HP reaping benefits of SCM program
Jennifer L. Baljko
July 12, 1999, Issue: 1168
Section: Supply-Chain Management
techweb.com
Silicon Valley -- The kinks in the electronics industry's supply chain are well known-short life cycles, inventory-management inefficiencies, slow decision-making processes, and costly product rollovers.
With those issues coming to a head, many OEMs and suppliers are counting on supply-chain management tactics to better organize their companies.
Palo Alto, Calif.-based Hewlett-Packard Co.'s Inkjet Products Group (IPG) embarked on such an endeavor in February 1998, and launched programs earlier this year that are reaping significant results, according to Tom Abell, supply-chain engineer for the group's Americas Manufacturing Operations.
In a recent HP-sponsored Webcast, "Supply Chain Results in Motion," Abell highlighted some of the challenges they faced, and a few of the steps the IPG took to smooth out supply-chain wrinkles.
When it first began examining trouble spots about 18 months ago, the biggest red flags that popped up involved the group's difficulty in managing its outbound inventory, ad hoc decision-making processes, and product rollovers, according to Abell, who headed up the project, and is currently leading a supply-chain initiative at HP's European operations in Barcelona, Spain.
"The main thing we wanted to target was our inventory management. ... We had no visibility in the supply chain," he said on the Webcast. "IPG has thousands of products at different locations, with different requirements and different SKUs. We have to manage all of that inventory because that's the kind of business we're in. Products are not phased in and out at the same time. And the products may have different features in different regions, and may need different components."
When the group did its initial evaluation, it decided end-of-life cycle schedules, forecasting ability, and supply situations were the areas that required the most attention at the time, he said.
"We really needed to know if we had too much or too little inventory. And we needed to know that ASAP so we could react as quickly as possible," Abell said. "If we're able to react to something two weeks earlier, we may be able to save millions of dollars."
Abell knew that achieving that level of efficiency would require a robust system, additional technology, and a move away from informal, ad hoc decision making.
But before going down that path and implementing an i2 Technologies Inc. software suite that targeted many of those areas, the IPG spent a considerable amount of time evaluating its existing supply-chain process, defining clear business objectives, and working with upper-level management to make sure everyone was on the same page.
Much of that was accomplished by benchmarking against other HP segments and industry leaders, finding ways to access and better use existing data, and forming a proactive team among in-house managers to foster strong ties to an external software vendor, he said.
After 11 months of evaluating solutions and conducting test runs, the IPG went live with the first phase of its supply-chain improvement plan earlier this year.
Although Abell is still quantifying the savings-a difficult task given the number of factors that influence operational cost reductions-the results have been positive. "This project has focused the entire division on more effective inventory management," he said. "We've put a process in place that allows us to make decisions more quickly. Once you can make decisions more quickly, you can make better mix or shipment decisions."
While the latest initiatives focused on outbound-supply issues, Abell said the group is studying other areas, including improved interaction with suppliers and contract manufacturing partners. "We have lots of other areas to look at. Any business objective doesn't really stop," he said. "We have more stuff to do. In phase one, we wanted to limit the scope of what we wanted to achieve. Now, our primary areas of focus will be on integrating our supply and demand process."
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Checklist For Implementing Supply-Chain Initiatives
- Management support
- A strong team consisting of internal and technology-vendor employees
- Clearly defined, business-driven goals
- Accurate and efficient access to in-house data
Copyright ® 1999 CMP Media Inc.
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