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Page 2 Executive summary
Page 3 Introduction
Page 4 Main supply chain issues within the Hewlett Packard-UPS case study
Page 6 Strategies for the future
Page 8 Conclusion
1 EXECUTIVE SUMMARY
The concept of supply chain is tightly linked to the concept of collaboration. A supply chain by nature involves the interaction of two or more firms, sharing resources, risks and capabilities and jointly working to achieve higher business performance. Therefore, companies involved in a supply chain structure must ensure collaboration among their partners by applying the following interventions :
- Appropriate performance measures: provides information regarding the results of the system efforts to supply chain members
- Intervention of integrated policies: replace local policies that prevent the supply chain members from attaining overall profitability
- Information sharing environment: to provide adequate visibility to all members
- Incentive alignment: so all members' behaviour is aligned with the overall chain goal
The required levels of collaboration increase as the context in which businesses are embodied become more and more complex. Most companies are going or have already gone through a process of transformation in the way they do business: from integrated companies to fragmentation of their supply chains, which leads to the need of reliance on third party specialists
Both characteristics of reliance and collaboration among supply chain members involve the concept of trust. When a company trust its partner it means that the company has positive expectations about its partner's motives . If one of the members has reasons to believe that its partner is motivated only by individual success and self-interest objectives, it is most likely that reliance and collaboration will not happen and the relationship will probably end.
Another trend of today's markets is the expansion of the company's activities to different countries, either because they start buying products from suppliers located in another country or because they start selling their products to customers around the world. Operating in a global context may bring many benefits to the company such as access to better quality raw materials or increase of sales; but many challenges must be overcome to enjoy these advantages because of the complexity implied in a global supply chain.
And the more the complexity of the conditions that surround the relationship between partners, the more the risk they are exposed to. And more risk implies increasing needs for collaboration, cooperation, alignment and trust. The complexity of the global market is not only in the fact that many different factors affect the business, but also that these factors are most likely to change over time and space.
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Therefore, to perform well in today's market, supply chain's qualities must also include the ability to react rapidly to sudden changes and to adapt over time as market structures and strategies evolve .
In the electronics and information technology (IT) industries companies are facing a period characterized by an increase of outsourcing activities; not only peripheral activities but also critical areas are being outsourced. This is due to a number of reasons :
- Products are characterized by shorter product life cycles
- Products are characterized by modular architectures
- The supplier market has developed, offering enhanced capabilities
- Opportunities of lower cost and better skilled labour else where
One of the activities that is most likely to be outsourced is the logistics and transportation of the products, upstream and downstream. Although logistics might be seen as a secondary asset, it is actually a very important one and mainly for companies in the IT industry such as Hewlett Packard (HP). Its products are assembled and sold all around the globe, with suppliers and customers in different countries; and these are usually high-value products with short life cycle so they cannot be stationary for too long.
The logistics in this context is not a minor aspect; HP needs to rely on a logistics supplier that will be able to provide a varied range of transportation alternatives that can be adapted to HP's requirements, to provide complete visibility through high performance information systems and to deal with changing international complexities. HP found in UPS the desired capabilities to act as a partner supplier and since then they have developed a relationship based on trust and collaboration, high performance and cooperation. UPS handles all of HP's logistic needs from transportation to warehousing and documentation requirements; for the variety of products the company handles from small consumer devices to large installations; and all across the world from a small local package delivery to warehousing assistance in Shanghai.
3 MAIN SUPPLY CHAIN ISSUES WITHIN THE HEWLETT PACKARD-UPS CASE STUDY
3.1 Characteristics of the context: global and changing
Being one of the biggest technological companies in the world, HP's products are by nature innovative products, which usually have short life cycles and require the introduction of a steady stream of newer innovations to keep imitators at bay. Their market is uncertain and suppliers in this context must be chosen for their speed and flexibility, not for their lower costs .
The company operates at a global scale with customers, suppliers and employees all around the world. This requires a logistics provider capable of dealing with international complexities. UPS had the suitable structure to fulfil these requirements, with infrastructure and transportation alternatives; the expertise and the knowledge as well as the necessary IT systems to provide HP total visibility of the entire process.
3.2 Characteristics of the partnership
The HP-UPS case is an example of a success alliance and collaborative supply chain performance. HP decided to outsource its logistics activities, not because they were incompetent or inefficient; but because they found on UPS a partner that was able to assume responsibility for their strategy, planning and control of HP's operation (Birtran G. Et al 2007). This way, HP could concentrate on their core competencies, while benefiting from what UPS did best.
Both companies aligned their expectations and objectives; they trusted each other and shared information and opinions. UPS worked with HP's customers in mind, which shows the high level of integration and commitment. They also established an appropriate performance measures that focused on measuring the partnership's success in meeting both financial and service-oriented targets.
