Exploiting Experience: Repeatable Deployment (An HP Case Study)
Four years ago Gueltstein was the first completion of HP's vision in bringing manufacturing and logistics for a region under one roof. This represented a transformation from geographic dispersion to a single location by region (America, Europe, and Asia Pacific). Where the fragmentation of sites was an outgrowth of the evolution of manufacturing in HP, creating the common characteristics of the manufacturing operations and logistics infrastructure. Similarly, the common need for a competitive and responsive infrastructure initiated the vision of a regional manufacturing strategy and a single site by region. As Doug states on the convergence of manufacturing and fulfillment strategy: "We came to the conclusion that one site was needed in parallel."
Leverage
Although, the strong sponsorship that helped to build Gueltstein was the envy of Roseville, they saw an opportunity for leverage. One aspect of leverage was building the case for management and having the Gueltstein instance to substantiate the claim. Or as Doug puts it: "They (Gueltstein) got an envious view from Roseville as they were able to do it first and it worked well, but it allowed us sharing what a single site means, the rationale, and most important, the financial justification." Not a casual sharing, as 9 people from Roseville went to Gueltstein to capture and diffuse the details. They conducted interviews, reviewed documents, and dialogued with the Gueltstein team. This leverage went far. One of the financial people in Gueltstein was assigned to the Roseville project. The one-site model calculation and justification were also completely adopted by the Roseville team. Does this mean uncritical adoption of what Gueltstein has done? Doug is very precise about the leverage process: "We focused on understanding the choices, the trade-offs, and reviewed the Roseville situation in detail. Typically we made a different decision." For example Gueltstein fully automated warehousing, the picking and presenting of raw materials. In Roseville, while not ruled out in the future, this was not justified from a cost perspective. It needed flexibility in floor space and shelving, where changes in form factors might hamper future changes in raw material in flow and would add investment costs.
Both sites are constrained in real estate and a third party ownership model was adopted. The Gueltstein and Roseville buildings are leased. Both used the same model how to structure the building. However, this model created significant influence of the local real estate market differences and developer input. The shell design, for example the building aspect ratio, needs to comply with local standards. A building that is highly desirable in Germany will not likely be in-demand in Roseville and vice-versa. These considerations become imperative as part of the cost savings come from market value to others.
Analysis of the automated transportation system for the transit of products from final assembly and test to distribution, justified the same investment in Roseville as in Gueltstein. The experiences and financial justification generated a similar design and concept. Seven of the nine people in the Roseville team were system and process engineers. They evaluated the overall program. The resulting proposal went to the controller and responsible business manager. The proposal focused on making the case succinctly and providing detailed justification as an appendix. The "burning platform", the reason why HP could not do nothing, centered on the financial and time cost of logistics fragmentation, customer satisfaction, and total cost reduction. The analysis, collaboration, and leverage created a basis for an ongoing relationship that is exploited once again, now HP is adopting a single site model in Singapore.
The Benefit of Hindsight
The third "solution factory" that completes the regional manufacturing and fulfillment strategy in Singapore capitalizes on 2 ½ years of experience. "We know what we like and we know what we would do different." To ensure the correct trade-offs, understanding the differences in the Asia Pacific regions is critical:
• The size of the region
• The service levels are unique by country
• The tax, duty, and regulatory aspects are unique by country
• Some countries have a good infrastructure, some countries don't
• The impact of political and geophysical instability (floods, landslides,
earthquakes, storms)
A thorough analysis of the unique regional aspects started with understanding the customer, channel partner, and sales perspective. This research created a baseline for actual service levels and benchmark against HP's competition. HP had to come to grips that its historic decision to serve solutions for the Asia Pacific region from North America created a competitive disadvantage. These choices complicated the ordering process, caused transit and process delays, and were not cost competitive with companies having a local presence. As the revenue has grown to nearly equal Europe's size, a regional presence is justified.
Different from Europe and Roseville, the Asia Pacific site required selecting a country. After analyzing all cost, uncertainty, and market reach (responsiveness) aspects, Japan and Singapore were singled out. Singapore was preferred eventually as it allowed exploiting existing HP infrastructure and experience. To be specific:
• Leverage Personal Systems Distribution Asia-Pacific (PSDA) infrastructure
and intellectual capital n
• Exploit tax and duty advantage
• Take advantage of existing qualified and low-cost labor pool
• Receive government subsidy
• Enjoy local stability
One differentiator is the deep and long experience in Singapore with an outsourced environment and the cost constraints and savings opportunities unique to that country. Singapore was the first site in HP to outsource manufacturing in 1985. This added to the opportunity space created by the third site. Common for all three sites is the SAP environment, proprietary manufacturing backplane or shopfloor system, test system, product engineering, and intellectual property. This allows code modifications to be made in one play and to deploy worldwide without additional cost. Overall this shared infrastructure creates a strategic and bottom-line advantage. What is not shared in Singapore is the leased real estate model of Roseville and Gueltstein. Space comes at a premium in Singapore. It is tight and expensive. Exploiting the PSDA experience in space consciousness benefited the project. One change was moving vertical, using standard space conscious equipment. Another was adoption of space in an existing owned building (moving in to one of the floors in the PSDA manufacturing facility). Currently the Singapore site is in the final stages of implementation-IT and physical processes are in place. The inflow of materials from suppliers and Roseville for prototype building is in process.
Learnings
The transfer of intellectual capital is a critical success factor. Sharing staff and their strengths is a critical component of this transfer. For example the same program manager lead both the Roseville and Singapore project. Roseville and Gueltstein shared a financial expert. Apart from knowledge and skill transfer, the understanding and comparing the financial performance is key. Finally, but most important, is to be explicit about what you want to achieve: What is your business strategy? What are your business objectives? How does the project align with this strategy and these objectives? All these factors allowed Asia Pacific's business model, its service levels, and its responsiveness to become extremely competitive.
