Why Information System Is Extremely Crucial for Hewlett Packard - Case Study Example

Sur Supervisor Hewlett-Packard Company Introduction The chosen company is Hewlett-Packard (HP), which is a global provider of products that include personal computing products, printing and imaging products, services, software, technologies and solutions to individual consumers as well as small and large companies. The company also provides networking products and solutions, enterprise server and storage technology, information technology infrastructure and information management solution. The company is listed at New York stock Exchange under the symbol HPQ. The companys closing share price as on April 10 was $32.92 (Hewlett-Packard Company). HP competes with several companies such as IBM, Dell, Microsoft, and Intel in the organized sector and numerous small and medium sector enterprises in different product segments. The company’s net revenues and net profits for the last three years are enumerated in the following table. In millions (for the fiscal year ended October 31) 2011 2012 2013 Net Revenue $ 127,245 120,357 112,298 Net profit $ 7,074 (12,650) 5,113 Source: http://media.corporate-ir.net/media_files/IROL/71/71087/AR-2013-t21sfr/index.html#/8/ The company did receive setback in year 2012; however, it recovered substantially in 2013 by making necessary changes in product mix and marketing strategies and reducing its dependence on personal computing market. Company’s Organization and Management of Information Systems Businesses are constantly exposed to ever-changing external environment that include macroeconomic factors such as GDP growth, inflation, unemployment rate apart from competitive forces that constantly work against companies. In order to counter these forces, the company must have a robust information system so that short-term and long-term objectives do not go haywire. The information system needs to have some essential elements to make it effective for any company (Laudon and Laudon). a. Information Storage and Analysis There has to be enough provision for storing the information in e-form. Information in hard-copy formats has now become totally redundant. HP has been in the most competitive business environment where procurement and operational inefficiencies can make the survival impossible. Danila Meirlaen, VP of business process outsourcing at Hewlett-Packard says, "Enterprises have made significant investments in technology to capture and store data" (Eddy). b. Information System Necessary for Decision Making Information system has to be up-to-date and quick to deliver the required information necessary for decision making. Businesses strive information and data from reliable sources regularly so that the company can know its current status in reference to all major parameters. Management needs information system to develop strategic plans for achievement of its objectives. Strategies need to be altered time-to-time in response to external environment and that is not possible without effective information system. c. Information system for Effective Execution of Business Processes Information system is integrated with several business processes for efficient outcomes. At times, large amount of data are available but it is necessary that they are harnessed properly to increase the efficiency of each processes and for that appropriate information system is needed. HP professionals not only collect a variety of data but also organize those data such that it helps in optimizing each process. Data analysis is critical and for that HP has developed ‘Data Analytics’ tool for easy execution of business processes (HP: 2013 Annual Report). HP’s Information Technology Environment Laudon and Laudon argue that the company may get immensely benefitted by upgrading its information technology infrastructure. The benefits come in terms of reduced cost of operations; optimization of available resources by identifying appropriate product mix. A few decades back, the lack of telephone infrastructure was considered a barrier to economic progress; similarly, lack of information technology environment is one of the root causes behind failure of any organization. Information technology revolution began in the 1990s and in keeping with that Hewlett Packard created a $1 billion "World e-inclusion" program to promote products related to information technology (Steinberg). IT environment is versatile and capable of meeting a variety of needs and challenges. Due to IT environment, Hewlett-Packard has been able to transcend geographical barriers. Anyone in the company sitting at any part of the world can access the same information without any cost and time difference. Information technology has helped HP in innovating product designs to achieving dematerialization. For example, HP has integrated printer, copier, scanner and fax into one unit. The benefit of this innovation is reduction in use of the component and packaging materials by 40% when compared with the material consumption in standalone pieces. An introduction of resource-efficient ‘e-pc’ is worth reporting that saved the company more that 2300 tons of material, 420 tons of packaging material and 8200 megawatt-hours in electricity consumption in 2001 alone. HP inkjet printers saved 1200 tons of steel per