Every day, HP delivers 1.3 million inkjet cartridges, 110,000 printers, 75,000 personal computer systems and 3,500 servers. Many of these products are produced by contract manufacturers or original design manufacturers. The company spends about $50 billion, or about 64% of its revenue, on supply chain activities. At this spending and complexity, supply chain mastery is an imperative discipline to control costs and foster collaborative relationships with suppliers.

Supply chain optimization "has a direct impact on customer satisfaction, stock price and profitability," says Dick Conrad, senior vice president of supply chain, Global Operations, at HP (Palo Alto, CA).

As a result, HP management assigns supply chain optimization a high priority. "We are continually focused on supply chain improvement," says Conrad. "The journey will never be done until we can do it for free or at a negative cost," he notes. "We have to be ... vigilant to ensure the supply chain is flexible and changing to meet ever increasing demands," he says.

This approach, which has reaped the company many benefits (including saving HP over $1 billion since 2001), has earned HP the Managing Automation Progressive Manufacturer Supply Chain Mastery Award.

HP is a major player in three highly competitive, price-sensitive businesses: printer and imaging solutions, personal computers and technical solutions. The latter includes services as well as enterprise systems for mission critical applications like stock exchanges.

This broad product line positions it against a large number of competitors. Other pressures include a widely dispersed global operation that extends into 178 countries and a rapidly flowing new product pipeline, which launches hundreds of new products each year.

HP's supply chain effort is overseen by its Supply Chain Council, which includes Conrad and the supply chain leader from each of the company's three business groups. Each year, the council updates its three-year plan and then translates it into a 12-month schedule. To monitor progress and ensure objectives are met, the Supply Chain Council meets monthly.

HP serves four customer segments: consumer, small/medium business, public sector and enterprise. Just a few years ago, customers received product or services from HP via one of 35 different supply chains. Today, the company has consolidated its business into five supply chains -- no touch, low touch, configure-to-order, high volume and solutions and services.

"One size does not fit all," says Conrad. In fact, relying on a single supply chain "limits the company's ability to grow and effectively serve different customer requirements and different market needs," he explains. "Right now five is the right number," but it's possible one or two more channels could be added.

With an increasing number of orders received directly from consumers using the HP Web site or working through an enterprise business partner, there's been considerable growth in the customer-centric, demand-driven configure-to-order supply chain. "We do more and more configure-to-order, especially on our mid-to-lower range of offerings," says Randy Burdick, vice president and group information officer, adaptive infrastructure and supply chain IT at HP. Combining SKUs and options just before shipping eliminates the need for custom builds and reduces inventory requirements. However, this direct-to-consumer business also necessitates different support such as call centers for customer service and Web site design for ease of use.