Hewlett-Packard: Network Printer Design for Universality

NBA 6410

Write up for Hewlett-Packard: Network Printer Design for Universality

Shreya Saboo (SS3644)

Q1. HP outsourced the manufacturing of their printer engines to their partners in Japan. Due to difference in the fusers required for printers to be sold in North America (110 V power supply) and Europe (220 V), there was a need to specify the details to the Japanese manufacturers fourteen weeks in advance. As the forecasting was not extremely accurate, HP faced the problems of over production or stock outs at different locations often. While trying to meet the demand at the DC with excessive demand, there were transshipments costs to be borne and the printers had to be reconfigured according to the market they were now sold in.

The universal power supply was a feature that catered to this need perfectly. The design of this printer is such that the stage of product differentiation is much later in the development giving HP the flexibility to of postponing the specifications of the printer by about two months in the planning process. This would always give them an opportunity to accurately forecast the demand for not just the individual regions, but globally. Apart from that, the printers can be sold in any market as all DCs would be equipped to provide elaborate customization for the printers. Hence, the postponement strategy here can help HP determine their order quantities more precisely and have a better allocation of printers available at each DC. This would indeed push the point of differentiation downstream, making customization available upon receipt of customer orders.

Q2. Despite being an attractive and viable idea, universal power supply did have some costs corresponding to the benefits it offered. Some of these are listed below.

1. Costs:

• The Japanese partners quoted that the universal power supply would increase the cost by $30 per unit.
• The $30 increase is not a huge amount in contrast to the production cost but since the benefits are still unproven- every dollar increase in the cost will cause a decrease of $1 in profit for HP.
• Customers might not want to pay for an additional feature which they do not need. Since most consumers will be indifferent to universal power supply, there is a chance of them not wanting to pay an increased price for the printer. This might cause loss in sales for HP printers.

1. Benefits:

• Reduction in lead time would be one of the biggest advantages for HP.
• The forecasting can be done more accurately with universal power supply having more thorough numbers corresponding to demand for both North American and European markets.
• The change in demand can be handled better as HP has a wider window of time to communicate to the Japanese manufacturers regarding the order quantities and specifications.
• The chances of stock outs or risk of unsold products can be reduced greatly.
• The transshipment will become a distinct possibility and the reconfigurations costs will be negligible in case of such an occurrence.
• Customer satisfaction will increase due to easier upgrades, order fulfilment, faster responses at the customer locations.

Q3. While the benefits are evident from the financial perspective of the case, it is to be noted that these benefits will only help level the costs off if the sales volumes are high. The benefit of having a universally sold product can help HP save a lot of money in terms of inventory, stock outs and transshipments provided they are able to pass these increased costs to the customer.