© 2006 hewlett-packard development company, l.p
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© 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.
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