© 2006 Hewlett-Packard Development Company, L.P. The information contained herein is subject to change without notice

Brian CargilleAPJ ManagerHP Strategic Planning and Modeling (SPaM)

Product Design for Supply Chain

04/12/23 2

Agenda• Introduction to the DfSC techniques and

results we are seeing at HP• The best DfSC has to offer; multiple

techniques in concert• Spreading the approach across HP

− Process of diffusion− An example technique that accelerates adoption

• Practice: rough cut analysis for product variety management

− Resources and Support

04/12/23 3

DfSC Success Examples

Tax and Duty Reduction Environment &Take-Back

2.0

1.1

2002 2003

45% reduction

Reducing physical size saves >$1/unit for all-in-

ones

Logistics enhancementVariety management

107 modules95 options

55 modules49 options

42% less inventory and better availability for PCs;

$25M

Commonality and Reuse

Move from ~12 rail kits to 5 for servers

$32M annual material cost reduction

InkJet suppliesrecycling increased

25%

Postponement

> 98% fill rate with ~2 WOS FGI of Laser Jets

> $10M in savings in storage products

04/12/23 4

Logistics• Dramatic decrease in size and weight vs.

previous generation• More robust product allows minimal packing

material and a high density per shipping pallet

• Rectilinear package design • Use of internal space to ship small

accessories• End pack box size reduced from 4760 to 1540

cu inches

Multiple DfSC techniques Example: Redesign of All-In-One Printer

Commonality and Reuse

Reused existing print mechanisms across printer, AIO and scanner platforms:

• ~ $30/unit cost reduction

• Increased bargaining power with suppliers

• Increased flexibility in product mix

Variety Control & Postponement• Only one base hardware model • Use of control panel plate to

localize language and product configuration

• Combination of two above enables fewer touches and shift of all assembly to WW factory in low cost labor region

04/12/23 5

Early Product/ Packaging Prototype

04/12/23 6

• Excellent use of rectilinear volume space

• Robust product design so less external padding is required

• Bulk pack materials used for end packing to save material, time, and labor

Product Designed to Maximize Bulk Pack Units per Container

04/12/23 7

Control Panel Plastic Plate Enables Product Variety at Low Cost

• Installs localized language and product features

• Postponement− End customer installs

control panel plate• Variety

− In multi-lingual regions, multiple control panel plates allow customers to self select their language

04/12/23 8

Key Steps for Diffusing Best Practices

• Use a combination of business experts and internal consultants

• Recognize and reward early successes

• Create brief, positive messages that appeal to the needs of the adopters

(1) Prove the concept with early wins

(2) Formalize the concept

Develop Collateral Formalize

(3) Formalize the program

(4) Accelerate adoption

• Crystallize definitions

• Develop educational materials that identify adopter concerns, provide relevant examples, and give reliable information

• Promote discussion with satisfied peer adopters

• Develop not only live courses but also online training, experience stories, articles, etc.

• Assign business owners and create incentives for success

• Establish metrics and use them to measure the company’s performance

• Set up a process for non-experts to learn skills, adopt the practices, and connect with a network of experts for support

• Use metrics to identify gaps in performance

• Conduct opportunity assessments to help management prioritize future applications

Diffuse

04/12/23 9

DfSC Opportunity Assessment Personal Computing

“SPaM clearly identified some significant opportunities for us. We will definitely take

them to the next step.”

HP Vice President and General Manager

Significant opportunity

Moderate opportunity

Commonality and Re-Use

$0-5M/yr• Focus on ODM

managed components

Postponement$0-1M/yr

• Address ship delays through postponement of Wireless EE prom burn at ODM

Tax and Duty Reduction

No opportunity identified

Take Back Facilitation

Not included in the analysis

Logistics Enhancement

$4-5M/yr• Plastic Pallets• Pallet loading

efficiency

Variety Control$8-18M/yr

• Platform, localization, and SKU-level management

Business need− Fast market growth, commoditization,

growing competition have led to shrinking margins for the business

− To remain competitive, supply chain efficiency and coordinated design will be critical

