The Supply Change Management Practices at Hewlett-Packard - Research Paper Example

? Supply Chain Management Introduction The purpose of this paper is to conduct a comprehensive analysis of the supply change management practices at Hewlett-Packard, which is an American multinational corporation and one of the key information technology firms that is providing solutions to a large client base across the globe. In order to achieve the objectives of the research, the paper has been divided into relevant categories to assist the development of appropriate evaluations and conclusions. Hence, an assessment of the company’s operations, background, history and product lines is followed by an overview of the organization’s supply chain management processes and an outline of the new product development practices which are adopted at Hewlett-Packard. Moreover, the research also addresses other fundamental concepts such as the procedures which precede the decision to invest in capital equipment and required services, whether to undertake measures that are associated with strategic outsourcing and an explanation of the legal issues and local and international contract disputes which are faced by the company. History and Background of the Organization Hewlett-Packard Company (HP) was founded in 1939 by Stanford University students Bill Hewlett and Dave Packard (Hewlett-Packard 2013). Since, its inception in a Palto Alto garage the primary objective of the business was built on the foundations of promoting a distinct within the industry. According to Hewlett-Packard (2013), the first product that was built by engineers, Bill Hewlett and Dave Packard was an audio oscillator which provides assistance to sound engineers. Eight samples of the company’s first ever creation were bought by Walt Disney Studios for their project, Fantasia. The product line by HP broadly includes Personal Computer systems (PC’s), printing & imaging (inkjet and printing), and enterprise services (software & services, and accessories & networking) (Hewlett-Packard 2013). The company sells high quality laptops, desktop computers, tablets, monitors, servers, storage systems, handheld devices, printers, toners, ink, softwares, and networking accessories. Among its services are consultation, outsourcing, infrastructure, applications and other technological services (Reuters n.d.). The Organization’s Supply Chain Management Efforts According to the International Business Blog, HP organizes its company based on product departmentalization (McEntee 2010). That is, it has three main product departments including Personal Computer systems, printing and imaging, and enterprise services. The organization chart for HP found on the Cogmap website shows Leo Apotheke as the CEO, president and Chairman of the HP company with nine Executive Vice Presidents (EVP’s) below it handling the different departments including technology solutions group, human resources, imaging and printing, personal systems group, and so on (2013). Below the EVP’s are the SVP’s (Senior Vice Presidents) after which come the VP’s (Vice Presidents) and then the GM’s (General Managers). Charlie McMurty is the SVP for supply chain and Randy Salley is the SVP for Information Technology (IT) and supply chain systems. To deal with supply chain issues after facing rising inventory and customer dissatisfaction in the late 1980s, HP called an internal consulting group known as SPaM (Strategic Planning and Modeling) consisting of industrial engineers and management scientists to solve problems regarding supply chain (Lee & Billington 1995). The supply chain of HP’s computational and other products included the production of integrated circuits, board assembly, final assembly and delivery. The initiative of improving supply chain issues was first started by the 1990 CEO of HP, John Young (Lee & Billington 1995). The company had a very diverse product line and therefore inefficiencies could occur anywhere along the chain. The first step was the identification of the problem. The shipment of supplies could be delayed or the supplies could be faulty. Also, the production system may be inefficient. So, manufacturing managers always had to deal with uncertainties. Analytical modeling was identified as being the best way of providing managers with data-driven decisions enabling them to create more efficient and cost effective systems of manufacturing and distribution (Lee & Billington 1995). Data recording issues were identified and in 1989 a quantitative method was implemented (Lee & Billington 1995). Even though this model was capable of figuring out costs and other variables, it could still not provide an accurate identification of uncertainties in customer service, inventory investment, and order filling response time. Therefore a new model was needed to solve supply chain management issues such as uncertainties. The SPaM started a supply chain model development that included projects such as Inventory Reduction, localization, supply chain design and other developments (Lee & Billington 1995). Procurement Risk Management (PRM) was developed using certain technological processes to manage supply chain risk (Global Logistics & Supply Chain Strategies n.d.). This technology provided a framework for measuring the risk and uncertainties such as cost, availability, etc. Product Development Process In 2002, HP developed its Product Development Center in Taiwan after having its PDC’s in Singapore, Shanghai, the US, Latin America and Europe. The corporate strategy was to produce its products along with its contractors thereby enabling a huge amount of time and effort to be saved (Chen, 2002). This Product Development Center would act as a hub for integrating the supply partners and the product design process. Setting up a PDC also allowed cost effective manufacturing and helped in the reduction of the time taken to market the products by allowing quick communication of market information to its contractors. Also, the supply partners got a chance to learn more about the product design technology (Chen, 2002). After merging with Compaq, HP extended it supply chain processes so as to integrate the different components. HP was able to achieve this through procurement and sourcing. Key Chain is HP’s networked supply chain centre that allows enhanced profitability, efficient cost structure and management of the various trade partners. Also, in order to satisfy customer demands HP’s PLM (Product Life Management) enables all its divisions to be interoperable thereby allowing unique solutions to be made. An integrated supply chain has also improved logistics and distribution and has led to an increase in revenue (“Supply Chain