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Hewlett-Packard Company (HP) has a laser printer division. This division was tasked with a decision on whether or not to use a universal-power supply for the next generation of network laser printer. HP served the North America and European markets. Each market used a different power supply. By using a universal power supply lead times could be reduced by two months but would increase cost of each printer by $30.

Postponement Strategy

According to Simao, Goncalves, and Rodriquez (2016) “packaging postponement strategies can have a positive impact on the supply chain and can help reduce inventory and transportation costs” (p. 399). HP was faced with a critical decision to incorporate using a universal power supply. By making this decision HP could postpone the specification of the printer engine by two months in the planning process. These two months would greatly benefit HP and would enable them to better respond to changing demand while reducing inventory costs.

Universal Power Supply Cost and Benefits

HP was considering a major decision of moving to a universal power supply for all of their laser printers. While this would help reduce lead times it would come at a $30 cost to the production of each printer. Management would have to be convinced that this was a good move for the company. A benefit would be that lead times would be reduced and as noted earlier that inventory costs would be reduced as well. Another benefit is that HP would be able to forecast more accurately. Management would need to determine if the added cost of production could be passed on to the customer and would the reduction in lead times help offset the added cost of production. If so, then this decision would be a smart decision for HP.

Product Life Cycle

The product life cycle of a printer can be divided into three stages; ramp-up, maturity, and end of life (Northouse, 2016, p. 360). Demand is going to fluctuate during each of the three stages of the product life cycle. HP noted that by making the move to the universal power supply would cost the company $13.5 million in additional material costs. HP also needs to look at the stockouts and inventory during these three stages. These costs will be different at the various stages. One thing to note is that at each life stage margins are different. They are greater at the ramp up stage but in the end of life stage there is stiff competition and the margins are tight and the lowest amount of profit would be obtained during this stage.

Operational Improvements

One area that HP can improve operations is the forecasting of the North America and Europe markets. This seems to be a function of the organization that is struggling when unveiling new products. Several of the managers mentioned the VIPER debacle and how HP missed the forecast for this product. If HP could invest some resources into their operations of forecasting this would be a good for the bottom line. According to Syntetos, Babai, Boylan, Kolassa, and Nikolopoulos (2016 note that “the frequency of which forecasts are produced vary from organization to organization and there is not a set technique for forecasting but rather approaches and strategies” (p.2). HP needs to evaluate the approaches and strategies to forecasting to make them stronger in the market.

Recommendations to HP

A recommendation to HP would be to move forward with the universal power supply. Although the cost is expensive for each additional unit the benefits that HP would receive would be worth the added cost. If HP could have two more months to accurately forecast supplies for each market I believe they would jump at that opportunity. HP could figure out how to pass those costs on to their supplier and customers and not allow it to affect their bottom line.

References

Simao, L., Goncalves, M., & Rodriquez, C. (2016). An approach to assess logistics and ecological supply chain performance using postponement strategies. Ecological Indicators. 63, 398-408. doi:10.1016/j.ecolind.2015.10.048

Syntetos, A., Babai, Z., Boylan, J., Kolassa, S., & Nikolopoulos, K. (2016). Supply chain forecasting: Theory, practice, their gap and the future. European Journal of Operational Research. 252(1), 1-26. doi:10.1016/j.ejor.2015.11.010

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