Hewlett Packard Case Study

Hewlett-Packard Case Study

Hewlett-Packard (HP) can attribute much of their success to their initiation of the DeskJet printer in 1988. In 1990, even with success of increased sales, concerns had arisen over growing inventory levels in the European distribution centers. This concern was raised due to the fact that they inventory had “tracked sales growth closely” (Chase, Jacobs, and Aquilano, 2005, p. 625).

In the HP cast study, the Supply Chain shows the DeskJet product is manufactured prior to being shipped to the distribution centers in the various overseas locations. The products are customized prior to shipping to the distribution centers; therefore, inventories cannot be shared due to the localization. The concern with this process is that they are unable to predict the demand of the product for specific countries and could be over producing creating a backlog of inventory (Chase, Jacobs, and Aquilano, 2005, p. 625).

Forecasting in Europe has proved to be a great challenge. The four forecasting techniques are qualitative, which is “based on estimates and options;” casual relationship, which identifies environmental factors that cause demand; simulation, which is based on a model of assumptions; and the time series analysis, which states “past demand can be used to predict future demand” (Chase, Jacobs and Aquilano, 2005, p. 513). With the company defining a good inventory level to be equal to one month of sales, and using “judgmental rule of thumb” to make predictions, they are using qualitative technique. A better forecast option would be the time series analysis focusing on trend projection and looking at evenly spaced sequences (Heizer and Render, 2007, p. 109).

In aggregate planning, HP needs to determine what the expected output for the product would be and at which schedule. The business would then combine the needed resources to accomplish this output. Strategies in aggregate planning dictate whether changing the size of the workforce will accomplish the necessary changes needed to meet production levels for the business. The workforce can be manipulated without changing demand by varying production rates through increasing or decreasing employees. The aggregate production plan feeds into the master production schedule, which then provides input into the material requirements plan. Capacity planning will influence the aggregate plan for production (Heizer and Render, 2007).

Holding costs take into consideration the costs that