Challenges for Supply Chain Management

Ch every last(predicate)enges for append Chain vigilanceintroductionThe biggest ch entirelyenge facing the Vancouver manufacturing localize was that for the pillow of Hewlett Packard, in that localisation of function was no occupation When it comes to real dollars, inventory apostrophizes do not enter into the P L republicments, but losses languish our revenues. Dont talk to us ab come forward inventory-service trade-offs. Period. Vancouver was held up as a posture of efficiency (Kanban) and the DeskJet printer range was a runaway advantage. A shade of territorialism and poor communication exacerbated the lack of urgency. Damaging internal rivalry was preponderant as a result of disjointed an myopic decision-making in the absence seizure of any truly spheric approach to the add bowed stringed instrument blusher achievement indicators (KPIs) the bullwhip effect was writ large all over the firms bring home the bacon arrange. The businesss brewing were real and mo unting and we argue that the best solution would control a fundamental overhaul of HPs reapingion and add together bowed stringed instrument resulting in the need to install a newly manufacturing plant in Europe.The consumer electronics pains is the very embodiment of key aspects of allow cosmic string management and related risks, (Sohdi, 2004), repay adequate to the piteous product lifecycles, tough competition, and global nature of the handicraft. The DeskJet printer business presented a new challenge for HP as the firms expertise was in highly customized, low volume, and great lead-time manufacturing and supply strand. In DeskJet, high volume, short product lifecycles, and high obsolescence risk were the name of the game. Printers were in transition from an in advance(p) product to a functional product but the supply chain did not reflect this. HP used OEMs to source comp unrivalednts and then did their suffer assembly. HP made high margins on the cartridges, and the printer was the conduit. HPs success in Europe was beginning to rival the home market place place in sales, adding win complications due to the need to modify powerfulness sources and languages for local markets. In Europe, product option AB had the highest monthly esteem demand, and demand was more than outspread over the options than in nary(prenominal)th America, where virtually the entire sales were in option A. Monthly standard deviation in demand for the touristy options was quite high at +- 30%. Even more centrally, the partnership was holding large and expensive safety stock due to the long shipping lead times and the prohibitive cost of air freight.The success of HPs DeskJet printer range in spite of an un-optimized supply chain suggests that there were significant potential gains in profit efficacy if the right solution were found. In addition, despite high inventory levels, stock-outs were still occurring, threatening the most r be asset of all in the hig hly war-ridden printer market node loyalty and sentiment. Questions of internal efficiency and customer fulfilment had to be evaluated against the backdrop of a rapidly growing printer market, which was exploding along with the proliferation of background knowledge PCs.Despite organizational inertia and competing priorities, a number of avenues were open to HP at the time, including inventory management-the benefits of postponing final assembly-product construct, and the introduction of JITD. We examine each and drudge deeper into the business and customer benefits of launching a production site in Europe to fully capitalize on the surge of the printer market. The market is evolving rapidly and needs a strategic realignment of its supply chain. Creating a European manufacturing facility, plus immixd financial performance and risk management (Hahn Kuhn, 2009) leave behind as well improve sh atomic number 18holder returns (by improving inventory management and so cash flows) and go out mitigate risk.Postponement schemaTo be no-hit the DeskJet supply chain must(prenominal) match customer demand. It must be in the zone of strategic fit, with a intermit match in Europe between responsiveness and uncertainty. It must integrate sales, manufacturing, dissemination, and operations. Postponement is a solution to conduct future DeskJet expansion in Europe and to bump European demand. A winning cargo bea strategy requires significant degrees of gluiness departmental barriers allow for need to be brought use up, emergencees restructured and products redesigned. However, the rewards of implementing a successful postponement strategy are great. HP is not without challenges to implement a successful postponement strategy. Significant organisational change and coordination would be required.As Pagh and make state (1998), The notion of postponement is to maintain the product in a achromatic and noncommittal status as long as come-at-able in the manufac turing process. In order to support this, characteristics of the DeskJet that endure to be localised should be added at the last moment. Standardising the DeskJet would make inventory management and foretelling easier. It is too a way to allow cost-effective end user customisation. By creating customisation, additional lines can be introduced and consumer needs are met more easily. Customisation lead assist HP in differentiating itself and in capturing the market. Based on Cooper (1993), we propose the use of the deferred packaging postponement strategy. The DeskJet peripherals are not normal to all markets whilst the formulation is common land.Postponement requires tight integration of processes and the formation of a ho harkic view. In the discipline of DeskJet printing, redesigning the product to make it more modular pull up stakes increase manufacturing costs, but would lower the total supply chain costs. A modular design will standardise the design and and so standardi se procurement processes. Making the DeskJet design more modular will also limit the inclusion of components that differentiate the product until the latest possible moment. Other benefits of modularity are identified by Feitzinger and Hau (1997), including the ability to manufacture modules each or in parallel, thereby reducing production time and assisting with problem diagnostics in identifying property problems.When considering a supply chain strategy, all elements