Hewlett Packard case study

Hewlett-Packard or HP is an American multination information technology corporation that that sells hardware, software and other related business services. The product line of HP includes a wide range such as PCs, servers, software, imagining products and scanners just to name a few. Hewlett-Packard also provides services and consulting business around its products and partner products. In 2013 under Lenovo, Hewlett-Packard was the world’s second biggest PC vendor.

But with so many product lines and options for such a big company such as Hewlett-Packard what problem would it run into? This issue is this would cause a high cost of design manufacture, and introduce a new product, feature, or option exceed the additional revenue it is likely to generate. Not to mention this also what costs would be related with too little or too much inventory of such a product. You also want to consider the additional supply chain intricacy along with how does this all effect the customer satisfaction.

Kathy Chou who is vice president of Worldwide Commercial Sales, responsible for growing HP’s worldwide commercial business through direct and indirect channels, said

“While revenue grew year over year, our profits were eroded due to unplanned operational cost,” She later stated that “As product variety grew, our forecasting accuracy suffered, and we ended up with excesses of some products and shortages of others.”

Constantly growing product variety would need to meet the increasing customer needs was the mode HP took. The problem at hand is was between marketing and operations. Marketing and sales always wanted more, more SKUs, more features, and more configurations where as supply chain mangers always wanted less, less to forecast, less inventory and less complexity to manage.

Analysis and Evaluation

Hewlett-Packard has always been within the top 5 of Vendor market share over that last 10 years, as you can see from the chart below of its Global laptop market share by units, percent from 2006-2013.

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Global laptop market share by units, percent (2006-2013)

Rank

2006

2007

2008

2009

2010

2011

2012

20131

1

Dell

15.9

HP

18.1

HP

18.2

HP

19.1

HP

17.9

HP

16.6

HP

16.1

Lenovo

16.9

2

HP

15.9

Dell

14.2

Dell

14.1

Acer

12.9

Acer

13.9

Lenovo

12.5

Lenovo

14.9

HP

16.2

3

Acer

7.6

Acer

9.7

Acer

10.6

Dell

12.1

Dell

12.0

Dell

11.7

Dell

10.7

Dell

11.6

4

Lenovo

7.0

Lenovo

7.4

Lenovo

7.5

Lenovo

8.0

Lenovo

10.9

Acer

10.8

Acer

10.2

Acer

8.1

5

Toshiba

3.8

Toshiba

4.0

Toshiba

4.6

Toshiba

5.0

Asus

5.4

Asus

5.7

Asus

6.9

Asus

6.3

Others

49.8

46.5

44.9

42.8

40.0

42.8

41.2

40.8

If HP wanted to stay on top each and every year it would need an answer, a tool, a way to fix all problems at hand and continue to improve each and every year.

Recommendations

HP wouldn’t be anything if it didn’t innovate and Kathy Chou was fully aware of this. With the rising cost and inefficiency associated with managing millions of products and configurations this problems “took their toll” she stated which soon she followed with “and we have no idea how to solve it.” So what would it take to solve these issues? HP would need a tool that would use a procedure or formula for solving a problem. HP combined a team within its company which would consist of HP Business Group, HP labs and HP Strategy Planning and Modeling and also individuals from a handful of consultancies and universities in order to work on the problems. Over the year the team would produced an analytically driven process for evaluating new products, created a tool for prioritizing existing products in a portfolio and developed an algorithm that solves the problem many times fast than previous technologies, which advancing the theory and practice of network optimization. With all the hard work done over the years the team would be reward in 2009 with an Edelman award (world’s leading prize for excellence in operations research practices) in developing what was called a revenue coverage optimization (RCO). This tool would allow HP to offer customers significantly improved service and at the same time save the company tons of money in improved efficiencies. Once this tool was implemented, HP would be improved customer service and saved the company a lot of money. Also this improved efficiency with HP business with their customers.

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References:

Turban, Efraim, and Jay E. Aronson. Decision Support Systems and Intelligent Systems. 9th ed. Upper Saddle River, NJ: Prentice Hall, 2001. Print.

“Hewlett-Packard (HP).” What Is ? Web. 14 Nov. 2014. <http://whatis.techtarget.com/definition/Hewlett-Packard-HP>.

“Executive Biography.” HP. Web. 14 Nov. 2014. <http://www.hp.com/hpinfo/newsroom/press_kits/2009/CompetitiveEdge/Kathy_Chou.pdf>.

Gartner Says PC Vendors Experienced a Happy Holiday Season with Fourth Quarter Worldwide Shipments Increasing 12 Percent. Gartner Press Release. January 14, 2004.

Questions for the Case

  1. When offering to many product lines and options that a big company such as HP might face are

    1. A high cost of design, manufacture, and introduce a new product, feature, or option exceed the additional revenue it is likely to generate
    2. The cost associated with too much or too little inventory for such a product, not to mention additional supply chain complexity, and how does all that impact customer satisfaction.
  2. The possible conflict between marketing and operations is that marketing and sales always wanted more, more SKUs, more features, more configurations where as supply chain mangers always wanted less, less to forecast, less inventory and less complexity to manage.
  3. HP combined a team within which would consist of HP Business Group, HP labs and HP strategy Planning and Modeling and also individuals from a handful of consultancies and universities.

    1. Produced an analytically driven process for evaluating new products
    2. Created a tool for prioritizing existing products in a portfolio
    3. Developed an algorithm that solves the problem many times fast than previous technologies, which advancing the theory and practice of network optimization.
  4. Whatis.com defines algorithm as a procedure or formula for solving a problem. An HP Senior Fellow Robert Tarjan has developed algorithms useful in everything from improving chip design to routing telephone calls, from optimizing deliveries in transportation networks to improving searches of large data sets. A software tool Revenue Coverage Optimization (RCO) was been developed that allowed HP to offer customers significantly improved service and at the same time save the company tons of money in improved efficiencies. This tool in 2009 won the Franz Edelman Award, the world’s leading prize for excellence in operations research practices. Robert Tarjan has received such major national and international awards as the ACM Turing Award, known as the “Nobel Prize” of computing, the Nevanlinna Prize and most recently, the Blaise Pascal Medal in Mathematics and Computer Science.
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Reference:

“Algorithm.” What Is ? Web. 14 Nov. 2014. <http://whatis.techtarget.com/definition/algorithm>.

“Robert Tarjan.” HP Labs. Web. 14 Nov. 2014. <http://www.hpl.hp.com/news/2004/oct_dec/tarjan.html>.

  1. The benefits HP gained from implementation of this model over all resulted in improved customer service and saved the company a lot of money. Also this improved efficiency with HP business with their customers.

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