse repercussions on the profit margins of the product sales. Fluctuations in demand in each period of the product life cycle lead to costs of missing a sale. When the company is not able to meet demand there is a risk of losing a customer to the competition and sale of consumables like cartridges would go down. Universal power supply eliminates these uncertainties by keeping inventory in check. Forecast errors are greater when introducing a new product since we do not know the market response and this can influence stockouts and the use of a universal power supply might help solve this issue.
How would such costs and benefits be different over the product lifecycle?
The effects of stockouts costs are high when the product is first introduced into the market and can grow to a higher level when it is publicity is heightened over time. At the end of the product cycle, the stockout costs will be considerably lower due to the anticipation of a new product that could be launched in the near future. During the introduction of the product the reaction to the product is uncertain, thus making predictions on the market demand is difficult and since HP is a leading innovator a stockouts cost are likely to increase. In the maturity stage, the standard deviation is approximated that of the average monthly demand it is at 40% in all markets. This is because the competition is increasing due to products of almost the same elements, as the rainbow would have been introduced, thus reduced demand and lower profits. At the last stages of the product, life cycle competition is fiercer and retail profits, product demand is very low, and to stay competitive HP has to innovate and introduce a new product into the market.
Besides deciding on a universal power supply, what other operational improvements can you suggest to HP Boise?
In anticipation of high demand during the ramp-up stage, which leads to high warehousing costs the company should adopt a new strategy or adopt the just in time philosophy the Japanese use and this way warehousing cost will be reduced. To meet demand at a quicker rate in different geographical locations HP could open up branches in areas where they are geographically strategic and stockpile their products in the warehouses instead of having a one storage place (Feitzinger& Lee, 1997). In operational improvements, 3D printing is the new face of printing, although the technology is expensive due to non-reusability of the materials used in printing which are expensive. Advancements in technology have made 3D printing materials to make objects that can be compared to the traditional one like the one the Rainbow printer makes Schubert et al. 2013). This is the new thing in the market and if HP does not adapt soon it will be out of business.
What would be your recommendations about the adoption of a universal power supply?
A four and a half month is a long enough time to prepare for demand changes because the companies supply and marketing departments should study the market conditions of all markets and give a good forecast on what is to expect. A few samples should be sent prior to the launch of the product before the full shipment so that approvals can be done in time and market response demand can be established. Another recommendation is that HP should analyze the impact of the additional costs and try to minimize expenditures, especially in stockout costs and inventory management so that their operational procedures can be more effective and efficient.
I REQUEST YOU TO KINDLY RATE THE ANSWER AS THUMBS UP. THANKS A LOT.
Related Questions
drjack9650@gmail.com
Navigate
Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.