HP's Supply Chain — By the Numbers (Part 2)

Continuing in the analysis of HP's global supply chain metrics -- courtesy of ZDNet's Larry Dignan -- it's worth looking at a few more key items in particular to get a sense of the operation. From a product obsolesce and ocean/air freight perspective, it's fascinating to note the difference in ocean transit time for a notebook from China to Long Beach, CA versus Rotterdam in Holland (20 days versus 39 or 40). This number appears to decline to 3-4 days when factoring in the "time it takes for that notebook to go from a China manufacturing facility to the U.S. or Europe (including customs clearance)" for what I presume is air freight. Speaking of air freight in HP's operation, the "interval between fully loaded flights of HP products out of Shanghai" on 747 freighters is ten hours.

To reduce costs in its products, 80% of HP's servers contain standard industry components. This number climbs to the "mid-to-high" 90% range for standard parts in HP's PCs. SKU / part / component rationalization appears to be beating out process rationalization in HP's supply chain, given that only 25% of "HP supply chain processes ... are shared between all supply chain activities today." Still, given the time it takes to standardize processes after the merging of two very different cultures -- not to mention two supply chains -- perhaps this number is not overly surprising.

What's missing from Larry's notes (and most likely also from the presentation that HP gave to RBC) are the savings and working capital improvement numbers associated with HP's efforts when it comes to procurement and supply chain transformation and evolution. I have no doubt that one of the major drivers of shareholder value for HP in recent years has been the purchasing and supply chain lever. Coincidently, it's no surprise that in Spend Matters' proprietary analysis of high-tech company procurement and supply chain sophistication, that HP ranks with Apple and Cisco as an Innovator (on the Geoffrey Moore adoption scale) given their process and technology adoption patterns and overall shareholder returns.

Jason Busch

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