Business Finance - Accounting Week Three Assignment 1 Instructions

HP's Inkjet Printer Design for Supply Chain RedSky Database

Hewlett Packard – Inkjet Printer Solutions

By Rick Cortez, Scott McLean, C’Anne Vaughn

Executive Summary RedSky is a supply chain tool that drives part and design reuse in the product development cycle. It

streamlines the product design process and limits component variation. Along the way, it provides

insight into themes such as price benchmarking, component usage and business analytics helping

optimize the supply chain and associated costs.

Innovation Statement An approach of using big data to more easily gain insight into supply chain costs and component usage.

This allows us to more efficiently drive supply chain improvements into the products design as well as

optimize supply chain costs.

Impact Statement Reduces complexity in the supply chain by minimizing component variation and saving HP greater than

$150M to date.

Applicability RedSky is a process that can be used in any supply chain environment to reduce number of parts, drive

lower cost, and/or perform a wide range of big data analytics.

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Introduction Hewlett Packard is a global company with its inkjet printing organization consisting of multiple design

centers, manufacturers and suppliers across the world. This was certainly no mistake from a strategic

standpoint, but along the way development engineers began designing products with a diverse set of

eyes, creating a wealth of unique designs and selection of parts. This translated into a supply chain

organization that was burdened with procuring a large component mix and providing manufacturing

with a diverse set of designs to support. This ultimately led to higher costs.

Designers lacked visibility: • Component costs • Product usage • Existing solutions to reuse

Result: • Component proliferation • High complexity • Costs not optimized • Missed opportunities “Use this one” “Not this one”

Figure 1 – Engineers attaching several screw types to a wall as a method of communicating which parts should be used.

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The response was to commission a team, known as Design for Supply Chain (DfSC), which was chartered

to drive component and design commonality. For the team to be successful, it was critical to have data

driven decisions. After all, data was needed to convince a strong and experienced team of product

development engineers that recommendations were in the best interest of the organization.

What started as a tool to help drive design commonality, quickly turned out to be much more as

evidenced by the team’s ability to drive cost savings (see Figure 2).

Annual Cost Savings

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Figure 2 – In 2010, the HP Inkjet DfSC team was re-purposed from a Post Manufacturing cost reduction group to a team of engineers that would engage early with R&D and have influence in the product design lifecycle.

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RedSky The RedSky Database (RSDB) is a tool developed by the DfSC team to provide the level of insight needed

to drive commonality and optimize costs. It is described as a merging of a product’s bill of material,

component costs, part attributes, forecast volume, and product attributes.

REDSKY

Bill of Materials

Component Cost Data

Product Attributes

Part Attributes

Volume Forecast

Figure 3 – Ingredients which make up RedSky that are “relational” in nature.

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The RedSky integration process involves three distinct steps:

Step 1: The production bill of materials (BOM) is imported from the product manufacturers identifying

the following key elements: products, parts quantities & prices, and assembly structure information.

Generally, this is 100,000 lines of data. While it’s possible to find the price of a given part, one would

need to know exactly where and how to search. Furthermore, it’s difficult to find if there are other

similar parts that might be a better choice based on price and usage.

Step 2: To provide the next level of insight, different attributes are assigned to parts. This allows for

logical organization. Examples of the different attributes are commodity type, such as screw or cable;

and design characteristics, such as glass thickness or inductor value.

Step 3: In the final step, each product is assigned attributes, such as volume forecast, manufacturer, and

product type. This produces a data set consisting of 100,000 rows and 60 fields of data, amounting to

6,000,000 pieces of information that can now be analyzed for different scenarios.

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Figure 4 – Data set can be scaled up or down, depending on those attributes that are important for analysis and the number of products and parts in the supply chain.

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Influencing Product Design Now that the usage of parts in production is well understood, the next challenge is to make an impact

on product development. Driving commonality means removing parts that are high in cost, low in usage

and steering towards others that are optimal from a supply chain standpoint. There is no better time to

switch to preferred parts than during the product development cycle. Thus, RedSky was enabled to

serve R&D by making data accessible and secondly, by incorporating an algorithm to see how well the

product aligns with commonality.

Figure 5 – Main Menu of RedSky that a typical user would navigate through. The front end interface was intended to be simple and focused, whereas the large extent of data would be accessible behind the password protected Admin block.

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Parts Catalog Having insight into the type of parts being used for a given commodity, there is now an opportunity to

optimize. Component cost, purchase quantity, product usage and part design attributes are all key

pieces of information that can be fairly compared with one another.

