Ups-Hp Case Study

TABLE OF CONTENTS

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. What is effective today may not be considered so tomorrow and the needs of a customer or supplier in one country may differ from the specific requirements in another country.

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 .

2 INTRODUCTION

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.