Taming Complexity in the Global Supply Chain: HP's Story

HP manages one of the most complex and truly global supply chains out there. The $118B company serves nearly every country in the world manufacturing and sourcing from every corner. And at the heart of that is Tony Prophet, senior vice president of HP's $57B Personal Services Group (PSG--which includes PCs, notebooks, and procurement for all HP).

A few years ago, the computer industry was labeled a commodity, with manufacturers making the same things and indistinguishable from each other. But the truth is the industry is just the opposite. While everyone may be building a computer out of the same parts, and most are doing it through a mix of owned and contract manufacturing, how well they create a brand identity around those products makes all the difference.

"How do you have a distinctive business model when you are contract manufacturing? And how can you make a better cake when everyone is making cakes out of the same ingredients?" Mr. Prophet asks. The answer: focusing on the areas that matter and doing them better than anyone else. For HP, that focus is on the following:

• Building a distinctive brand with marketing targeting key demographics.
• Managing HP's global presence, balancing shared gains on a worldwide basis.
• Executing on a balanced blend of HP and partner resources
• Using its scale to deliver assurance of supply and best total cost
• Assuring operational excellence in core processes
• Conducting active and comprehensive risk management
• Being a world leader in socail and environmental responsibility.

Easy said, but how do you get there? For one, HP has been reinventing its brand to create a young and hip image, something reliable and cool that customers are going to keep coming back to. That's how a company like HP breaks out of the commodity trap. "We've worked hard in our markets around the world to grab market share where we're seeing demand skyrocket," Mr. Prophet said. The company landed celebrity icons like Serena Williams, Shaquille O'Neill, and Vera Wang to create that image.

But it isn't just the front end. This type of innovation has to stretch back into the manufacturing side of the business as well. When demand for notebooks and other devices exploded a few years ago, there was a global shortage of memory. Companies big and small were scrambling for any scrap of memory they could find. "Every time you got another gig of memory, you shipped a computer. It was hand to mouth," Mr. Prophet said. "Demand was exploding, so any notebook you could build you could sell." After that crises subsided it was a battery shortage, then it was a shortage of panels, one thing after another. "The winners weren't necessarily the best, but just the ones that had the right parts to get something out the door," he added.

And through it all, HP saw market share grow, and sales progress. The company had developed ways to protect its brand by employing a buy-sell method in which HP bought all the necessary parts directly from the main suppliers than used them as needed or sold them to the contract suppliers directly, never relying on others to ensure it had the right parts to meet consumer demand.

Lastly, these days brand is also about much more than product, it's also about corporate identity in the global economy. HP has long been a leader in sustainability practices, in fact last night HP took home one of AMR Research's Sustainability Leadership Awards. HP has gone further than most companies to ensure its practices are best for it and the world it lives in.

Comments

[Cheap Computers]

I think its a good achievement of HP to be the good and cheap computer producer in the market

[cheap computers]

For the Taming Complexity in the Global Supply Chain Hp is doing great job.