Anyone following business headlines these past few weeks could not miss the less than flattering headlines surrounding the recent decision by Hewlett Packard’s board of directors to oust CEO Leo Apotheker with newly appointed CEO Meg Whitman. These headlines have particular significance for supply chain implications because of HP’s previous publically announced decision to explore strategic options for possibly shedding its PC division.
In our Supply Chain Matters commentary surrounding the ouster we observed that the PC division decision raised yet another bomb of uncertainty for HP’s customers and supply chain partners, that could also threaten to unwind HP’s high volume leverage in contracting and procurement of strategic hardware components such as displays, memory and other key components.
Today, business media is now reporting that HP is actively re-thinking its previous decision. The Wall Street Journal reported that fresh analysis conducted by HP indicates that the cost implications related to a spinoff may well outweigh the benefits. Specifically cited in the WSJ reporting is that the company is acknowledging that separating the PC division “would significantly diminish H-P’s buying power with component makers because H-P would lose economies of scale. It could complicate H-P’s supply chain and decrease profit margins on some products, the analysis suggest.”
For most procurement and supply chain management leaders, this new HP development should be a no-brainer, since grounding in supply chain’s strategy’s impact to business bottom line results comes with the designation of supply chain leader. The obvious question remains- were any of HP’s former senior leadership team actively voicing such cautions, and why was this recent analysis not completed prior to the announced spin-off decision? Only insiders can provide a true account.
From a broader perspective, Supply Chain Matters believes that it brings forth a very current and real reminder that C-level executives residing in any manufacturing or retail firm need to possess a solid understanding of the tradeoffs of supply chain strategy. Some argue that senior operational and former supply chain executives, for instance Tim Cook, the current CEO of Apple, are adequately experienced in leading manufacturing and branded companies because of their supply chain roots. Others, including ourselves advocate that a senior supply chain or operations executive needs to have a meaningful voice at the senior management table for business strategy discussion.
There is credence for both approaches.
Suffice to reiterate that for manufacturers and retailers, supply chains do matter a lot in formulating and deploying change in corporate strategy. Supply chain input is also crucial in tactical decision-making when overall service level, bottom-line cost, and asset tradeoffs are being considered.
Readers may recall that under the leadership of former CEO Mark Hurd, HP elected to de-centralize its supply chain voice several years ago, folding that voice within separate business units. HP lost that voice and input at the senior management ranks, and we trust that it quickly returns before it is too late.
©2011 The Ferrari Consulting and Research Group, LLC and Supply Chain Matters
Well articulated point of view with which I wholeheartedly agree. CEO’s are required to make the ultimate in integrated decisions. They can’t do that if they ignore the huge tradeoffs in supply chain (and manufacturing).