Hewlett-Packard has long been admired for its global supply chain management system. This operational facet faced one of its biggest challenges in the 90s, as prices for PCs tumbled while demand exploded. And after H-P's 2003 merger with COMPAQ, its manufacturing network grew five-fold.
The global PC industry has experienced increased competition and very narrow margins, making cost controls imperative. Supply chain costs had accounted for 15-20% of H-P's total expenditures.
Affiliate Professor of Technology Management and Entrepreneurship Michael Pich and H-P's Supply Chain Strategy Director, PC Group Xavier de Montgros have co-authored a case study demonstrating the company's application of the "4 Ps" of supply chain management: Planning: "push vs. pull"; postponement and flexibility;
partnering with suppliers and channel partners, and positioning and value capture.
One of the most critical recent developments in H-P's logistics has been the move to build-to-order (BTO). The authors detail how the decision was made and implemented to make all Hewlett-Packard PC products BTO, making them only when they received an order from a first- or second-tier reseller.
The case also describes Hewlett-Packard's experiments with channel replenishment, by which it strove to be able to keep a closer eye on inventory held by its resellers. H-P also endeavoured to create supply hubs, through which it hoped to eliminate the inventory of raw materials and components from its plants.
Pich and de Montgros describe the various channel partnering and value migration initiatives taken by the corporation, including its Top Value and Select Express programmes. H-P's outsourcing policies for many of its key manufacturing and industrial operations to third parties are also covered in concise detail - as are the risks involved, as seen by de Montgros.
HP Direct was an attempt to surpass Dell's proven capacity for incorporating direct channelling into their supply chain networks. The greatest challenge for H-P was to surpass their main rival, while avoiding the conflicts experienced by Dell and other major competitors.
The study concludes with a consideration of the way forward for Hewlett-Packard in these areas. Merging its supply chain system has been far from easy, but has been seen overwhelmingly as successful. Xavier de Montgros poses three strategic questions for H-P:
· What supply chain models will help the firm grow faster?
· How can H-P keep enhancing customer satisfaction and match better customer requirements?
· What supply chain structures would help H-P to increase gross margin further, and at the same time help it offer greater product variety to its customers?