HEWLETT PACKARD CASE STUDY

Hewlett Packard case study



Management Science and Systems

Introduction

In 1939, the Hewlett-Packard Company (HP) introduced its first product, an audio oscillator, which it sold to Walt Disney Studios for creating some of the special sound effects for the movie Fantasia. In May 2002, HP merged with Compaq, with the goal of becoming the world's leading provider of information technology (IT) solutions. By the end of 2002, HP's revenues were $72.3 billion. Today, HP operates in over 170 countries and is a leading provider of fault-tolerant servers, Windows servers, Linux servers, storage systems, management software, personal computers, pocket PCs, inkjet printers, multifunction printers, LaserJet printers, flatbed scanners, printing services, and IT services. (Chase, 2003)

Task One

To maintain its position as an industry leader, HP must keep pace with constant advances in technology in a highly competitive marketplace. To do so, it introduces thousands of new products every year. The older units lose value so quickly and competition is so fierce that it must properly design, configure, and optimize the supply chain wherever possible.

Cost factors, such as material devaluation, scrap costs, write-offs, and fire-sale discounts, have become the single biggest detriment to profitability, sometimes eclipsing the already-slender profit margins. To calculate these inventory-driven costs, HP must consider service levels, demand and supplier uncertainty, and end-to-end process times across the entire supply chain. The stochastic nature of many of these factors makes this problem very challenging. (Chase, 2003)

Throughout the 1990s, HP tackled the problem of first determining and then minimizing inventory-driven costs through a combination of homegrown spreadsheets coupled with the modeling expertise of HP's internal Strategic Planning and Modeling group (SPaM). Managers and planners from different HP organizations commonly conducted supply-chain analyses on their own by building models in Excel. They would then share their models with each other and spend considerable time trying to get their peers across the supply chain to buy into their analyses.

With 141,000 employees in 178 countries who coordinate their operations with a global network of suppliers, HP cannot rely on a few experts to make good supply-chain analysis decisions. For some time, SPaM had been searching for a robust methodology that would enhance business units' ability to conduct end-to-end modeling of the supply chain. Over the years it had developed robust methodologies and analysis techniques to solve complex supply-chain problems. However, the sophistication of the modeling often made SPaM a bottleneck in the process of making supply-chain decisions. Although the process and methodology were clearly transferable, SPaM could not find a modeling tool that it could easily transfer to the business units. More than 60 percent of the group's resources were allocated to network analyses, but demand was still not satisfied. In addition, because so many of its resources went to supply-chain analysis, SPaM could not focus on complex problems outside the supply-chain domain. HP needed an application that wouldn't require business users to become expert modelers. It had to have the supply-chain theory packaged so that users could analyze and model the key supply-chain ...