Challenges Of Operations And Supply Chain Management Essay

The biggest challenge confronting the Vancouver fabrication works was that for the remainder of Hewlett Packard, there was no “ job ” ; “ When it comes to existent dollars, stock list costs do non come in into the P & A ; L statements, but losingss hurt our grosss. Do n’t speak to us about inventory-service tradeoffs. Time period. ” Vancouver was held up as a theoretical account of efficiency ( Kanban ) and the DeskJet pressman scope was a runaway success. A civilization of territorialism and hapless communicating exacerbated the deficiency of urgency. Damaging internal competition was rife as a consequence of disjointed an myopic decision-making in the absence of any truly planetary attack to the supply concatenation cardinal public presentation indexs ( KPIs ) ; the “ bullwhip ” consequence was writ big all over the house ‘s supply concatenation. The jobs brewing were existent and mounting and we argue that the best solution would necessitate a cardinal inspection and repair of HP ‘s production and supply concatenation ensuing in the demand to set up a new fabrication works in Europe.

“ The consumer electronics industry is the really incarnation of [ cardinal ] facets of supply concatenation direction and related hazards, ” ( Sohdi, 2004 ) , due to the short merchandise lifecycles, tough competition, and planetary nature of the concern. The DeskJet pressman concern presented a new challenge for HP as the house ‘s expertness was in extremely customized, low volume, and long lead-time fabrication and supply concatenation. In DeskJet, high volume, short merchandise lifecycles, and high obsolescence hazard were the name of the game. Printers were in passage from an advanced merchandise to a functional merchandise but the supply concatenation did non reflect this. HP used OEMs to beginning constituents and so did their ain assembly. HP made high borders on the cartridges, and the pressman was the conduit.

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HP ‘s success in Europe was get downing to equal the place market in gross revenues, adding farther complications due to the demand to modify power beginnings and linguistic communications for local markets. In Europe, merchandise option “ AB ” had the highest monthly average demand, and demand was more spread over the options than in North America, where virtually the full gross revenues were in option “ A ” . Monthly criterion divergence in demand for the popular options was rather high at +- 30 % . Even more significantly, the company was keeping big and expensive safety stock due to the long transportation lead times and the prohibitory cost of air cargo.

The success of HP ‘s DeskJet pressman scope in malice of an un-optimized supply concatenation suggests that there were important possible additions in profitableness if the right solution were found. In add-on, despite high stock list degrees, stock-outs were still happening, endangering the most cherished plus of all in the extremely competitory pressman market: client trueness and sentiment. Questions of internal efficiency and client fulfillment had to be evaluated against the background of a quickly turning pressman market, which was detonating along with the proliferation of desktop Personal computers.

Despite organisational inactiveness and viing precedences, a figure of avenues were unfastened to HP at the clip, including stock list management-the benefits of proroguing concluding assembly-product design, and the debut of JITD. We examine each and dig deeper into the concern and client benefits of establishing a production site in Europe to to the full capitalise on the rush of the pressman market. The market is germinating quickly and needs a strategic realignment of its supply concatenation. Making a European fabrication installation, plus “ incorporate fiscal public presentation and hazard direction ” ( Hahn & A ; Kuhn, 2009 ) will besides better stockholder returns ( by bettering stock list direction and hence hard currency flows ) and will extenuate hazard.

Delay scheme

To be successful the DeskJet supply concatenation must fit client demand. It must be in the zone of “ strategic tantrum, ” with a better lucifer in Europe between reactivity and uncertainness. It must incorporate gross revenues, fabrication, distribution, and operations. Postponement is a solution to back up future DeskJet enlargement in Europe and to run into European demand. A successful delay scheme requires important grades of coherence ; departmental barriers will necessitate to be brought down, processes restructured and merchandises redesigned. However, the wagess of implementing a successful delay scheme are great. HP is non without challenges to implement a successful delay scheme. Significant organizational alteration and coordination would be required.