− Also used the assessment as an opportunity to provide training and disseminate DfSC concepts across design team

DfSC contribution− Through data collection and a series of

remote and on-site interviews, systematically investigated each of the 6 DfSC techniques (take-back facilitation excluded) and identified opportunities to apply the techniques on a forward-looking basis

− Estimated the potential financial impact to HP from applying DfSC against the identified opportunities

− Advised business on recommended action plan

Value delivered − Potential savings: $12-$29M/Year

04/12/23 10

Sample Product for Analysis*Digital Camera

• Mean demand: = 5,000/week• # SKUs: n = 20• Forecast error: fe ~60% (CoV)• Product cost: c ~ $200/unit• Product price: p = $220/unit• IDC percent: h = 40% per year• Mean lead time: L = 8 weeks• Std. dev. lead time: s = 0.8

weeks• Review period: R = 1 week• Delivery frequency: f = 1/week• Service level target: SL = 95%

Make design for supply chain decisions

Goal:

* All data presented are for illustrative purposes only and do not reflect actual demand, costs, portfolio size, prices, operating policies, supplier performance, or forecast accuracy at Hewlett-Packard.

04/12/23 11

What’s at stake?Calculate current inventory costs

How much are we currently spending per WOS?

How many WOS do we expect?

52

$/unit/WOSin cost Inventory

//$

chI WOSunit

fCS

RLfekSS

WOS

WOS

2

1

in WOSstock Cycle

in WOSstock Safety

5252

equation of Derivation

//$//$

//$

chII

hcI

WOSyearWOSunit

WOSyear

21.

:iferror 10% hasn calculatio This

time.lead ticdeterminis Assumes*

2

1

equations of Derivation

2

2

2*

feRL

s

SSCSI

fCS

RLfekRLkSS

SS

RLkSS

WOSWOSWOS

WOS

unitsWOS

units

04/12/23 12

Safety Stock Factor

0

0.05

0.1

0.15

0.2

0.25

0.3

0.35

0.4

0.45

0.5

-3 -2 -1 0 1 2 3

0

0.1

0.2

0.3

0.4

0.5

0.6

0.7

0.8

0.9

1

Cum “k”99% = 2.32698% = 2.05495% = 1.64590% = 1.28284% = 0.99450% = 0.000

“k” is the safetystock factor

95%

1.645

04/12/23 13

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

1 2 3 4 5 6 7 8 9 10

Product Number

Safety stock reduction through risk pooling

0%

5%

10%

15%

20%

25%

1 2 3 4 5 6 7 8 9 10

Product Number

0%

5%

10%

15%

20%

25%

1 2 3 4 5 6 7 8 9 10

Product Number

Spread Volume

Consolidate Volume

Universal SKU

n

mnmRR

1)1(1

n

mRR 1

nRR

11

04/12/23 14

What’s it worth to have one universal SKU?Benefit of going from 20 SKUs to 1

1//$/$

1

2

2

1

22

i

1

111

equal are all Assuming

to1 numbered SKUsFor

equations of Derivation

nWOSWOSunitsavingsunit

t

ptn

ipp

itt

iip

i

n

ipooled

ti

n

itt

ii

SKUs

totalindividual

RRSSISS

nn

n

n

nn

SS

SSSSRR

RLnkRLkSS

RLnkRLkSS

nn

n

nfennfe

fe

ni

n

1//$/$

1

11

$/unitin savingsstock Safety

nWOSWOSunitsavingsunit

n

RRSSISS

nRR

How much is safety stock reduced by pooling uncertainty to 1 SKU?

04/12/23 15

Expertise and resources

• Proven approaches and inspiration from articles in a variety operation journals and practitioner magazines – including Supply Chain Management Review and publications of INFORMs as well as textbooks from IE/OR courses.

• the supply chain and design engineers in your company currently working on new product introductions, packaging, procurement, competitive product analysis, product portfolio development, supply chain network design, inventory control, and capacity management.