Supply chain management is a frequently encountered phrase these days, as managers strive to improve factory performance. The trouble is that all too often the real meaning is lost. Instead, a casual observer might interpret the activities at the factory as evidence of an intensive effort to improve supplier management.
Good supplier management, while praiseworthy, does not constitute good supply chain management without a concurrent effort to manage the rest of the aspects of delivering products to customers. In this article, I will present a complete supply chain management methodology. This approach, developed at Hewlett-Packard, will enable a manufacturing operation to better manage its supply chain, ultimately improving customer satisfaction levels while reducing overall costs.
Hewlett-Packard has successfully used this methodology and is making efforts to implement the practice of good supply chain management at all its divisions. HP identified the need to improve its process for manufacturing and delivering products to customers as profit margins suffered pressure from increasing competition. Other factors have contributed to a renewed focus, namely:
- More instances of multisite manufacturing, where several independent entities are involved in the production and delivery process;
- Increasingly cut-throat marketing channels, such as independent computer dealers;
- The maturation of the world economy, with heightening demand for “local” products;
- Competitive pressures to provide exceptional customer service, including quick, reliable delivery.
HP’s methodology has led to major changes in the way it does business. In the process, though, we have also discovered some appealing side effects. The proper execution of this methodology leads to improved team-work and cooperation among employees, especially those normally separated by either business function or geography. We’ve also discovered that this methodology leads to greatly improved customer focus, in addition to better relationships with suppliers.
In the following pages, I will introduce HP’s methodology. First, I will identify the problems inherent in supply chain management. Then, I will describe some key insights and briefly describe an analytical tool that we have developed to support a rational analysis of real supply chains. Finally, I will close with representative case studies describing HP successes with “real” supply chain management.
Responding to Uncertainty
Large manufacturing companies are “hostage to complexity,” according to Lew Platt, HP’s president and CEO. The nature of the complexity is evident in a review of material flows for a complicated product. Multiple suppliers ship to manufacturing sites with varying regularity. There, subassemblies and final products are made by complicated and somewhat uncertain processes.