Max Grover

Hewlett-Packard’s Reputation Hewlett-Packard is considered one of the best

computer systems till this very day.

Its name is identical with the evolution of Silicon Valley and technological innovation.

Its array of products and services is the broadest in the tech sector.

Its brand is known and respected by consumers and corporations alike.

Hewlett-Packard’s Velocity Background Hurrenberg plant which is located in Germany.

Director Operations is Hendrick Brumme.

Brumme along with HP Enterprise Systems Group operated the Herrenberg plant.

The Velocity Factory This factory had

become the showcase and model within the HP world.

The concept of minimizing order fulfillment time and reducing inventory.

Awarded Industrial Excellence.

Room for Improvement? Brumme focused on

re-examining the current structure of the supply chain.

By reconfiguring:

Compress time.

Reduce cost.

Increase customer satisfaction.

Area of Focus Brumme focused his

attention in a couple of major areas in the factory.

Major areas for improvement: Reducing raw material

inventory. Increasing on-time

delivery performance. Dropping order

fulfillment time. Reducing factory response

time.

Company Overhaul On February 10 2002,

Company Chairman & CEO Carly Florina was forced out of the company.

The merge with Compaq was a huge controversial deal.

Year 2002 Market Share

Up-to-Date Market Share

•The problem Hewlett Packard faced had to do with the plant matching their supply with their demand

•The major issues within this problem had to do with the volatility in the demand chain, as well as the high value erosion of the components

What is Volatility? Volatility has to do with the sharp fluctuation, or

changing, in value of a certain product or service in the market

In Hewlett Packard’s case, the volatility came with the changes in demand for their individual products

Further Problems Hewlett Packard built unique products – each

component would be useless if not sold in an efficient manner

Product demand varied from $500,000 to $16,000,000 per day, requiring flexibility on the floor level

Value Erosion Because of the speed in the industry, the cost of

holding excess inventory could be prohibitive

Strong declining component values were crippling the company from the bottom up

Examples of Component Value Erosion (per year):

Memories: 80%

Processors: 40-50%

Hard Disks: 40-50%

Modems: 40-50%

Motherboards: 10-20%

Monitors: 10-20%

S - Strengths Merged with Compaq

Biggest computing solutions provider in the world.

W- Weaknesses Mostly Unique Products-

Obsolete Quickly

Supply Chain Structure

Raw material Inventory

O - Opportunities Reduce cost and

Production Time

Increase Customer Satisfaction

Higher than 14 on the Forbes 500 list

Enter Other Markets

T - Threats Other Large Companies

– IBM, Dell, Apple

Small Company with a niche

The Economy

Problem Supply vs. Demand for product varied from $500,000

to $16,000,000 depending on the day

Can not build inventory

Custom products

Technology is progressing quickly

How to solve this? Add or drop workers on a short term basis

Create new software program for workers

Showed all orders for the day

Color coded for the importance of job

Orders that had ample time would not be started early

Orders would often be changed during assembly

Our thoughts HP approached situation well

Did the right thing

Questions?