With thousands of products delivered each day, operations in nearly 200 countries, multitudes of far-flung suppliers, demanding customers, and a rapidly flowing new product pipeline, HP (Palo Alto, CA), winner of Managing Automation's Supply Chain Mastery Award in 2005, focuses on continuous improvement in its supply chain to eliminate waste and inefficiency.
"We are always putting the customer first," says Gianpaolo Callioni, director of supply chain strategy at HP. Toward this end, the company has built a powerful supply chain portfolio that provides the flexibility it needs to deliver products to customers the way they want to receive them. This includes the capabilities of five supply chains -- no touch, low touch, configure-to-order, high volume, and solutions and services -- and four routes to market (value direct and volume direct plus partner-assisted value indirect and volume indirect). This highly flexible repertoire allows HP to mix supply chains and routes to address complex customer needs. It also allows the company to optimize costs as products move through their life cycle by permitting an initial emphasis on velocity and a shift to cost management as a product ages.
The company watches costs closely and is on track to save $1 billion in 2005 on top of the $1 billion saved during the 2001-2004 period. Its e-visibility system connects HP to its third-party logistics providers and generates proof of delivery in 48 hours on 92% of shipments, accelerating the invoice/payment process and improving cash flow.
HP's Supply Chain Council oversees the company's efforts and consists of Dick Conrad, senior vice president of supply chain, global operations, and the supply chain leader from each of the company's four operation groups. The council updates a three-year plan each year, sets a 12-month schedule, and then meets monthly to monitor progress. By tweaking the existing system and adopting innovations, the company is on track to save $1 billion per year in 2005, 2006, and 2007.
HP relies heavily on quantitative analysis to measure benefits and identify potential improvements. Once a decision is made to change a process, a more detailed planning phase determines budget and resource needs. Implementation focuses on the human component, with heavy emphasis on communicating the need and explaining the solution and anticipated benefits.
Current areas of emphasis include maximizing benefits from existing IT investments and continuing to simplify platforms and improve the ability to work cross-functionally. "The biggest challenge remains cross-functional connection and collaboration," Callioni reports. However, sharing knowledge across departmental boundaries can generate huge benefits, as shown by the more than $100 million the company has saved in a "design for the supply chain" effort, which has fostered interaction among engineering, packaging, and supply chain personnel. "A lot of early product design decisions impact the supply chain, especially in terms of shipment density and freight charges," Callioni explains. "This will remain an area of focus moving forward. We also want to continue sharing best practices across the organization," he concludes.