Summary on a Case Study

HP Transforms Product Portfolio

Management with Operations
Research

Submitted By:
Nabendu Paul (M120006MS)
Christy Mathew Jacob (M120007MS)
Paresh Pandurang Vengulkar (M120008MS)
Patel Jay Hemantkumar (M120009MS)
Navin Joseph (M120012MS)

Introduction
Case HP (Hewlett Packard ) problem faced while
following its strategy to increase its market share
through product diversification and drive sales.
Two problems 1. Introduction of new products
2. Management of variety of launched
products
This case highlights how M/s Hewlett Packard
overcame its challenges to a large extend using the
various techniques of Operations Research

PROBLEMS FACED BY HEWLETT PACKARD

1. High operating and Inventory cost .

2. Forecasting accuracy decreased
3. High cost of lost sales
4. Confusion and complexity between customers and sales
people
5. Average order cycle time was unpredictable
6. Product line cost was hidden and the same would not be
captured in standard accounting system.
7. Absence of data-driven approach.
8. Customer dissatisfaction- PSG

OR Methodology approach as a Solution:

Solution 1 First solution was to screening of the new product
proposals before introduction based on a data driven approach.
Detailed analysis of cost structure and drivers in each business and
product line was done(throughout the complete life cycle), which
could not be captured in accounting systems.
Two types of cost structure were studied :
I ) Variable Complexity Cost -volume costs, storage cost,
depreciation, expediting cost, cost of lost sales etc
II ) Fixed Complexity Cost - R&D Cost, testing cost, outsourcing
cost, manufacturing switching costs, returns cost etc.
Calculation of ROI using the above costs to take decision about
introduction of new products.
Solution 2
The Revenue Coverage optimization tool was used by HP

Benefits to HP:

1. PSG states that the Order Cycle time (OCT) is reduced by 4 days
on notebook and 2 days on Core Desktop. Each day of OCT
improvement saves $38 Million annually.
2. The RCO enabled the elimination of 3300 products from a product
portfolio of 10,000 of one of the units of HP, which resulted in $11
Million Cost savings.
3. Company wide profits had improved by $500 Million for a period
of three years.
4. Improved Customer Satisfaction.
5. Product line complexity reduction.
6. Reduced confusion among customers and sales representatives
and hence less return costs.
7. Increased organizational effectiveness .
8. Increased visibility of OR within HP.

Conclusions

This case of HP demonstrates the utility of OR in the practical

Field of business and how it can improve organizational performance.
They provide a powerful and comprehensive tool for business decision
making.

Thank you