Discussion III. HP Inventory Driven Costs Fast Delivery Premium PDF

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Discussion III. HP Inventory Driven Costs Fast Delivery Premium...

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III. HP Inventory Driven Costs & Fast Delivery Premium Inventory is a necessary element for customer service. However, it implies an additional cost that can become unsustainable for an organization. Read the article Inventory-Driven Costs and answer the following questions: ● Is HP’s focus on minimizing inventory costs feasible for a company operating in a market where delivery speed is an order-winning factor? ● Would you pay a premium for a product or service price for an earlier delivery? For which type of products or services? In the discussion forum, you are expected to participate often and engage in deep levels of discourse. Please post your initial response as early as possible and continue to participate throughout the unit. You are required to post an initial response to the question/issue presented in the Forum and then respond to at least 3 of your classmates’ initial posts. You should also respond to anyone who has responded to you. Calloni, G., de Montgros, X., Slagmulder, R., Van Wassenhove, L., Wright, L. (2005). InventoryDriven Costs. Harvard Business Review. Retrieved from: https://hbr.org/2005/03/inventorydriven-costs

III. HP Inventory Driven Costs & Fast Delivery Premium

Inventory is the components used to make up a product(James, 2011). In manufacturing business, inventory not only refers to the raw materials of the products, but also the finished products which are ready to sell, and the finished goods that are on the factory floor(Tanoy, n.d.). According to Gianpaolo Callioni et al(2005), Hewlett-Packard, became the world's third leading computer manufacturer standing after Dell and Compaq pushing down the IBM in 1999. Even though it achieved its success in acquiring and maintaining market share, it struggled to raise a dollar. The speed of delivery and supplying fresh products have key competitive advantages of some manufacturing industries such as HP. In such cases, the inventory has a short shelf life. HP adapted an inventory model suitable for high speed delivery, minimizing the inventory cost by reducing the stock-ups and improved working capital(Kokemuller, n.d.). Inventory Costs The decentralized inventory had provided HP, a fast delivery system across the globe. HP

turned around to check on increasing its profit margin by changing the alternatives, like launching new products, controlling the cost of the material, and controlling the operating costs, where all of these remained the situation unchanged, until it started handling the supply chain inventory driven costs(Callioni et al, 2005). According to Gianpaolo Callioni et al(2005), excess inventory was leading HP’s PC costs and for very less profit margin. The costs associated with inventory are the storage costs, the storage tax, insurance, rework, breakage, and spoilage which increases the capital costs and the physical costs of the inventory. HP realised inventory costs in many forms, in particular, The component devaluation costs: Results from holding outdated components as inventory. Price protection costs: Reimbursements of the differences of the price drop and their sales price, to the distribution partners to avoid their loss in goods that are not sold. Product return costs: 100% reimbursement to the distribution partners in case of unsold goods. Obsolescence costs: Results from devaluation of the products. Just-In-Time Delivery It is sure that any company handling perishable goods such as fresh flowers like our business, or technological companies like HP should reduce the inventory cost as the shelf life is very less, say for example 4 days in the former and 6 months in the later. Just-in-time delivery is an inventory management strategy where the goods are available closely just before the demand supply(Banton, 2021). Incorporating just-in-time delivery avails competitive advantage to such companies. Over or under anticipation of demand can be avoided by well streamed and channelized supply chain information which also helps to increase the profit by effectively using the inventory. The inventory driven costs saved using the metrics improved the scope of R&D and marketing decisions(Callioni et al, 2005). Everyone in the world knows that Amazon can deliver the customer’s products in two days. According to Chris Lee(2018), Amazon’s fulfillment inventory management system helps them sort the items in the market at five different levels. The centralized information helps them to manage the decentralized inventory metrics and fulfill the customers’ needs. Premium for Early Delivery of Goods or Services When the product is easier to buy, arrives quickly, with best features, earns buyers’ reputation by valuing customer satisfaction, price difference is not worth the hassle, the premium on goods/services is justified(James, n.d.). In our fresh flowers business, the premium delivery charge is appreciated by our customers because they would get their items on time, maximum within a day, using overnight shipments across the USA. Customers tend to pay yearly premium membership with Amazon when they know their items will reach them within two days. Conclusion

Having centralized information technology in managing the decentralized inventory system substantially helps in managements’ decision making. A guaranteed competitive advantage can be achieved by reducing the inventory and maintaining a quick delivery system.

References:

Banton. C. (2021, Apr 28). Just In Time. https://www.investopedia.com/terms/j/jit.asp

Callioni. G., Montgros. X. D., Slagmulder. R., Wassenhove. L. N.V., and Wright. L. Inventory- Driven Costs. https://hbr.org/2005/03/inventory-driven-costs James. G. (n.d.). 10 Reasons Customers Will Pay More. https://www.inc.com/geoffreyjames/the-10-reasons-customers-pay-more.html James. T. (2011). Operations Strategy. https://my.uopeople.edu/pluginfile.php/1276072/mod_page/content/9/BUS5116James.pdf Kokemuller. N. (n.d.). The Advantages of Reducing Inventory. https://yourbusiness.azcentral.com/advantages-high-inventory-turnover-1466.html Lee. C. (2018, October 15). Rank at The Top of Amazon Search With Amazon Inventory Management. https://www.warehouseanywhere.com/resources/amazon-inventorymanagement/ Tanoy. (n.d.). Inventory Management: What is Inventory? Definition, Types, and Examples. https://www.zoho.com/inventory/guides/inventory-definition-meaning-types.html...