As Pagh and Cooper province ( 1998 ) , “ The impression of delay is to keep the merchandise in a impersonal and noncommittal position every bit long as possible in the fabrication procedure. ” In order to back up this, features of the DeskJet that have to be localised should be added at the last minute. Standardizing the DeskJet would do stock list direction and prediction easier. It is besides a manner to let cost-efficient terminal user customisation. By making customisation, extra lines can be introduced and consumer demands are met more easy. Customisation will help HP in distinguishing itself and in capturing the market. Based on Cooper ( 1993 ) , we propose the usage of the deferred packaging delay scheme. The DeskJet peripherals are non common to all markets whilst the preparation is common.

Delay requires tight integrating of procedures and the formation of a holistic position. In the instance of DeskJet printing, redesigning the merchandise to do it more modular will increase fabrication costs, but would take down the entire supply concatenation costs. A modular design will standardize the design and therefore standardize procurance procedures. Making the DeskJet design more modular will besides restrict the inclusion of constituents that differentiate the merchandise until the latest possible minute. Other benefits of modularity are identified by Feitzinger and Hau ( 1997 ) , including the ability to fabricate faculties individually or in parallel, thereby cut downing production clip and helping with job nosologies in placing quality jobs.

When sing a supply concatenation scheme, all elements from the design, procurance, industry, gross revenues and distribution must be considered in unison. For illustration, doing the DeskJet power supplies cosmopolitan electromotive force may be more expensive, but it would supply HP with a more flexible usage of stock list and would cut down calculating mistakes. Selling must be involved in the design procedure to formalize that merchandise assortment and customisation meet market demands. Finance must be engaged to supply activity-based costing, ( ABC ) statistics to back up scenario analysis. All stakeholders and their differing point of views must be considered in order to construct a holistic theoretical account of the revised supply concatenation.

Successful delay requires that organizational boundaries are traversed. HP should work with resellers and distributers to supply some merchandise localization of function and customisation undertakings. In many instances resellers will necessitate important support, preparation, and systems to transport out these undertakings. The long term value outweighs the short term investing. In all instances, postponement partnerships must be made on the footing of empirical grounds and holding considered the mutualities of the theoretical account. The determination to construct European fabrication capableness and interfacing this capableness with European distribution is important to back up DeskJet gross revenues in Europe. We support set uping a European works as a scheme given European demand. However, in add-on to the works, distribution Centres across Europe should be capable of pull offing merchandise localization of function and refilling of all localization of function stuffs.

The “ before ” and “ after ” supply concatenation diagrams are shown below. One can see as a consequence of set uping a European production centre aˆ¦aˆ¦..GUYS I DO N’T See IT HEREaˆ¦.LOOKS LIKE WE ‘VE JUST DUPLICATED THE SAME SUPPLY CHAIN IN EUROPE ( IE 2X THE COSTS? ) AND ADDED A STEP FAT 2 WHICH IS LOCALIZATION IS THIS CORRECT?



Opening a new installation in Europe

Companies going planetary and basking turning gross and spread outing market portions across geographicss face an of import challenge: inactiveness. Being nimble and being able to respond rapidly to altering conditions sometimes requires hazardous determination in volatile, unsure environments, and sometimes authorizations direct investing in foreign venues. The company must acknowledge that what sustained past success will no longer work and must be adapted. This is the challenge Hewlett Packard faced when the Vancouver installation, which served the U.S. market, at the clip HP ‘s largest, could no longer run into the demands of turning abroad markets which were going increasingly more of import in footings of units sold. ( Monthly mean of 23,108 units in Europe vs. 26, 611 units in North America ) .

