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HP company: use or not use a universal power supply for next generation of…
HP company: use or not use a universal power supply for next generation of network printer?
HP's strategy
Key = innovation
In 1992, 10% of revenues to R&D
Working with cross-functional teams to improve new product development
Advantage: identify design problems in early stage
Improving customer service and responsiveness
Top priority = improving order fulfillment
Advantages of universal power supply:
Flexibility of postponing the specification of the printer engine by at least two months
Better respond to changing demand in individual markets
Reduce its inventory costs
Rainbow = next generation of network printer
Main engine = outsourced to Japan
Final customization at own DC's so that all extra options can be installed as accessories
Supply chain involves:
transportation of base printer to HP's DCs. Shipment of one month
Shipment of accessories to DCs
Stock at DCs. When order arrives, printers are customized
Final transportation time. From DCs to reseller. Days to one week.
Points to consider
High competition in the market: very hard to predict demand in individual markets
Long lead times for basic printer from Japan. 4.5 months while product life time is 18 months
Costs: Universal power supply would increase costs 30$ per unit
Lack of data --> Benefits and costs seem hard to quantify
Need to know: are the benefits worth more than 30$ increase in material costs?
Will cost 13.5$ million in materials + high cost of stockout at ramp up stage
Benefits: decreasing lost sales (three or four future printers included), decreasing bad publicity and word of mouth, relatively low cost of stockout at end of lifecycle
Other benefits: delaying regional allocation decision, so forecast can be improved before products are allocated to individual markets
Other benefit: making transshipment actually possible and financially viable
Yet, transhipment is not desired by DCs: want to maintain high service level
Look at two development metrics: 1. cost reduction 2. break-even-time (BET)
Alternatives: if forecast could be improved, universal power supply would be needless