The following also appears as a published guest commentary on the Supply Chain Expert Community web site.
Technology and services provider Hewlett Packard remains in crisis and the challenges that have led up to the current crisis, have in this author’s point of view, much to do about supply chain strategy decisions that now span three different CEO’s.
In October 2011, the Supply Chain Matters blog featured two separate commentaries, The Need for C-Level Grounding in Supply Chain Strategy, and HP Finally Reverses its PC Spinoff Decision- What Needs to Come Next, which were penned just after the ouster of previous HP CEO Leo Apotheker and the entrance of new CEO, Meg Whitman. Both reflected on the botched decision to jettison HP’s personal systems business and the potential implications that the decision had not only on HP’s future PC revenues, but also on diluting HP’s supply buying leverage. The takeaways related to this 2011 commentary were our observations that CEO Meg Whitman needed to quickly look at HP from a broad supply chain strategy lens. Under the former leadership of CEO Mark Hurd, HP elected to de-centralize its supply chain strategy voice in favor of de-centralizing supply chain capabilities among each of HP’s existing business units.
During these past two weeks, HP has once again made financial news headlines that raise cautions for existing stockholders and supply chain stakeholders. In the latest fiscal quarter, HP’s overall profitability among all HP businesses declined a whopping 44 percent. Revenues within its personal computing business unit fell by 15 percent, printing and imaging revenues fell by 7 percent, while server and data storage declined by 10 percent.
In her public remarks to stockholders and Wall Street analysts, Ms. Whitman pointed directly to supply chain concerns as causes to the current performance, directly indicating that years of underinvestment in processes and systems made these problems worse. In an Associated Press syndicated article published in the online Wall Street Journal titled HP CEO pleads patience as earnings fall 44 percent, Whitman is quoted: “ We were not as effective as we needed to be in matching that supply with that demand, ..”. Ms. Whitman is further quoted: “ I’m not sure I’d say we were world class in terms of how we think end to end about supply chain.” Members of the supply chain community are more than cognizant to the reality that when the CEO makes these types of statements reflecting on a company’s supply chain capabilities, then change must inevitably occur.
The effects of the flooding in Thailand were directly attributed to more than half of the company’s revenue drop. Yet shortly after the potential magnitude Thailand flooding crisis on hard disk supply began to become more visible in the Fall, CEO Whitman indicated that HP’s buying influence and supply chain capabilities would be able to successfully manage the crisis.
In the specific case of HP, those of us who have followed supply chain developments for many years can well remember the days when HP’s supply chain capabilities were clearly viewed as a world class benchmark. Strategies related to segmented supply chain strategy across diverse product segments, risk management practices among volatile and rapidly changing high tech businesses, the first implementation of multi-echelon inventory and extended supply chain trading partner collaboration, and leading edge aspects of sales and operations planning were all attributed to HP’s supply chain teams.
Something obviously changed, and we argue that change can be traced to the former decision to organizationally de-centralize supply chain among the various business units and then expose supply chain capabilities to needs for individual business cost cutting and profitability mandates.
We know all too well, however, that the past is past, and HP’s lens needs to quickly focus towards its current dilemmas. Thus, we have elected to re-iterate our past commentary in the belief that HP, more than ever, needs the voice of supply chain strategy and execution at the senior executive table.
Many of the latest business media articles related to HP speculate that even after the Hurd era of extreme cost cutting, HP senior management may be facing yet another long, tough turnaround path that may call for yet additional headcount and cost reductions. More across-the-board cuts would, in our view, be the obvious simplistic approach. HP would be better served with consideration of two key decisions. The first is appointing a senior executive with the responsibility and authority for leading HP’s overall supply chain strategies and resource requirements. The second would be a reassessment of the current and, more importantly, required future supply chain capabilities needed to support HP’s revenue growth and profitability needs. Such a plan may involve re-investments or re-assessments of the three key areas we all know are so important: processes, technology and people. The context is improving execution, more timely supply chain global visibility and decision-making, as well as making HP’s supply chain once again a competitive advantage. To perhaps use a simple medical analogy, HP’s supply chain may is in need of a complete physical and new health regimen.
What about further community viewpoints? Is the voice of supply chain strategy and execution at the senior executive table a mandatory requirement for high tech focused supply chains?
Bob Ferrari, Founder and Executive Editor, Supply Chain Matters
©2012 The Ferrari Consulting and Research Group LLC and the Supply Chain Matters blog. All rights reserved.