Hewlett realized that in footings of lead clip, stock list optimisation, transit costs, and localization/customization, seeking to function European clients with its U.S. fabrication installation was no longer feasible despite assorted efforts at engineering invention and optimisation, alterations in merchandise design, and displacements in its logistic procedures ; the job could non be solved. ( Transit clip by sea takes up to five hebdomads. ) As the European market matured, it needed one or more fabrication locations geographically near to local providers and to stop clients. However, choosing the right locations in which to set one or many distribution centres and fabricating installations required executing scenario analysis ( Sodhi, 2003 ) and sing several of import standards in a “ holistic model for value-based public presentation and hazard direction in [ robust ] supply ironss ” ( Hahn & A ; Kuhn, 2009 ) :

O Customer and supplier location, concentration and importance: the ideal location is a “ centre of gravitation ” based on weight bunch, transit cost, the geographical location and comparative importance of difference providers and clients. Order bringing clip is a “ critical unifying dimension ” ( Tempelmeier, 2001 ) when choosing a location that serves downstream demands. However, the “ centre of gravitation ” has to be modified by presenting extra restraints as listed below. In other words, optimisation under many restraints must be performed. And this has to be done dynamically, including current informations and future projections.

O Labor: The accomplishments, preparation, and demographics of the work force, unemployment tendencies, productiveness, cost of labour, unionisation, work ordinance, work civilization all vary widely across Europe and have to be considered.

O Cost and handiness of land: The existent estate environment of the country under consideration has to be analyzed: sites, constructing handiness, building cost, ordinance, including environmental ordinances, the handiness and dependability of public-service corporations, local building companies, and care suppliers.

O Corporate revenue enhancements and inducements: revenue enhancements are another bed of costs that have to be taken into history. Local governments and authoritiess may be viing to pull foreign direct investing and job-creating investings, offering revenue enhancement and other fiscal inducements which can lend to returns and lower hazards.

O Logistical substructure: HP needs to measure connexions to main roads, rail conveyance, and the propinquity to airdromes and havens, all of which have to be dependable and cost effectual. They besides have to happen believable logistic/transportation spouses.

O Other standards include the local clime and exposure to natural catastrophes.

O Finally, the company must supply exile forces to pull off the operation and its labour so quality of life issues must factor into the choice of the location.

The procedure of choosing the optimum location is a multi-stage, top-down one, where initial showing produces a short list of states or parts and so extra and more demanding standards are added to contract down the initial list through several loops until one or two concluding locations are selected.

The benefits of a fabrication installation in Europe are important and affect every measure in the supply concatenation which now has a better strategic tantrum. Physical, fiscal, and information flows are better aligned. The market is every bit big as the U.S. but more diverse and will be better served. Natural stuffs procurement becomes more streamlined. Inventory yearss autumn because one benefit of standardisation ( with local customization ) is that stock list can be moved from one part to another so as to avoid stacking up stock list in one part and stock-outs in another. The concatenation has moved to more of a “ push-pull ” system. Lead times are shorter. Finished merchandise besides does non stack up. The cost of fabrication goes down and since pressmans were “ quickly going a trade good merchandise, ” economic systems of graduated table and cost nest eggs are critical since clients “ taking between two inkjet pressmans of equal velocity and quality ” will do their determination based on cost and dependability.

From a direction position, managing the supply concatenation becomes easier since it is optimized to regional demands but still integrated in a planetary model that captures the benefits of HP ‘s graduated table in purchasing power. The supply concatenation better serves client demands and enables the company to turn more efficaciously in Europe and besides is a theoretical account for other parts as they develop. The company can break pull off its hazards ; it has reduced its exposure to stock list and transit hazard and improved its ability to pull off supply concatenation supply and demand uncertainnesss in Europe. ( Uncertainty prosodies like borders, prognosis mistake, stockout rates are all lower. ) Finally, the improved supply concatenation should better stockholder returns since operating borders, plus bends, and hard currency flow are positively affected.

Other Improvement Opportunities

As HP ‘s direction moves frontward, it should take into history the undermentioned extra recommendations:

O A clear, overarching scheme for Europe needs to be defined and implemented across HP ‘s corporate central office. Conflicting and viing corporate involvements need to be reconciled with a clearly delineated bid and communicating construction. A clear company-wide and bottoms-up consensus should be reached about the model necessary to accomplish enduring success in Europe.