Let’s take screws used for securing into plastic as an example. At one point in time, we had as many as

28 different screws that had a thread diameter of 3mm. While there are certain properties that are

diverse enough to be considered critical, there are other properties that are close enough to warrant

debate. We had four screws with lengths of 9, 9.1, 9.86 and 10mm along with head diameters of 5.6,

5.39, 5.6, and 4.85mm respectively. While one can argue that these property differences may have been

critical for their design application, we also knew that declaring one of these screws as our preferred

screw would be met with success for future designs. As such, we were able to identify 10 screws that

we call preferred, giving us a good mix of color, length, and head diameter.

Figure 6 – An example of a report designers see once a search is complete.

The Parts Catalog was rolled out in 2 phases. The first phase focused on a select number of

commodities. The format that allowed for easy searching was then tested with the design community.

Once fully tested and vetted by the R&D community, it was expanded to the other key commodities.

Figure 7 - Example of consolidation summary for electrical components.

Part Lookup In addition to the Parts Catalog, a Part Lookup utility was provided in the form of a graphical user

interface (GUI). This provides basic queries without the need to navigate an overwhelming amount of

data. Its purpose is to allow a designer to acquire business intelligence for a part that can be searched by

part number, description, or commodity type. Price, purchase quantity, product usage, and

manufacturer usage are then presented back to the user.

Figure 8 – Part Lookup utility with built-in smart searching.

BOM Analyzer Lastly, the BOM Analyzer is a tool embedded in RedSky that evaluates an itemized BOM in its entirety

for commonality and preferred parts performance. Once a BOM is loaded, it makes the determination

whether a part is new or pre-existing via calculation. Furthermore, it analyzes parts by commodity to

determine if designers are using preferred parts or non-preferred parts.

Behind the calculations, lies a sophisticated algorithm that allows RedSky to make recommendations on

whether a preferred part should be used in the event a non-preferred part is in use. For instance, if a

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non-preferred part is being used on a legacy assembly, it’s in the best interest of the business to not

make any changes. On the other hand, if there is non-preferred part that is being used for a new design,

its preferred part equivalent is identified along with other information to justify its use such as savings,

usage, etc.

Product Design R&D REDSKY

BOM Analysis

Production

Target: Lean Supply Chain

Figure 9 - Closed loop process for maximizing preferred part usage. RedSky imports a BOM under design, analyzes for performance, and reports back to the design team where there are opportunities.

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Other Welcomed Benefits of RedSky

What once started off as a tool to provide insight for component commonality, proved to be much more

fruitful in the areas of Cost Optimization, Price Benchmarking and general analytics.

REDSKYParts Catalog

Part Lookup

BOM Analysis

Analytics

Figure 10 – The information and tools that RedSky provides.

Should Cost Price Optimization

Now that design attributes and pricing for similar components are easily accessible, patterns in cost can

now be seen.

For example, as a result of design proliferation, we had two A4-sized scanner glass parts being used in

production, one 2mm shorter in length than the other. What was odd was that the glass with 1% less

material was 10% higher in cost. We challenged the supplier with this knowledge and ultimately drove

the price down by 14%. In addition, we also managed to design the higher material glass out of

production and settled on the lower cost preferred glass.

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Manufacturer Price Benchmarking

With multiple manufacturers for our products, pricing can be compared for the same components.

Whereas two manufacturers might be charging us $1.00, the other might be charging us $1.10. Since we

can also associate these components with purchase quantity, we have the right level of insight and focus

to determine if these are opportunities to investigate. Was there something unique about the supply

base or were we simply not receiving competitive pricing?

General Analytics

The underlying ability of RedSky is the power to perform different levels of analytics which are

correlated to the attributes loaded into the system. These analytics have been used to drive

commonality and look for opportunities for driving down cost.

There is a wealth of reports that can be produced based on your imagination. You can use RedSky to

summarize how much is spent annually on 100Ω resistors. Maybe instead, you want to generate a part

count for each one of your products in production. Better yet, why not use RedSky to help you

determine the cost impact of one second cycle time for your plastic molded parts.

Conclusion

The RedSky supply chain tool has driven part and design reuse into the HP Inkjet Printer product

development cycle streamlining the product design process and limiting component variation. It has

been well received by the R&D design community due to the fact that it simplifies the part selection

process and makes it easier to design with these parts in mind. Consequently, there is an average 85%

preferred part usage in all new Hewlett Packard Inkjet Printer development. All of this has netted HP

greater than $150M to date.

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