Reference no: EM132254181

Study Case Safety Stock The Hewlett-Packard Company

The objective of this assignment is to promote the literature review and analysis evaluation of the topics discussed in this week. You need to select one of the topics from the lecture and make a case study research. From this case study, you will need to develop an one page essay with the following components: a. Summary of the case study b. What analytical tools were used to solve the problem? c. What conclusions the case provide? d. How do you solve the case?

Introduction-

The report is developed by me, Brent Cartier the material manager of Hewlett-Packard (HP) Company Vancouver Division In this report I had used my expertise knowledge in the material management to solve the issues related to the inventory in the different Distribution Centers in the worldwide. I am providing a detailed analysis of the safety stock of Deskjet which is required to be kept by each division so as to avoid the stock-out situation. The report also contains the potential solutions, to solve the company current problems, along with the detailed action plan and implementation of my recommended solution

Critical Success Factor-

The generic strategy used by the Hewlett-Packard (HP) is product differentiation.

This was due to their monopoly in the disposable head inkjet printers with high quality and the low price.

Problem Statement-

The issues faced by the company are generally categorised under major and minor issues.

Major issues-

The proper level of safety stock is not defined in the three distribution centres which in turn affects the satisfaction of the customers in terms of product availability.

The Distribution C of Europe is highly affected as more some models are having high inventory for which they have to rent a warehouse to hold the inventory. On the other hand, for the some models there is a situation of stock out.

There is imbalance level of stock for the various level of printers.

Minor issues-

Transportation of goods via seaways which results in long time in shipment.

There is only one manufacturing plant of Deskjet printers which is situated in Vancouver, this plant is responsible for all the fulfillment of demand of Deskjet printers in all the three Distribution Centers.

Analysis-

The imbalance in the stock level of the three distribution centers would be balanced effectively and efficiently.

This can be done by assuming that

The service level will remain 98%

The lead time in case of Europe and Asia Pacific will be 5 weeks or 35 days (1 week for factory cycle for PCAT, FAT and 4 weeks for transportation).

Alternatives- The alternatives to solve the problem faced by the company are as follows:-

Keeping Vancouver plant as the manufacturing plant-

The company would keep on manufacturing the Deskjet printers at the Vancouver plant and can used the safety stock level as analysed for different Distribution centres such as Europe , Asia Pacific and North America.

This would ensure the appropriate amount of stock which is to be kept by each Distribution Centers to avoid unnecessary inventory holding cost or the situation of stock-out.

Sometime, goods would also be transported via Airways in case of any emergency in the all three distribution centers.

Fulfillment of demand of product as there will be safety stock to avoid stock-out situation at different distribution centers.

Low inventory holding cost.

Customer satisfaction with the product availability.

Low risk stock-out due to demand uncertainty with transportation of goods via air.

            Demerits:-

High cost of transportation via air.

Establishing new manufacturing plant –

The company would establish a new manufacturing plant of Deskjet printers in order to fulfill the demand of the Europe and Asia Pacific. The plant would be established in Asia as there will be the benefit of low labour cost in Asia. Hence, the new plant will help in reducing the lead time for the goods and proper safety stock at Europe and Asia-Pacific Distribution Centers.

Low cost of production of goods.

Low inventory holding costs.

Low transportation costs.

Fulfillment of demand of safety stock.

Reduced lead time.

            Demerits:-

Huge cost of investment to establish new plant.

Increased burden of the company.

Increased expenses for running the plant.

Using airways as the mode of shipment of goods-

The company would use the airways to transport goods to Europe and Asia Pacific permanently from the Vancouver manufacturing plant and use current safety stock cycle.

This will ensure high speed transportation of goods and resulting into product availability to the customers.

Reduced lead time.

Product availability.

Low risk of stock-out.

            Demerits:-

High cost of transportation.

Reduced profits.

Recommendations and Justification-

It is recommended that company should keep operating Vancouver plant as the only source of manufacturing of desk jet printers and implement the new analysed safety stock levels of different distribution centers such as Europe, Asia Pacific and North America. This will ensure the product availability at each and every distribution centers and avoiding the situation of stock-out and high inventory holding costs. In case of emergencies, the uncertain demand of the goods would be fulfilled by the air transports.

Implementation-

Short Term Plan-

Fixing up the meeting with the management of three distribution centres.

Discussing the new safety stock plan with the management.

Setting up meeting with the best air-freight provider providing high quality service at low cost.

Mid Term Plan-

Implementing the new safety stock plan with whole three distribution centers.

Long Term Plan-

Reviewing the results of the implemented plan.

Manufacturing new plant in Asia if the demand of the printer exceeds the production capacity of the Vancouver manufacturing plant.