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What Has Caused the So-Called Inventory/service “crisis”?

Autor:   •  February 1, 2016  •  Case Study  •  474 Words (2 Pages)  •  1,730 Views

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What has caused the so-called Inventory/Service “Crisis”?

The DeskJet printer was introduced by HP in 1988 and became one of its most successful products. The printers were manufactured in HP’s plants in Vancouver and shipped within USA and to Europe and Asia-Pacific via sea routes. The sales of the printer grew steadily, reaching a level of over 600,000 units in 1990. However, inventory growth tracked sales growth- HP’s distribution centres were filled with pallets of the DeskJet printer. Worse still, the organization in Europe claimed that inventory levels needed to be raised even further to maintain satisfactory product availability. So there were two major issues: finding the best way to satisfy customer needs in terms of product availability while minimizing inventory, and getting agreement among the various parties that they had the right level of inventory. The distribution centre in Europe was the one facing the most issues. There are many reasons for this:

Lead Time and demand uncertainties:

1. Time taken for Shipping was about 4-5 weeks from manufacturing location(Vancouver Plant) to Europe and Asia Pacific. It was difficult for the DCs in Europe to cope up with the rapidly changing demand and in order to cope up they had to increase safety stock which pushed up Inventory costs. Also, issues like late shipments, wrong parts, etc, and machine downtimes resulted in delays in the manufacturing lead time to replenish the stocks at the DCs., again affecting the ability to meet fluctuating demands.

2. Localisation/Warehouse Issues: Due to variation in power supply cords across different countries, customization was needed. At the same time different languages manuals was also needed. This customization was done at the manufacturing location. So this prevented from piling any geography specific stock.

3. Service Level of 98%: As per the marketing Department, the Line Item fill rate was 98% and was considered as a blocking value across all products of their significance/value.

b) What should be the target

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