Press Release: April 28, 2009

HP Wins 2009 INFORMS Edelman Award for Operations Research Breakthrough

Software algorithm developed by HP Labs helps company realize millions in cost savings
PALO ALTO, Calif., April 28, 2009

HP has won the 2009 INFORMS Franz Edelman Award for its successful product variety management initiatives.

The work being honored includes both the Revenue Coverage Optimization (RCO) software algorithm, developed by HP Labs, and the company’s complexity return on investment (ROI) calculators, developed by HP’s Strategic Planning and Modeling Team (SPaM). The combined innovations have saved HP more than $500 million between 2005 and 2008.

The RCO software algorithm helps HP manage its product portfolio more effectively within its supply chain and enables faster product delivery to HP’s enterprise customers. While RCO helps HP manage its existing portfolio of products, the complexity ROI calculators evaluate the return on investment of new products prior to them being integrated into a product offering.

The RCO algorithm and the complexity ROI calculators have helped HP improve its operational focus on key products, while also reducing the complexity of its product offering for customers.

For example, HP implemented the RCO algorithm to rank its Personal Systems Group offerings based on the interrelationship between products and orders. It then identified the “core offering,” which is composed of the most critical products in each region. This core offering represented about 30 percent of the ranked product portfolio. All other products were classified as HP’s “extended offering.” Based on these findings, HP adjusted its service level for each class of products:

  • Core offering products are now stocked in higher inventory levels and are made available with shorter lead times.
  • Extended offering products are offered with longer lead times and are either stocked at lower levels or not at all.

“A large and diverse product portfolio allows companies to serve a vast customer base, but variety like this often brings unneeded complexity to an organization,” said Kathy Chou, vice president, Worldwide Commercial Sales, Personal Systems Group, HP – the leader of the team representing HP at the competition. “Armed with the RCO tool, HP has been able to implement significant improvements in the way we manage our product portfolio, resulting in lower costs and higher margins for the company, as well as improved service to our customers.”

The RCO algorithm also has been instrumental in helping HP enhance its Global Product Offering, which provides a consistent set of products to HP’s enterprise customers across all geographies. After implementing RCO, adoption of the offering increased from 18 percent to 80 percent of global customers’ businesses in 2008.

The RCO software algorithm was developed as part of HP Labs’ “analytics” theme, which applies mathematics and scientific methodologies to help decision making and create better-run businesses. Analytics is one of eight major research themes of HP Labs, which last year refocused its efforts to address the most complex challenges facing technology customers in the next decade.

“Smart application of analytics is becoming increasingly important to businesses, especially in the areas of operational efficiency, risk management and resource planning,” said Jaap Suermondt, director, Business Optimization Lab, HP Labs. “The RCO algorithm is a fantastic example of an innovation out of Labs that helps drive efficiency with our businesses and our customers.”

The Franz Edelman Award is presented by the Institute for Operations Research and the Management Sciences (INFORMS). In its 38th year, the competition attests to the contributions of operations research in the profit and non-profit sectors. This is the first time HP has won; the company has been a finalist four times.

The six finalists that competed in the 2009 Franz Edelman Award competition were CSX Transportation, HP, IBM, Marriott International, Norske Skog and Zara.

More information about the competition is available at and

About HP

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About HP

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