HP Transforms Product Portfolio Management with Operations Research

Julie Ward (), Bin Zhang (), Shailendra Jain (), Chris Fry (), Thomas Olavson (), Holger Mishal (), Jason Amaral (), Dirk Beyer (), Ann Brecht (), Brian Cargille (), Russ Chadinha (), Kathy Chou (), Gavin DeNyse (), Qi Feng (), Cookie Padovani (), Sesh Raj (), Kurt Sunderbruch (), Robert Tarjan (), Krishna Venkatraman (), Joseph Woods () and Jing Zhou ()
Additional contact information
Julie Ward: Hewlett-Packard Labs, Palo Alto, fCalifornia 94304
Bin Zhang: Hewlett-Packard Labs, Palo Alto, fCalifornia 94304
Shailendra Jain: Hewlett-Packard Labs, Palo Alto, fCalifornia 94304
Chris Fry: Strategic Management Solutions, Redwood Shores, California 94065
Thomas Olavson: Hewlett-Packard SPaM, Palo Alto, California 94304
Holger Mishal: Hewlett-Packard Personal Systems Group, Cupertino, California 95014
Jason Amaral: Emeraldwise LLC, Woodside, California 94062
Dirk Beyer: M-Factor, Inc., San Mateo, California 94404
Ann Brecht: Hewlett-Packard Technology Solutions Group, Fort Collins, Colorado 80528
Brian Cargille: Hewlett-Packard SPaM, Palo Alto, California 94304
Russ Chadinha: Hewlett-Packard Personal Systems Group, Houston, Texas 77070
Kathy Chou: Hewlett-Packard Personal Systems Group, Cupertino, California 95014
Gavin DeNyse: Hewlett-Packard SPaM, Portland, Oregon 97221
Qi Feng: McCombs School of Business, University of Texas at Austin, Austin, Texas 78712
Cookie Padovani: Hewlett-Packard Technology Solutions Group, Roseville, California 95747
Sesh Raj: DSApps, Inc., Sunnyvale, California 94087
Kurt Sunderbruch: Hewlett-Packard Technology Solutions Group, Roseville, California 95747
Robert Tarjan: Hewlett-Packard Labs, Palo Alto, California 94304, and Department of Computer Science, Princeton University, Princeton, New Jersey 08540
Krishna Venkatraman: Intuit, Mountain View, California 94043
Joseph Woods: Hewlett-Packard Technology Solutions Group, Roseville, California 95747
Jing Zhou: Belk College of Business, University of North Carolina at Charlotte, Charlotte, North Carolina 28223

Interfaces, 2010, vol. 40, issue 1, 17-32

Abstract: Hewlett-Packard (HP) offers many innovative products to meet diverse customer needs. The breadth of its product offering has helped the company achieve unparalleled market reach; however, it has come with significant costs and challenges. By offering multiple similar products, a manufacturer increases its overall demand volatility, reduces forecast accuracy, and can adversely affect revenue and costs across the entire product life cycle. At HP, these impacts included increases in inventory-driven costs and order-cycle time; liabilities to channel partners; and costs of operations, research and development, marketing, and administration. Furthermore, complexity in HP's product lines confused customers, sales representatives, and channel partners, sometimes driving business to competitors. HP developed two powerful operations research-based solutions for managing product variety. The first, a framework for screening new products, uses custom-built return-on-investment (ROI) calculators to evaluate each proposed new product before introduction; those that do not meet a threshold ROI level are targeted for exclusion from the proposed lineup. The second, HP's Revenue Coverage Optimization (RCO) tool, which is based on a fast, new maximum-flow algorithm, is used to manage product variety after introduction. By identifying a core portfolio of products that are important to order coverage, RCO enables HP businesses to increase operational focus on their most critical products. These tools have enabled HP to increase its profits across business units by more than $500 million since 2005. Moreover, HP has streamlined its product offerings, improved execution, achieved faster delivery, lowered overhead, and increased customer satisfaction and market share.

Keywords: cost analysis; stochastic inventory analysis; flow algorithms; product portfolio management; inventory management; regression; statistics; binary programming; Lagrangian relaxation; parametric maximum flow (search for similar items in EconPapers)
Date: 2010
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (6)

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