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 WoodsJing Zhou

Research output: Contribution to journalArticle

20 Scopus citations

Abstract

Hewlett-Packard (HP) offers many innovative products to meet diverse customer needs. The breadth of its productoffering has helped the company achieve unparalleled marketreach; however, ithas 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.

Original languageEnglish (US)
Pages (from-to)17-32
Number of pages16
JournalInterfaces
Volume40
Issue number1
DOIs
StatePublished - Jan 1 2010

All Science Journal Classification (ASJC) codes

  • Strategy and Management
  • Management Science and Operations Research
  • Management of Technology and Innovation

Keywords

  • Binary programming
  • Cost analysis
  • Flow algorithms
  • Inventory management
  • Lagrangian relaxation
  • Parametric maximum flow
  • Product portfolio management
  • Regression
  • Statistics
  • Stochastic inventory analysis

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    Ward, J., Zhang, B., Jain, S., Fry, C., Olavson, T., Mishal, H., Amaral, J., Beyer, D., Brecht, A., Cargille, B., Chadinha, R., Chou, K., DeNyse, G., Feng, Q., Padovani, C., Raj, S., Sunderbruch, K., Tarjan, R., Venkatraman, K., ... Zhou, J. (2010). HP transforms product portfolio management with operations research. Interfaces, 40(1), 17-32. https://doi.org/10.1287/inte.1090.0476