Supply Chain management at Hewlett Packard
Introduction On average, a firm loses anywhere between 9 and 20 percent of its value over a six-month period due to supply chain problems, according to a Georgia Technical University study. That gives a lot of room for improvement of the Supply Chain performance in general and for cutting losses of companies of the system. ... Supply Chains are very complex system and realization of what can go wrong and why, could be the first step in the process of its optimization. Innovative companies in different industries have founded that they can control the bullwhip effect and improve the supply chain performance by coordinating information and planning along the supply chain. One of such companies is Hewlett-Packard. Background The Hewlett-Packard Company was founded in 1939 by William Hewlett and David Packard. ... Solving the latter crucial problem was flagged in 1990 by then CEO John Young as a key objective for the entire company, and one way of accomplishing the objective was through better supply chain management. The supply chain for HP’s products contain manufacturing, research and development sites in 16 countries and sales and service offices in 110 countries (in 1995). HP management had recognized that its performance filling orders will cause it to win or lose the competitive battle. ... Grappling with supply-chain issues is a complex and multi-faceted task, especially in a company like HP whose products are diverse and complex. Variabilities and uncertainties can occur at any point along the chain. ... In spring of 1989, SPaM began modeling the supply chain of HP. ... This project called for modeling its supply chain to provide analytical support for manufacturing decision making. Early in 1990, SPaM began to develop a model that would capture material flows and the associated uncertainties of the Vancouver supply chain. The modeling approach was based on developing a single-site inventory model to represent each operation in the supply chain and later on integrated all the individual site models to cover the complete supply chain. ... These linkages formed the basis of the complete supply-chain model that was known as Worldwide Inventory Network (WINO). Inventory Benchmarking and Uncertainties: SPaM’s project with Vancouver enabled the manufacturing manager to understand the inventory service trade-offs for the supply chain and how well the division was performing relative to the inventory service efficient frontier. This was the first fundamental step in supply chain analysis. ... This analysis helped the managers to prioritize the investments needed to improve the performance of supply chain. ... This prompted the division to consider redesigning products and processes to lessen the impact of demand uncertainties on its supply chain performance. Figure 1: Inventory can be reduced by successively eliminating the uncertainties in supply chain. ... It became apparent during the early applications of WINO that improvements in the supply chain performance could be made by employing a variety of fine tuning techniques, including more frequent reviews of inventory, subassembly and finished product forms properly using different means of transportation and reducing manufacturing cycle times. ... In designing a new European distribution network, SPaM used a combination of cost modeling and supply chain inventory model methodologies. ... Secondly, it validated the importance of integrating the supply chain inventory and fundamental cost models. Thirdly, this effort convinced that the composition of a project team greatly affects management receptivity and the implementation success of modeling projects. ... Therefore when SPaM embarked on the European manufacturing and distribution strategy it had to model the worldwide desk jet supply chain. ... Design for Supply Chain Management The concept of Supply Chain Management had begun to grow as projects proliferated through out the company which led to the emergence of the concept of “Design for Supply Chain Management”. ... This concept was also applied to another printer division which replaced dedicated power supplies for printers destined for the European markets that use 220V and those for the North American markets that use 110V with a universal power supply. ... Designing the distribution channel SPaM’s supply chain projects at HP then started to include suppliers on the upstream side and sales force and dealers on the down stream side. HP’s expanded view of its supply chain has led it to try to create win-win situations for HP and its dealers. ... A number of projects had revealed that demand uncertainty resulting from forecast errors was the key source of inefficiency in a supply chain. ... It also embodied the analysis of forecast errors on the efficiency of the supply chains. The processes that used forecast to generate production, inventory, capacity and financial plans were also included in the scope which resulted into the involvement of representatives from production planning, finance, marketing, process engineering and materials management. ... Another extension to the supply chain modeling at HP was to include the financial implications of a worldwide supply chain.