All conditions were present for it to be a successful partnership, and it was. So far the experience had been positive for both companies and as the writer suggest, it was a partnership characterized by HP's collaborative culture and UPS's high performance and operational excellence
3.3 Needs for the future of the partnership
Although the relationship between HP and its logistic provider UPS was considered according to the writer a "model for outsourcing success", HP wanted more. If the partnership was to continue to progress HP needed to realize that UPS was improving its performance as a supply chain partner even further and UPS understood that taking the relationship to a higher level would imply doing a better job of earning HP's trust.
But this is particularly difficult in the logistics field. Every customer has different needs and it is the responsibility of the logistics provider to satisfy them in a flexible and adaptable way, at the lowest possible cost. This is the most difficult target: create economies of scale while simultaneously providing tailored solutions. The new challenge for UPS at this stage was to improve its efficiency of existing operations while exploring new strategic alternatives for HP and to make HP feel they were UPS's only customer
4 STRATEGIES FOR THE FUTURE
4.1 Offer innovative alternatives by also increasing operational efficiency: obstacles and solutions
Finding innovative alternatives implies thinking in different ways than what the company is used to. It forces the organization to ask a new set of questions, draw on new technological and commercial skills and to employ new problem solving approaches. Large companies such as UPS sometimes fail to introduce this kind of innovations, not because they do not have the capabilities but because of the way knowledge is organized and managed. In established firms knowledge is usually build around current tasks and shaped by the nature of the competitive environment that it faces .
This is the situation UPS is facing in its alliance with HP: it is good, but how to make it better, how to offer innovative alternative and still be operational efficient. The obstacle is to think outside of the comfort zone, which is the way the company is used to deal with problems. There are three factors that affect what an organization can or cannot do and its capacity to change: its resources, processes and values . And as the company matures capabilities shift from resources to processes and values until it finally become part of the organization's culture and decisions start to be made by assumptions rather than by conscious choice.
This is fine as long as the firm continues to face the problems that its values and processes were designed to address. But as values also define what the firm cannot do, when the problems change the firm is often unable to respond.
A way of overcoming this obstacle is by creating a separate organizational structure within the firm in which new processes and ideas can be developed. Pull together a group of people out of the organization, maybe working on a different setting, where new patterns of working together and new processes to satisfy HP's and also other UPS customer's may arise.
4.2 Make customers feel like they are UPS's only customer: personalized attention and tailored solutions
In the logistic field options are varied. From sending a simple package to working on a big industrial project, there are always different ways of transportation, with distinctive qualities and costs. What a customer wants from its logistics provider is to be offered the best possible solution for each one of its requirements. This is customized or tailored service.
According to the case study, UPS possesses the structure and the resources to provide customized solutions for its diverse customer's needs, but there is something more important than just having access to the tools and it is counting on people trained to use the tools at its fullest performance. The author suggests that UPS had to "improve the sales personnel's awareness of the UPS's broad range of services offerings", which give us light on the fact that this may be a problem within the organization: they offer so many logistics' solutions that it becomes hard to keep all employees on top of all of them.
The success of the logistics agent performance depends on its capacity to adapt not only to different customer's needs, but to different needs of the same customer at different times. It is all about being flexible and being able to cope with these changes, making the client feel that it is not being provided a standard service. The client needs to feel that UPS, as their partner supplier, is aware of its necessities and will choose the best alternative to satisfy them.
A way to overcome this obstacle is by training the company's employees, not only the sales personnel but all the staff of people who are in contact with the end customer at different stages of the service chain. Make them aware of the complete range of services the company offers, how to get access to every option, what are the pros and cons of each one of them, what are the cost related issues and for what kind of situations are the different alternatives more suitable for.
Another important aspect is the communication channels. It is very important to make sure that each customer has a direct contact within UPS and that if the contact person is not available there will always be someone to assist. By phone or email, all customers' concerns must be dealt with and all questions answered. If the customer fails to communicate with UPS or it is not able to get an answer, it is most likely that the customer will feel it is not being appreciated, employees are too busy to deal with its problems or there are clients more important for UPS.
On the contrary, if UPS is able to make each customer feel they are always available, their requirements are being solved according to the characteristics of the problem, phone calls are being taken, emails are being answered. If the customer has the same satisfactory experience along the complete service process, that customer will feel like it is UPS's only customer and that there is a team of people working proactively to create always better value.
Facing current trends of the supply chain configurations of many companies UPS has been able to develop as one of the most chosen logistic provider by offering a wide range of services, with commitment to customers' strategies and combining the flows of goods with flow of information through systems that allow visibility along all processes.
This is shown in its relationship with Hewlett Packard which is considered a success from different points of view. But even successful partnerships need to improve and UPS now has to work on providing innovative alternatives while improving their operational efficiency as well as on their ability to make HP feel like they are UPS's only customer.
The proposed way to achieve this goal is by enhancing the creativity skill among UPS's employees in order to find innovative solutions to everyday problems; by investing in intense training of employees at all levels of the organisation so they are able to manage all the options the company offers and by improving the quality of the communication between both parties to make sure the information gets to the customer at the right time on the right way.