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- June 29, 2006 -


Supply Chain Strategy: HP Unwinds Central Supply Chain Function



In an unusual move, responsibilities are split among the operating divisions, but will have company-wide responsibilities



SCDigest editorial staff

The News: As part of the continued transformation under new CEO Mark Hurd, technology giant HP announced its was disbanding its Global Operations division, which provided centralized supply chain management functions for all of  HP. In an unusual move, it appears that key functions will move directly into the three main operating divisions, but that these divisions will perform the services they inherit for the other divisions as well.

The Impact: This is the latest corporate move (see The Gap Splits Its Supply Chain Function, as Chief Supply Chain Officer Leaves the Company) countering the trend towards centralized SCM. Whether HP’s specific hybrid approach that decentralizes while maintaining aspects of centralization can work remains to be seen.

The Story: HP announced last week it was unwinding its Global Operations group, which provided centralized supply chain services to the company, and had been on something of a public relations campaign in the past two years, touting its capabilities (in part SCDigest believes to counter the perception that Dell had the dominant high tech supply chain.) The evidence was that in fact HP had made enormous supply chain progress, and in several areas was developing leading edge supply chain processes and technology (see SCDigest story from last week: HP Raises the Bar in Procurement Through Use of Technology)

The group has now been disbanded, with responsibilities pushed back into the core operating divisions – but with a twist.

For example, the Personal Systems Group, or PSG, will now have responsibility for company-wide supply-chain operations and global procurement services. Similarly, the Imaging and Printing Group (IPG) will have company-wide responsibility for worldwide logistics and strategy planning, and network modeling.

Can it work? Generally, as functions are decentralized and push back to the business when the corporate function is seen as slow and not responsive enough to individual SBU needs. In HP’s case, however, it will now be an individual business unit that has responsibility for performing SCM functions for the others, which on the surface would seem to leave open the potential for conflicts in strategy, priorities, and execution.

CEO Hurd is shedding workers, and it is possible that even though there was a centralized SCM function, the individual business groups still had employees performing similar roles. As such, this may be an opportunity to lower SCM overhead costs.

We’ll stay close to this story to see how things work out.

Do you have any insight on HP’s move to unwind its global SCM function? Can it work to split company-wide supply chain responsibilities among operating groups? Let us know your thoughts.

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