1. In what way is a universal power supply a postponement strategy?
HP has two specifications for its printers, 110-volts for North American region and 220-volts for European region. One of the crucial part of the printer is engine. It is built by one of HP’s manufacturing partner in Japan who needs the specification 14 weeks in order prepare for production. However production period only takes four weeks. The dilemma is that should HP were to develop universal power supply, it can have the flexibility of postponing the specification requirement to its partner by 2 months. On the other hand,should the universal power supply strategy is implemented, HP can respond the demand in the ...view middle of the document...
The extra cost will be: 450,000 * 20% * ($75 shipping cost + $250 reconfiguration cost) = $29,250,000
With universal power supply – The forecasting improved so that only 10% of goods needed to be transshipped and then reconfigured between DCs, the extra cost will be $450,000 * $30 + $450,000 * 10% * $75 = $16,875,000
The extra cost of with universal power supply is SMALLER than without it.
With universal power supply, ideally HP no longer needs to develop demand forecast for each market. It only needs to generate estimated worldwide product demand four months ahead.
Allow HP to better forecast demand as a whole, which is more accurate. Consequently, it reduces inventory buildup issue.
Flexible to respond to customer order so that HP can increase service level.
3. How would such costs and benefits be different over the product life cycle?
Over the product life cycle, both cost and benefit are different.
At the beginning life cycle (ramp-up) of product, the cost of stock out would be high because for every order lost would not only result in lost in revenue but also future revenue. The theory is the customers tend to buy similar product and/or brand to keep consistency. In addition, it takes over four life cycle of product before that customer returns to HP.
At the maturity stage, the extra cost, although very small, can be a real disadvantage because during this period, the market becomes very competitive and many players enter the same field causing price to drop. Customers also become more price-sensitive. However, the benefit of...