Hewlett-Packard's wide product range gave market reach but also raised inventory-driven cost, order-cycle time and channel liabilities, and confused customers and partners.
HP built two OR-based tools: ROI calculators that screen a new product before launch, and a Revenue Coverage Optimization tool using a maximum-flow algorithm that keeps the core portfolio that covers customer orders.
Together the tools raised profits across business units by more than $500 million since 2005, while streamlining offerings and improving delivery.
Screen products by ROI and keep the ones that cover demand
Too many similar products raised cost and cut forecast accuracy
ROI screening stops weak new products before launch
Revenue coverage keeps only the products that matter for orders
Measured: over $500 million in profit since 2005
Product variety is not free; a manufacturer that screens new products by ROI and keeps only those needed for order coverage can add profit while simplifying operations.
The work earned HP the 2009 INFORMS Edelman Award and the tools became part of HP's product-portfolio process, letting HP simplify its lines and respond faster.
FOLLOW THE EVIDENCE
The sources
- HP Transforms Product Portfolio Management with Operations Research IDEAS/RePEc / INFORMS Interfaces · ideas.repec.org
- HP Transforms Product Portfolio Management with Operations Research Semantic Scholar · semanticscholar.org