Supply Chain Management SS 23
Case Study: HP
1. What has caused the so-called inventory/ service crisis?
Hewlett-Packard faced inventory and service issues due to internal communication prob-
lems, coordination issues, demand fluctuations, reliance on a centralized forecasting sys-
tem, and inefficient inventory management. The successful introduction of the DeskJet
printer in 1988 led to excessive inventory growth and overwhelming distribution centers.
In Europe, challenges included long lead times, demand uncertainties, localization issues,
and a service level target of 98% due to the preference of the marketing department.
Long lead times of 4-5 weeks for shipping to Europe and Asia made it difficult to predict
and respond to demand changes. This, combined with demand uncertainties, resulted in
inventory build-up or backorders. HP struggled to balance inventory while meeting cus-
tomer demands, leading to increased costs and reduced margins.
To address these issues, HP needed to improve communication, enhance forecasting ac-
curacy, and adopt an approach to safety stock determination. This would mitigate the bull-
whip effect, optimize inventory management, and align inventory levels with actual de-
mand. Strategies such as using air freight or regional distribution centers could reduce
lead times. Localizing operations would provide better control over inventory and faster
response to demand changes.
2. What industry/product/supply chain characteristics are particularly important
to Brent Cartier’s problem?
Industry Characteristics:
▪ HP operates in a highly competitive printer industry with regional brand domi-
nance, so of course the product loyalty is low due to intense competition.
▪ Other brands dominate regions like Canon in Japan and Epson in Europe.
▪ Customers preferences depend on reliability (delivery), product cost, high quality,
and product availability.
Product Characteristics:
HP has a leading technology in the inkjet market in the US, known for high-resolution
printing on standard paper. HP customizing products in Vancouver before shipping
1
Case Study: HP
1. What has caused the so-called inventory/ service crisis?
Hewlett-Packard faced inventory and service issues due to internal communication prob-
lems, coordination issues, demand fluctuations, reliance on a centralized forecasting sys-
tem, and inefficient inventory management. The successful introduction of the DeskJet
printer in 1988 led to excessive inventory growth and overwhelming distribution centers.
In Europe, challenges included long lead times, demand uncertainties, localization issues,
and a service level target of 98% due to the preference of the marketing department.
Long lead times of 4-5 weeks for shipping to Europe and Asia made it difficult to predict
and respond to demand changes. This, combined with demand uncertainties, resulted in
inventory build-up or backorders. HP struggled to balance inventory while meeting cus-
tomer demands, leading to increased costs and reduced margins.
To address these issues, HP needed to improve communication, enhance forecasting ac-
curacy, and adopt an approach to safety stock determination. This would mitigate the bull-
whip effect, optimize inventory management, and align inventory levels with actual de-
mand. Strategies such as using air freight or regional distribution centers could reduce
lead times. Localizing operations would provide better control over inventory and faster
response to demand changes.
2. What industry/product/supply chain characteristics are particularly important
to Brent Cartier’s problem?
Industry Characteristics:
▪ HP operates in a highly competitive printer industry with regional brand domi-
nance, so of course the product loyalty is low due to intense competition.
▪ Other brands dominate regions like Canon in Japan and Epson in Europe.
▪ Customers preferences depend on reliability (delivery), product cost, high quality,
and product availability.
Product Characteristics:
HP has a leading technology in the inkjet market in the US, known for high-resolution
printing on standard paper. HP customizing products in Vancouver before shipping
1
