Corey Billington

Material management in decentralized supply chains

A supply chain is a network of facilities that performs the functions of procurement of material, transformation of material to intermediate and finished products, and distribution of finished products to customers. Often, organizational barriers between these facilities exist, and information flows can be restricted such that complete centralized control of material flows in a supply chain may not be feasible or desirable. Consequently, most companies use decentralized control in managing the different facilities at a supply chain. In this paper, we describe what manufacturing managers at Hewlett-Packard Company (HP) see as the needs for model support in managing material flows in their supply chains. These needs motivate our initial development of such a model for supply chains that are not under complete centralized control. We report on our experiences of applying such a model in a new product development project of the DeskJet printer supply chain at HP. Finally, we discuss avenues to develop better ...

Services Supply Management: The Next Frontier for Improved Organizational Performance

This article explores how the purchase of services is managed within the organization, the risks associated with current services purchasing practices, and how to improve the professional management of services purchases. Survey data obtained from benchmarking research performed by CAPS Center for Strategic Supply Research reveal that purchasing services is viewed as more difficult than purchasing goods. In addition, while purchasing of services is growing in importance and magnitude, the resources to manage it are not. Accordingly, there are huge opportunities for organizations to improve their services purchasing in terms of cost and value, by dedicating more, and perhaps different, resources to services purchasing. Developing an outstanding capability to purchase services, and to manage that purchase, could truly be the next frontier for improved supply chain and organizational performance.

Purchasing leverage considerations in the outsourcing decision

Abstract As outsourcing has increased, an unanticipated problem has come to light for many manufacturers: as they reduce their purchase volume with their materials and parts suppliers for inputs to items that are now outsourced, these manufacturers lose their volume and price leverage for the inputs. As a result, they may have to pay more for parts and materials that they continue to buy from suppliers. In addition, the contract manufactures to whom they outsource may also be paying a higher material/part price or may get a lower price by consolidating volume from a number of customers, but may retain the volume discount as part of their profit. This paper uses the transaction cost literature to explore how purchasing can best manage the potential loss of volume/purchase leverage for the inputs to items that are outsourced. In exploring this issue, case studies are used to demonstrate both unsuccessful and successful attempts at managing this loss of purchasing leverage. A prescriptive framework is developed that suggests how to best manage the risk of losing purchasing leverage when outsourcing. This framework considers the relative volume of the buyer and the contractor, the level of trust, and the concerns of the supplier regarding its price visibility.

Designing Products and Processes for Postponement

Companies that compete in a global market have to manufacture and configure products to meet the diverse needs and demands of customers. Such diverse needs can result from geographical differences, government regulations, or simply differences in customer preferences and tastes. Uncertainty in the market place makes it extremely difficult to forecast product demands accurately. This results in high inventory costs and low product availability. Postponement is a strategy whereby the final configuration of a product is delayed as much as possible, usually until a customer order is received. Postponement ranges from simple packaging and labeling, bulk packing or special customization, to more complex forms such as localization, assembly and test, and final product integration. Effective implementation of postponement requires careful redesign of the products and the processes involved. In this paper, we describe a conceptual framework for design for postponement, and the appropriate cost drivers that can be used to assess postponement strategies for a company.

Safeguarding the Promise of Production Outsourcing

Todays product companies (original equipment manufacturers, or OEMs) increasingly outsource production, especially when the activities are asset intensive or require process technologies characterized by rapid innovation. When such an OEM also outsources the procurement of the required materials, especially to the party providing the production services, the OEM risks unpleasant surprises, such as unauthorized part or supplier substitutions, overbilling, mistreatment of the supply base, and the loss of the OEMs procurement leverage. Based on supply chain audits and interviews in numerous industries, we propose and analyze strategies for preventing these outcomes when outsourcing production. We recommend that OEMs carefully consider the underlying means, motives, and opportunities of the service providers when deciding which activities to outsource and how to establish effective business controls. Firms such as Hewlett-Packard, Motorola, and Dell have implemented these ideas.

Accelerating the Profitability of Hewlett-Packard's Supply Chains

Hewlett-Packard (HP) developed a standard and common process for analysis coupled with advancement in inventory optimization techniques to invent a new and robust way to design supply-chain networks. This new methodology piloted by HPs Digital Imaging division has received sponsorship from HPs Executive Supply- Chain Council and is now being deployed across the entire company. As of May 2003, a dozen product lines have been exposed to this methodology, with four product lines already integrating this process into both the configuration of their new-product supply chains and the improvement of existing-product supply chains. The team will highlight the application of these new capabilities within HPs Digital Camera and Inkjet Supplies businesses. The realized savings from these first two projects exceeds

Design of manufacturing cells: Operation assignment in printed circuit board manufacturing

130 million.

The Evolution of Supply-Chain-Management Models and Practice at Hewlett-Packard

We consider an operation assignment problem that arose from a printed circuit (PC) board assembly process. Components can either be inserted on boards manually or by machine. The objective is to determine an assignment of components (operations) to a set of capacitated machines (with the remainder of the components inserted manually) to minimize the total set-up and processing cost for assembling all boards. The problem can be formulated as a mixed integer linear program, but is too large to be practically solved. For the case of one machine, we present two different solution heuristics. We show that while each can be arbitrarily bad, on average the algorithms perform quite well. For the case of multiple machines, we present four different solution heuristics. We discuss implementation of our results at Hewlett-Packard.