O HP needs to follow improved corporate communicating and defined domains of duty and answerability across the organisation. The instance reveals that some of the company ‘s most of import technological promotions have been discovered by coincidence. Enhancing its technological promotion procedure with a more strict coaction and invention theoretical account would render technological and supply concatenation procedure betterments less susceptible to opportunity. For illustration, common planetary KPIs on stock list would be a good starting point.

O HP should take “ organisational barriers ” to cut down lead clip. ( Billington & A ; Lee, 1992 ) .

O The company should set up a dedicated “ European Localization Management Team ” to measure current local market tendencies every bit good as the viability of the suggestions above.

O The company should research farther trade chances within the European Union and in Eastern Europe, beyond merely the revenue enhancement and other cost-savings options.

O HP should work e-commerce, utilizing the cyberspace to take orders and form distribution.

O The company should develop a supply concatenation risk-management model to expect and extenuate any breaks. A new or enhanced supply concatenation is an chance to incorporate “ currency hazards, cyber onslaughts, failed communicating with suppliersaˆ¦terrorismaˆ¦non-compliance. ” ( Bosman, 2006 ) .

O HP should modify its local selling schemes based on national and cultural consumer demographics. The selling and PR squads should besides use available resources to place such chances and take part within the European supply concatenation community.

O There are “ green ” chances within the supply concatenation that could be exploited.

Technology & A ; Information processing: JITD
New systems and better prediction will do the job visible but non work out it. The greatest additions are cardinal: Streamline design of the merchandise to ease industry at the DCs and construct capableness at the DCs. However, there are still proficient additions that can be made.

[ they implemented a system called FLAP – Prediction, logistics and be aftering ) to track prognosis truth. ]


The HP instance is an illustration of how effectual supply concatenation direction requires both a revised direction paradigm ( strategic alteration ) and more sophisticated tools and techniques ( optimisation ) . The “ delay ” scheme is a better strategic tantrum between the supply concatenation and HP ‘s merchandise life rhythm across the cardinal strategic and competitory variables: invention, client service, and cost leading since pressmans are quickly transitioning to adulthood. Establishing a fabrication works in Europe, a major alteration in HP ‘s pressman supply concatenation, will better the company ‘s public presentation in four critical countries: costs, client satisfaction, stockholder returns, and hazard direction. The company ‘s physical flows, fiscal flows, and information flows will all be more aligned and efficient. After the initial capital cost of set uping the works, the company should see significant cost nest eggs from lower stuff costs, better predictability, improved supply confidences ( no deficits ) , and lower stock list carrying costs.

There is a tight linkage between gross revenues, stock list, and merchandise handiness, ( Raman et al, 2009 ) , and so client satisfaction, as measured by lower lead times, reduced variableness in demand, fewer stock-outs, and enhanced ability to custom-make by part, should better. The company will besides place itself for future growing. HP should see the benefit of improved client satisfaction in lifting gross revenues and market portion in Europe. Shareholder value will be enhanced by the positive impact the supply concatenation alterations will hold on stock list and on the job capital and hence on operational value drivers like operating borders, plus use, and hard currency flow. Finally, the company will bask important betterments in hazard direction. ( Hahn & A ; Kuhn, 2009, mentioning to others ) .

Certain hazards, like being out of stock of a cardinal constituent or merchandise, will be wholly eliminated. Others can be mitigated through improved ability to contingency-plan and gimmick jobs earlier. The company will be able to offload other hazards or portion them with providers and clients. And it will be able to consciously choice hazards, instead than passively absorbing them. Overall, the revised supply concatenation and the new fabrication works in Europe will be a accelerator for dramatic betterments in HP ‘s operating and fiscal public presentation, non merely on the Continent, but around the universe.


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