惠普打印机案例感想.doc

Lingnan MBA CenterLingnan (University) College, Sun Yat-sen UniversityAssignment FormCourse: Operational Management Instructor: Chen GangHomework:Case Write Up HP Printer Name:Sandra Deng 邓玉艳 & Connie Wang 王华燕Student ID No.:10210353 & 10210348Class:2010PASTUDENT DECLARATIONI declare that this assignment is my own work, which all sources of reference are acknowledged in full and it has not been submitted for any other course.Signature: Date:Questions and Answer:1. In what way is a universal power supply a postponement strategy?HP has two specifications for its printers, 110-volts for North American region and 220-volts for European region. One of the crucial part of the printer is engine. It is built by one of HPs manufacturing partner in Japan who needs the specification 14 weeks in order prepare for production. However production period only takes four weeks. The dilemma is that should HP were to develop universal power supply, it can have the flexibility of postponing the specification requirement to its partner by 2 months. On the other hand, should the universal power supply strategy is implemented, HP can respond the demand in the individual market by optimizing is inventory and reducing its indirect cost that hits is SG&A.With a universal power supply, HP need not make the decision for customization (whether the printer should be made for the North American or European market) when it places an order with its Japanese partner. Instead, it just had to provide an aggregate order (for both markets) and the final product will be generic. The printer is customized only when HP sees a demand for printers of a certain region. Therefore, customization of the product for the local market is pushed back further down the supply chain i.e. postponed.2. What are the costs and benefits of a universal power supply?Costs: A. Production cost will be higher as it costs the Japanese partner $30 more to produce and install the universal power supply than if it were to integrate the 110V power supply or 220V power supply. Universal power supply will cost $13.5 million which it is only 3% of product cost that can easily be passed through customer. On the other hand, HP can cover the cost which means 3% off its bottom line. However, if this money is not invested, lost of future customers due to stock out or even lost in profit margin due to transshipment can drain the companies finance through time. B. Increase in price by 3% can also reduce revenue (sale) due to high price of cost increasing.C. There may be an increase in transshipment transportation costs as currently. With the universal power supply, it is possible to transport the products between Europe and USA easily. Therefore, we foresee that the universal power supply will induce more transshipment and thus higher transportation cost.Benefits: A. Lower Inventory Level and Holding Cost. Decrease if not eliminate stock out. B. More Flexible Supply Chain and Higher Service Level.C. With universal power supply, HP no longer needs to develop demand forecast for each market. It only needs to generate estimated worldwide product demand four months ahead. D. Standardization in universal power supply in printer can also initiate standardizing in other products such as work stations and servers. E. Add value to customers. Standardization in universal power supply could also offer customer benefit of using the product in different region.D. Eliminate direct cost associated with labor spent responding to demand.3. How would such costs and benefits be different over the product life cycle? Ramp-up and Maturity StageThe underage cost here is the stock out cost of $10,000 per unit. The overage cost is the inventory holding cost of $75 per unit per month, supposing that we can always sell the over ordered printers in the next month. Therefore, to achieve a tradeoff between the underage and overage costs, we should set the service target to be $10,000/ ($10,000 + $75) = 99.25%, and so the safety factor z is 2.43.Cost without Universal Power SupplyUnder the base stock model, the expected ordering quantity per month is equal to the expected demand per month. Thus the ordering cost (including production and transportation cost) is ($3,000 + $15) × 25,000 = $75,375,000. The average inventory cost per month is $75 × (15,000/2 + 2.43 × 12,000 × ) = $5,201,827 in North America and $75 × (10,000/2 + 2.43 × 8,000 × ) = $3,467,885 in Europe. Therefore, the total cost per month is $84,044,712.Cost with Universal Power SupplyWith universal power supply, the ordering cost (including production and transportation cost) is ($3,000 + $30 + $15) × 25,000 = $76,125,000. The average inventory cost per month is $75 × (15,000/2 + 2.43 × 6,000 × ) = $2,108,942 in North America and $75 × (10,000/2 + 2.43 × 4,000 × ) = $1,405,961 in Europe. Therefore, the total cost per month is $79,639,904.As a result, the universal power supply reduces the monthly cost by $4,404,808. Although it costs $30 more per printer, the inventory holding cost could be reduced greatly because the postponement increases the forecasting accuracy while decreasing the supply lead-time.End-of-Life StageThe underage cost here is the stock out cost of $2,500 per unit. In the end-of-life stage, HP usually sells the printers at a discounted price, dismantles the printers and sells the parts, or simply writes the printers off. Here we consider the overage cost to be $2500. Therefore the service target is $2,500/ ($2,500 + $2,500) = 50%, and so the safety factor z is 0.-Cost without Universal Power SupplyIn this case, the ordering cost (including production and transportation cost) is still ($3,000 + $15) × 25,000 = $75,375,000. However, the average inventory cost per month decreased to $75 × 15,000/2 = $562,500 in North America and $75 × 10,000/2 = $375,000 in Europe. Therefore, the total cost per month is $76,312,500.-Cost with Universal Power SupplyWith universal power supply, the ordering cost (including production and transportation cost) is ($3,000 + $30 + $15) × 25,000 = $76,125,000. Since we do not hold the safety stock inventory in this stage, the inventory cost should be the same in the case without universal power supply, that is, $562,500 in North America and $375,000 in Europe.Here we could transship the printers across the Atlantic to satisfy the shortage in the other market, so we need to consider the profit generated via transshipment. Suppose the unit price is $5,500, and the salvage value of a printer without transshipment is $3,000 + $30 + $15 - $2,500 (overage cost) = $545. The profit generated by one unit of transshipment is $5,500 - $75 - $545 = $4,880. Note that transshipment is possible and necessary only if the demand in one market is less than the mean while the demand in the other market is greater than the mean, and the number of units transshipped is equal to the number of excess units in the market with low demand. Let fA() and fE() denote the probability density function of the demand in North America and Europe respectively. The expected transshipment profit is $9,306,382where the first term represents the excess in North America and the shortage in Europe, and the second term represents the reverse situation. As a result, the total cost in this case is $76,125,000 + $562,500 + $375,000 - $9,306,382 = $67,756,118.To sum up, the universal power supply reduces the monthly cost by $8,556,382. The extra cost $30 incurred by the universal power supply per printer is comparatively low compared with the potential profit brought by the transshipment.4. Besides deciding on a universal power supply, what other operational improvements can you suggest to HP Boise?An operational improvement could be to stop relying solely on a single Japanese supplier who controls one key piece of equipment in the production cycle. HP Boise could modify the product so that it doesnt require the use of that one component or it can be a combination of other suppliers components. This will reduce the product to market lead time, and therefore allow HP to have higher flexibility in the supply chain, reduce the monthly forecast error as well as the inventory holding cost.5. What would be your recommendations about the adoption of a universal power supply?Given that the benefits of the introduction of the universal power supply outweigh the costs of such an implementation, HP should proceed with its plan. However, it may want to consider the following recommendations.Centralized PlanningCentralized planning is necessary if we are to avoid the conflict between the various distribution centers. Through centralized planning, HP will