In What Way is a Universal Power Supply a Postponement Strategy
Discussion: Hewlett-Packard Company Network Printer Design In What Way is a Universal Power Supply a Postponement Strategy?
Hewlett-Packard (HP) is developing a new network printer, named Rainbow, as a printer with more configurable options, such as memory, stapling ability, firmware, system software, fax modems, paper handling, linkage to print server, scanner, and printer stand (Simchi-Levi et al., 2021). One the new features being introduced in Rainbow is the inclusion of a universal power supply (Simchi-Levi et al., 2021). HP currently has two different specifications for printer power supplies, a 110-voltage power supply for North America and a 220-voltage power supply for Europe (Simchi-Levi et al., 2021).
Printers are manufactured in Japan and have a minimum lead-time of fourteen weeks (Simchi-Levi et al., 2021). The manufacturer in Japan produces the power supply and fuser, which than are shipped and integrated into the printer circuit board at HP’s Boise factory (Simchi-Levi et al., 2021).
Deciding to utilize a universal power supply would provide HP with the ability to postpone the specification of the printer engine by at least two months (Simchi-Levi et al., 2021). Postponement is a supply chain strategy to manage uncertainty and risk (Sabet et al., 2017). Postponement allows HP to defer final production until more accurate demand information is available (Flynn et al., 2016). Including the universal power supply into the design of the printer will allow HP to respond to fluctuating demand levels by allowing HP to commit to manufacturing of one part number versus maintaining commitments to manufacturers for specific voltage power supplies (Simchi-Levi et al., 2021).What are the Costs and Benefits of a Universal Power Supply?
The Japanese manufacturing partner estimated the cost per unit would increase by $30 by changing to a universal power supply (Simchi-Levi et al., 2021). The HP marketing manager stated, “Customers will not pay for features that they don’t need, and universal power supply is irrelevant to them” (Simchi-Levi et al., 2021, p. 307). The benefits of changing to a universal power supply would be seen in the demand forecasting process, as demand in changing markets would be easier to respond to and HP could reduce its inventory cost (Simchi-Levi et al., 2021). Given one of the current problems identified by HP is the inability to forecast demand in geographic regions, a benefit of the universal power supply is the ability to transfer products across continents to balance supply against demand within the regions (Simchi-Levi et al., 2021).How Would Such Costs and Benefits be Different Over the Product Life Cycle?
During the ramp-up stage of the product life cycle an excess of inventory is often stocked to ensure there is not a shortage of inventory given shortages are a high cost to HP (Simchi-Levi et al., 2021). During the ramp-up stage there isn’t generally a need for geographical transfers since excess inventory would be carried within each region (Simchi-Levi et al., 2021). During the ramp-up stage there is little known about customer demand which results in the greatest amount of forecasting errors (Simchi-Levi et al., 2021). Given the holding cost rate is approximately 30%, the ramp-up stage would incur the highest holding cost in the product life cycle (Simchi-Levi et al., 2021).
In the mature stage of the product life cycle there is also generally a minimal need for geographical transfers because the level of inventories and safety stock is maintained to maintain a service target of 98% (Simchi-Levi et al., 2021). While inventory levels are not maintained at the same levels as the ramp-up stage, and customer demand is forecasted with more accurate information at the mature stage, there is still a holding cost rate of 30% that is incurred to carry enough inventory to maintain the 98% service rate (Simchi-Levi et al., 2021).
At the end-of-life stage geographical transfers would be needed the most as inventory and safety stock levels would not be maintained at the same levels (Simchi-Levi et al., 2021). While geographical transfers can fulfill customer demand quickly, the cost of the transfer is roughly $75/unit, reducing the product per unit for transferred printers (Simchi-Levi et al., 2021).Besides Deciding on a Universal Power Supply, What other Operational Improvements Can You Suggest to HP Boise?
One of the main concerns that was identified is the possibility of transferring product back and forth between regions repetitively, reducing the overall profit margin of the product (Simchi-Levi et al., 2021). Improving the forecasting process would decrease the number of transfers and potentially eliminate products being transferred back and forth repetitively. Product development should review improvements in the design and configuration of the printer to look for opportunities to reduce manufacturing times and lead-times. Reviewing the supply chain and available suppliers, alleviating the monopoly currently found in the Japanese manufacturers, could potentially also reduce lead times. While reducing lead times may have a trade-off of increases total price, the fulfillment of customer demand improvements may justify this (Gawor & Hoberg, 2019). This could include techniques of finding additional suppliers or looking for faster transportation options.What Would Be Your Recommendations About the Adoption of a Universal Power Supply?
Given the sales price between $5,000 and $6,000 per unit (Simchi-Levi et al., 2021), it would be recommended to implement the universal power supply. The benefits HP will receive of better world-wide forecasting, the ability to transfer product geographically, faster customer response times, and the ability to generate fire sales at the end of a product life cycle outweighs the $30 per unit cost increase of the universal power supply and the $75 per unit cost of geographical transfers. HP should experience lower inventory levels and holding costs throughout the product lifecycle and a lower number of unsold units.
Flynn, B.B., Koufteros, X., & Lu, G. (2016). On theory in supply chain uncertainty and its implications for supply chain integration. Journal of Supply Chain Management. http://bi.gale.com.ezproxy.liberty.edu/global/article/GALE%7CA459510427?u=vic_liberty
Gawor, T., & Hoberg, K. (2019). Customers’ valuation of time and convenience in e-fulfillment. International Journal of Physical Distribution & Logistics Management, 49(1), 75-98. http://dx.doi.org.ezproxy.liberty.edu/10.1108/IJPDLM-09-2017-0275
Sabet, E., Yazdani, N., & De Leeuw, S. (2017). Supply chain integration strategies in fast evolving industries. International Journal of Logistics Management, 28(1), 29-46. http://dx.doi.org.ezproxy.liberty.edu/10.1108/IJLM-01-2015-0013
Simchi-Levi, D., Kaminsky, P., & Simchi-Levi, E. (2021). Designing and managing the supply chain: Concepts, strategies, and case studies (Fourth ed.). McGraw-Hill Education.
Answer preview to in What Way is a Universal Power Supply a Postponement Strategy