ups and hp: value creation through supply chain partnerships

7/24/2019 UPS AND HP: VALUE CREATION THROUGH SUPPLY CHAIN PARTNERSHIPS

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Richard Ivey School of Business Case # 907D02

Camelia Indah Murniwati 1406513376

Jejen Nugraha 1406589114

Muhammad Yuriansyah Putra 1406514100

Nasrul Nabil Sangadji 1406589303

LOGISTIC & SUPPLY CHAIN MANAGEMENT | MO 141 | 2 NOVEMBER 2015



In 1907, James E. Casey founded American Messenger Company whichdelivered messages and small packagesin the Seattle area mainly by foot andbicycle.

In 1919, Company had new name: UnitedParcel Service (UPS) and made its firstexpansion into Oakland, California.

Decades later, UPS, the world’s number

one package delivery company,delivered more than 14 million packages aday in more than 200 countries andterritories worldwide.

UPS leveraged its giant global deliverynetwork: offering customer firms a widerange solutions for supply chainneeds.

In 1995, UPS formed UPS Supply ChainSolutions (UPS-SCS) which is enable“syncronized commerce” process.

UPS

Services

Supply ChainDesign &Planning

Logistics &Distributions

Services

Transportation& FreightServices

InternationalTrade

Management



Hewlett Packard (HP) – one of the

largest global information technology

(IT) companies in the world.

HP strategy: offer hi-tech and low cost

products, services, and solutions, anddeliver the best customer experience.

In 2002, HP’s acquisition of Compaq

Computer Corporation (another

customer of UPS) created a leading

global provider of products,

technologies, solutions, and services

for consumer and business.



Scope of Services Agreed Upon by HP and UPS (3-year contact)

o Courier / NFO (Next Flight Out)

o Field Stocking Locations (FSL) – United States and Canada

o Information Technology (IT) – for scoped services

o Request Fulfillment – call centers / help desk

o Reverse Logistics – defective warehousing, free trade zone

o Package Transportation – domestics and international, hold for pick-up



Teams within and across each firm

were structured to define individual

roles and reporting responsibilities.

Structuring tools: 100 individual

Service Level Agreements (SLAs).

A financial metric by which success

could be evaluated aimed at a 12 per

cent reduction in spending for HP

over the 3-year contract period.



After the acquisition ofCompaq, UPS assisted HP in

merging the operations in Asia. UPS worked with

Original Design Manufacturers(ODM) to coordinate the flow

of materials.

UPS set up a central partsdistribution center in Tokyoand 15 stocking locations

around.

UPS warehousing facility atPudong Airport in Shanghai

for finished notebookcomputers before exported,

documentation facilities, & asa freight forwarder out of

China.

UPS vital service: allowingcustomers such us HP to dealwith exogenous forces. E.g:UPS managed internationalreturns through Free Trade

Zone (FTZ) in Louisville,

Kentucky.

Centralized Warehousing &Distribution Facility in Chicago

& Los Angeles, Atlanta,Dallas, New York (4 additional

destinations).

UPS coordinated withcustoms, retrieved in bulk &coordinated with some of HPlargest customer (Circuit City

& Best Buy)

UPS provided visibility of theentire process with Flex

Global View.



The teams reviewed

quarterly performance

metrics pertaining to

predetermined ServiceLevel Agreements (SLAs)

created at the beginning of

the partnership.

On March 23, 2004, Pat Grace, of UPS Supply Chain

Solutions (UPS-SCS) and Mark Colaluca, of Hewlett

Packard (HP), were leading their teams in a lively

discussion during a quarterly business review.



Being efficient in process while still agile and responsive.

Create infrastructure to meet various requirement of

individual customer.

How to create the best coordination structure betweenHP and UPS.



Transportation

o Moves products to geographically distanced markets to

provide people all over the world with access to a wide variety

of goods from various countries.

o Transportation offers time and place utility to consumers.o Transportation function is an opportunity for supply chain

managers to minimize cost and improve profitability.

Carriers -> UPS

o Those who provide transportation services to move goods

from one point to another .

Shippers -> HP

o Those who require transportation services.



Overview of Carrier Operations

Supply Chain

Design and

Planning

Logistics and

Distribution

Services

Transportation

and Freight

Services

International

Trade

Management

• Transportatio

n and Site

Organization

• Distribution

Center

Design

• Order Fulfillment

• Critical

OrderFulfillment

• Reverse

Logistics

• Parts Planning

• Air – North

American

• Air –

International

• Urgent

• Ocean• Rail/Intermodal

• Road

• Trade

Consulting

• Custom

Brokerage

• Managed

Services• Import/Export

Technologies



Motor Carrier Air Freight Water Carrier

Railroad Containers



Intermediaries vs Strategic Partnership

o Intermediaries

• Lack accurate demand forecast from carriers

• Inffective information systems

• Short-term relationships• 3PL provider (Third-Party Logistics)

o Strategic Partnership

• Greater operational flexibility

• Moderately decentralized

• Long-term relationships

• Sharing both risk

• Shipper can focus to its core competence -> Technology

innovation

• 4PL providers (Fourth-Party Logistics)



3PL vs 4PLo 3PL

• Firms that manage & execute certain value-add logistics andtransportation functions on behalf of their customers, using their own assets and resources.

• Offer an array of logistics services (carrier selection, route

scheduling, shipment storage, partial assembly of parts andtransortation).

o 4PL• Emerged to cover informational technology needs in transportation.

• A supply chain integrator that synthesizes and manages theresources, capabilities and technology to deliver an e-commerce supply chain solution to its customers.

• Provides strategy-consulting, reviews and redesign its customer’sbusiness process, integrates various technologies and leverages human resources.

o Summary• 4PL provider is a strategic partner instead of tactical transportation

service provider such as 3PL provider.



Agile infrastructure

o Allow customization for each customer

o Companies Corporate Strategy

Sharing information

o Intensively but selectively

o Frequency of communication

o EX: Release dates of new products, Innovation(Technology)

Collaboration Improvement Projects

o Help customer with their internal processes

o Joint improvement activities



Create team concentrating on each aspect

Ability to explore other opportunities when it comes to their:

o Processes

o Methods

o Infrastructure

Balance of current strategy and Innovation opportunities

o Competitors

o Industry best practice

Evaluationso Internal

o Customer



Criteriao Based on corporate strategies

o Ex: Delivery and Innovation

Amount of SLAso

Consolidate SLAso Concentrate on certain at a time

o Categorize

Monthly Scorecardso Measure progress on a monthly basis

o KPIs Ex: # of ideas,o Meetings on a monthly basis

Why?o Measurement tool for the partnership



Major Feature/ issue facing the relationship between HP and UPS:1. Being efficient in process while still remaining flexible

2. Efficiently manage new and old process

3. Create adaptable infrastructure to meet the diverse needs of individualcustomer

4. Internal and external communication and coordination

Strategy to deal the issue:1. Elimination duplicate service in HP, thereby concentrating on core

competency

2. Interaction of various departments of UPS and HP to make use of tailored

services3. Design an information pathway between UPS and HP where practices and

processes could be shared across industries.

4. Making UPS a part of the HP strategic team in deciding suppliers from asupply chain viewpoint.



Derive value by personalizing attention toward the

customer (Tailored or customized services)

Intense training of employee’s and creative utilization of

technology

Strategic partnership agreements :

o Trust

o Collaborative profit goal

ups and hp: value creation through supply chain partnerships

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