from the design, procurement, manufacture, sales and distribution must be considered in unison. For example, making the DeskJet power supplies universal voltage may be more expensive, but it would reserve HP with a more flexible use of inventory and would shrivel forecasting errors. Marketing must be involved in the design process to validate that product variety and customisation meet market requirements. pay must be engaged to offer up activity- base costing, (ABC) statistics to support scenario compendium. A ll stakeholders and their differing viewpoints must be considered in order to score a holistic form of the revised supply chain.Successful postponement requires that organisational boundaries are traversed. HP should take a shit with resellers and distributors to provide some product localisation and customisation tasks. In many cases resellers will require significant support, training, and systems to carry out these tasks. The long term set outweighs the short term investment. In all cases, postponement partnerships must be made on the basis of empirical evidence and having considered the interdependencies of the model. The decision to build European manufacturing capability and interfacing this capability with European distribution is crucial to support DeskJet sales in Europe. We support establishing a European plant as a strategy given European demand. However, in addition to the plant, distribution centres crossways Europe should be capable of managing product localisatio n and successor of all localisation hooeys.Opening a new facility in EuropeCompanies becoming global and make happying growing revenue and expanding market shell outs crossways geographies face an important challenge inertia. Being agile and being able to react quickly to changing conditions sometimes requires risky decision in volatile, uncertain purlieus, and sometimes mandates form investment in foreign locales. The connection must admit that what sustained past success will no longer shit and must be adapted. This is the challenge Hewlett Packard faced when the Vancouver facility, which served the U.S. market, at the time HPs largest, could no longer meet the needs of growing foreign markets which were becoming progressively more important in toll of units sold. (Monthly mean of 23,108 units in Europe vs. 26, 611 units in North America). Hewlett realized that in terms of lead time, inventory optimization, transfer of training costs, and localization/customization, try ing to serve European clients with its U.S. manufacturing facility was no longer viable despite various attempts at technology innovation and optimization, changes in product design, and shifts in its logistic processes the problem could not be crystallised. (Transit time by sea takes up to basketball team weeks.) As the European market matured, it needed one or more manufacturing locations geographically close to local suppliers and to end customers. However, chartering the correct locations in which to practice one or many distribution centers and manufacturing facilities required performing scenario analysis (Sodhi, 2003) and considering several important criteria in a holistic framework for harbor-based performance and risk management in robust supply chains (Hahn Kuhn, 2009)Customer and supplier location, concentration and importance the ideal location is a center of gravitation based on weight clustering, transportation cost, the geographical location and congeneric i mportance of difference suppliers and customers. Order delivery time is a overcritical unifying dimension (Tempelmeier, 2001) when selecting a location that serves downstream needs. However, the center of gravity has to be modified by introducing additional constraints as listed below. In opposite words, optimization under many constraints must be performed. And this has to be through dynamically, including current data and future projections.Labor The skills, training, and demographics of the workforce, unemployment trends, productivity, cost of labor, unionization, work regulation, work culture all vary widely across Europe and have to be considered.Cost and availability of land The real estate environment of the area under consideration has to be analyzed sites, building availability, edifice cost, regulation, including environmental regulations, the availability and reliability of utilities, local construction companies, and maintenance providers.embodied taxes and incentives taxes are an separate layer of costs that have to be taken into account. Local authorities and governments may be competing to attract foreign direct investment and job-creating investments, offering tax and other financial incentives which can cave in to returns and lower risks.Logistical infrastructure HP needs to evaluate connections to highways, raceway transport, and the proximity to airports and seaports, all of which have to be reliable and cost effective. They also have to find credible logistic/transportation partners.Other criteria embroil the local climate and exposure to natural disasters.Finally, the keep confederacy must provide expatriate personnel to manage the operation and its labor so quality of life issues must factor into the selection of the location.The process of selecting the optimal location is a multi-stage, top-down one, where initial screening produces a short list of countries or regions and then additional and more demanding criteria are added t o narrow down the initial list through several iterations until one or both final locations are selected.The benefits of a manufacturing facility in Europe are significant and affect every step in the supply chain which now has a wagerer strategic fit. Physical, financial, and information flows are better aligned. The market is as large as the U.S. but more various and will be better served. Raw materials procurement becomes more streamlined. scrutinise days fall because one benefit of standardization (with local customization) is that inventory can be moved from one region to another so as to avoid piling up inventory in one region and stock-outs in another. The chain has moved to more of a push-pull system. ensue times are shorter. Finished product also does not gage up. The cost of manufacturing goes down and since printers were rapidly becoming a commodity product, economies of carapace and cost savings are vital since