Management for the adaptive enterprise” 2004). Capital Equipment and Services Analysis The primary focus of HP’s Key Chain program for supply chain collaboration was to deal with e-procurement. Initially it was only used to refer to MRO (maintenance repair operations) and involved direct or indirect material procurement. Also, decisions started getting decentralized along the independent product lines. A majority of its products started to be produced by external contractors and only a small amount of them were made by HP itself. As a result many of the procurement decisions are taken by non-HP employees. A private exchange known as Key Chain was invented to synchronize the supply chains. This allowed supply chain collaboration and currently addresses the issues of the complete supply chain (“Key Chain: Supply Chain Collaboration at HP” 2003). The product line at HP was very diverse and their supply chains also had very different characteristics. Every product had a distinct life cycle and requirements. Plus, HP’s decision making was disintegrated as the manufacturing shifted to external contractors. As 80% of the product manufacture shifted to contractors, much of the decision started being made by non-HP employees. There could be many suppliers dealing with many HP divisions. For example, a supplier produces a disk which can go into a desktop computer, a home computer and a notebook computer. A federated solution was required in order to allow integrity and autonomy. A network was created having a many-to-many relationship between the attributes allowing the different suppliers to correspond with one company – HP. Every component of demand has a different risk profile and Key Chain allows custom procurement vehicles to deal with the different risk profiles. Analysis of Organization’s Outsourcing In 1993, 80% of the products were produced by HP itself and only 20% was manufactured by external contractors. By 2003, 80% started being manufactured by contractors. HP developed its Product Development Centers in various cities including Taipei, Singapore, Shanghai, the US, Latin America and Europe allowing production of its materials thereby reducing costs, complexity, time and effort. The suppliers were numerous and different hence the supplier base was standardized in a mechanism that involved outsourcing the distribution assets and the non-strategic procedures. The collaboration models allowed increased supply and demand visibility for the supplier and hence enabled HP’s partners to forecast demand. Such visibility also enabled suppliers to create production and logistical efficiencies on their supply chains. Also this cut costs for the suppliers allowing HP to obtain a discount from the suppliers (“Supply Chain Management for the adaptive enterprise” 2004). Interaction of HP’s suppliers has been simplified by the presence of one point of interaction with HP company. By implementing a supply chain strategy, HP’s suppliers have been able to exclude non value added stages that add to the costs (“Supply Chain Management for the adaptive enterprise” 2004). The supplier price, service, and value were dealt by HP using a model that was designed to highlight the value. The suppliers were encouraged to view HP as one whole separate company. Having done that, suppliers were asked to give the best terms, enhance pricing and develop more cost effective strategies (“Supply Chain Management for the adaptive enterprise” 2004). An inventory collaboration known as the SMI (Supplier Managed Inventory) has made use of the internet and networked solutions to help organize the complicated processes involving supplier managed inventories. The fact that various manufacturers and suppliers are involved makes the task more difficult. A vendor hub or may be involved and in-transit information may be provided by a logistics carrier to calculate the inventory. The inventory collaboration helps to provide a flexible solution to entertain the discrepancies surrounding the SMI models (“Key Chain: Supply Chain Collaboration at HP” 2003). How the Organization Deals With Contract Issues According to the HP website, it sells two types of contracts: HP Direct Contracts and HP Partner contracts (Hewlett-Packard 2013). HP’s suppliers interact with the company using HP’s Supplier Portal. The suppliers and contractors are also provided with certifications that indicate that the supplier is an official HP contractor. HP explicitly mentions its terms and conditions for its suppliers, ethical and compliance expectations, global procurement terms and conditions, and payment terms (HP Suppliers Portal 2013). The conditions clearly mention that ethical and legal faults can hurt HP’s reputation. High standards are expected in areas including health, safety, and environment. Its partners and contractors are encouraged to set up compliance programs so as to determine unlawful conduct and practices. Also when misconduct has been found, suppliers and contractors must take immediate action against it. HP encourages its supplier or contractor to contact its support in case they require any information regarding the legalities and other issues. The suppliers must deal with malpractices within their organization themselves by having compliance programs that determines the misconduct occurring. References Chen, K. (2002). HP opens product development center. Taipei Times. Retrieved August 24, 2013, from Hewlett-Packard Co (HPQ.N) Company Profile. (n.d.). Reuters.com. Retrieved August 24, 2013, from Hewlett-Packard - HP Organization Chart. (n.d.). Cogmap Org Chart . Retrieved August 24, 2013, from HP history. (2013). Hewlett-Packard Co.. Retrieved August 24, 2013, from HP Invents New Framework for Managing Supply Chain Risk. (n.d.). Global Logistics & Supply Chain Strategies. Retrieved August 24, 2013, from HP Supplier Portal. (2013). HP Supplier Portal. Retrieved August 24, 2013, from Key Chain: Supply Chain Collaboration at HP. (2003). Hewlett-Packard Co.. Retrieved August 24, 2013, from Lee, H.L. & Billington, C. (1995). The Evolution of Supply-Chain-Management Models and Practice at Hewlett-Packard. Institute for Operations Research and Management Sciences. Retrieved August 24, 2013, from < http://www.e3associates.eu/old_site/images/Article%20-%20The%20Evolution%20of%20Supply-Chain-Management%20Models%20and%20Practice%20at%20Hewlett-Packard.pdf > McEntee, I. (2010). HP’s organizational structure. International Business Blog. Retrieved August 24, 2013, from Supply Chain Management for the Adaptive Enterprise. (2004). Hewlett-Packard Development Co.. Retrieved August 24, 2013, from < http://h71028.www7.hp.com/enterprise/downloads/SCM_FINAL_HP_Case_Success_Story.pdf> Read More