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7/24/2019 UPS AND HP: VALUE CREATION THROUGH SUPPLY CHAIN PARTNERSHIPS
http://slidepdf.com/reader/full/ups-and-hp-value-creation-through-supply-chain-partnerships 1/18
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
7/24/2019 UPS AND HP: VALUE CREATION THROUGH SUPPLY CHAIN PARTNERSHIPS
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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
7/24/2019 UPS AND HP: VALUE CREATION THROUGH SUPPLY CHAIN PARTNERSHIPS
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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.
7/24/2019 UPS AND HP: VALUE CREATION THROUGH SUPPLY CHAIN PARTNERSHIPS
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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
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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.
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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.
7/24/2019 UPS AND HP: VALUE CREATION THROUGH SUPPLY CHAIN PARTNERSHIPS
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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.
7/24/2019 UPS AND HP: VALUE CREATION THROUGH SUPPLY CHAIN PARTNERSHIPS
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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.
7/24/2019 UPS AND HP: VALUE CREATION THROUGH SUPPLY CHAIN PARTNERSHIPS
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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.
7/24/2019 UPS AND HP: VALUE CREATION THROUGH SUPPLY CHAIN PARTNERSHIPS
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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
7/24/2019 UPS AND HP: VALUE CREATION THROUGH SUPPLY CHAIN PARTNERSHIPS
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Motor Carrier Air Freight Water Carrier
Railroad Containers
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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)
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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.
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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
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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
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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
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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.
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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
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