customers choosing between two inkjet printers of equ alise speed and quality will make their decision based on cost and reliability. From a management perspective, handling the supply chain becomes easier since it is optimized to regional needs but still integrated in a global framework that captures the benefits of HPs scale in buying power. The supply chain better serves customer needs and enables the company to grow more effectively in Europe and also is a model for other regions as they develop. The company can better manage its risks it has reduced its exposure to inventory and transportation risk and meliorate its ability to manage supply chain supply and demand uncertainties in Europe. (Uncertainty metrics like margins, forecast error, stockout rates are all lower.) Finally, the improved supply chain should improve shareholder returns since direct margins, asset turns, and cash flow are positively affected.Other benefit OpportunitiesAs HPs management moves forward, it should take into account the following additional recomme ndationsA clear, overarching strategy for Europe needs to be define and implemented across HPs corporate headquarters. Conflicting and competing corporate interests need to be reconciled with a clearly delineated command and communication structure. A clear company-wide and bottoms-up consensus should be reached about the framework necessary to achieve lasting success in Europe.HP needs to adopt improved corporate communication and defined spheres of responsibility and accountability across the organization. The case reveals that some of the companys most important technological advancements have been discovered by happenstance. Enhancing its technological advancement process with a more rigorous collaboration and innovation model would seek technological and supply chain process improvements less susceptible to chance. For example, common global KPIs on inventory would be a good starting point.HP should remove organizational barriers to reduce lead time. (Billington Lee, 1992). The company should establish a dedicated European Localization Management Team to appraise current local market trends as well as the viability of the suggestions above.The company should explore further trade opportunities within the European Union and in Eastern Europe, beyond just the tax and other cost-savings options.HP should tip e-commerce, using the internet to take orders and organize distribution.The company should develop a supply chain risk-management framework to anticipate and mitigate any disruptions. A new or enhanced supply chain is an opportunity to integrate currency risks, cyber attacks, failed communication with suppliersterrorismnon-compliance. (Bosman, 2006).HP should modify its local marketing strategies based on national and cultural consumer demographics. The marketing and PR teams should also enforce available resources to identify such opportunities and participate within the European supply chain community.There are green opportunities within the supp ly chain that could be exploited.Technology Information processing JITDNew systems and better forecasting will make the problem visible but not solve it. The greatest gains are fundamental Streamline design of the product to press forward manufacture at the DCs and build capability at the DCs. However, there are still technical gains that can be made.ConclusionThe HP case is an example of how effective supply chain management requires both a revised management paradigm (strategic change) and more sophisticated tools and techniques (optimization). The postponement strategy is a better strategic fit between the supply chain and HPs product life cycle across the key strategic and competitive variables innovation, customer service, and cost leadership since printers are rapidly transitioning to maturity. Establishing a manufacturing plant in Europe, a major change in HPs printer supply chain, will improve the companys performance in four critical areas costs, customer satisfaction, sh areholder returns, and risk management. The companys physical flows, financial flows, and information flows will all be more aligned and efficient. After the initial capital cost of establishing the plant, the company should experience substantial cost savings from lower material costs, better predictability, improved supply assurances (no shortages), and lower inventory carrying costs. There is a tight linkage between sales, inventory, and product availability, (Raman et al, 2009), and so customer satisfaction, as measured by lower lead times, reduced variability in demand, fewer stock-outs, and enhanced ability to customize by region, should improve. The company will also position itself for future growth. HP should see the benefit of improved customer satisfaction in rising sales and market share in Europe. Shareholder value will be enhanced by the positive impact the supply chain changes will have on inventory and working capital and hence on operational value drivers like opera ting margins, asset utilization, and cash flow. Finally, the company will enjoy significant improvements in risk management. (Hahn Kuhn, 2009, referring to others). Certain risks, like being out of stock of a key component or product, will be entirely eliminated. Others can be mitigated through improved ability to contingency-plan and catch problems earlier. The company will be able to offload other risks or share them with suppliers and customers. And it will be able to consciously select risks, rather than passively absorbing them. Overall, the revised supply chain and the new manufacturing plant in Europe will be a particle accelerator for dramatic improvements in HPs operating and financial performance, not just on the Continent, but around the world.BibliographyBillington, Corey, Lee, Hau L. (1992, Spring). Managing Supply Chain Inventory Pitfalls and Opportunities. Sloan Management Review, mess 33, Number 3.Bosman, Ruud. (2006, April). The New Supply Chain Challenge Risk M anagement in a Global Economy. FM Global.Cooper, James C. (1993). Logistics Strategies for Global Businesses. multinational Journal of Physical Distribution and Logistics Management, Vol. 23, No. 4, pp. 12-23.Feitzinger, Edward, Lee, Hau L. (1997, January-February). Mass Customization at Hewlett Packard The indicator of Postponement. 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