year by simply modifying the diameter of the carriage rod without affecting its performance. Bulk shipping to North American market saved significant packaging material, fuel costs and all this has been achieved through information technology tools (HP Invent). HP has made significant forays to socioeconomic development, especially in developing countries through ‘e-inclusion’. Accordingly, e-inclusion program facilitates collaborative working to improve quality of life of community members. The company has been making concerted efforts to bridge the gap between the technology-endowed communities and the technology-barred communities. The company strongly believes that e-inclusion program can enhance the quality of life globally by supporting education worldwide as a core commitment of HP. The e-inclusion mission aims at providing information-technology solutions by leveraging the available expertise to the world community. The company has launched ‘The PeopleConnect’ program that provides opportunity of internet access along with computer to the employees of government in South Africa. The ‘i-community’ project is another successful project that was launched by HP in collaboration with one of the state government of India to bring socioeconomic development in rural regions of the state. In this initiative, government could generate birth and death certificates, land records, and other important documents in e-forms. The program also provided health services and vocational training through distance learning (HP Invent). HP has begun the New Style of IT that include big data, cloud services with enhanced security to customers in line with 21st-century IT architecture meeting specific needs of customers. That means the infrastructure, software, hardware with innovative solutions and services are all available at one place. The company is well aware that system security risks pose a great threat to the company by disrupting internal operations resulting into not only revenue and profit loss but also can harm reputation of the company. This risk usually comes from hackers and computer programmers with the possibility of compromising with customer privacy. HPs security solutions are designed to eliminate such risks at all levels of the functioning right from the infrastructure levels to applications with regular updating to the information system (HP: 2013 Annual Report). Application of Information Systems – Revamping Supply Chain The companys supply chain is critical for its survival and growth. HP has designed a framework called Procurement Risk Management (PRM) that has now become a backbone to the supply chain management system. In 2000, HP faced major supply constraints of flash memory. Its printer products used this component for which it had to compete in its procurement with cell-phone manufacturers who were also using the component in huge quantities. Due to exponential growth in the cell-phone market, flash memory became a short-supplied item in the market. HP could not fulfill its commitment of orders for at least 250,000 printers and the company lost revenue in the millions of dollars. Not only this but also the company’s planning and operations went haywire (SupplyChain Brain). The companys PRM monitors and manages over $6 billion spending annually across several product lines. When the company designed PRM, it was unique in the market place and hardly any competitor had any control process in place. Over the years, HP also realized that such supply risks contribute to significant losses to the company. Most industries experience such uncertainties in the business but HP is highly prone to supply constraints and product demand flare-ups due to nature of its products. HP procures hundreds of components such as hard disk drives, RAMs, LCD panels from outside and non-availability of a single component may disrupt the whole operation. Key uncertainties that company faces in its various business segments are demand, component availability, and costs and that needs to be kept in control and managed. Prices of the components are also highly volatile that the company needs to procure efficiently. For example, DRAM memory prices had declined by over 90 percent in 2001 to rise again by 300 percent in 2003 (SupplyChain Brain). Moreover, the PRM process that HP has developed is highly cross-functional meaning finance, sales, procurement and marketing functions all work in close alignment. Using this process, each business unit looks at risks involved and decides whether it is worth to accept. It is pertinent to note that over 750 employees have been given training on PRM. HP has benefitted with PRM immensely. It has saved the company over $100m in additional savings. For example, HP has been able to get discounts on its procurement up to 5 percent for standard components and increased discounts for other components. The discount has come to them because they have been able to give commitment to vendors for quantities. Due to possible cost predictability, margins are now more secured. Achieving supply assurance from the vendors through PRM, HP manages its own targeted revenue and profits successfully. This is not one-sided; suppliers too are benefitted for they have assured quantity commitments to plan in advance. HP gets assured supply, especially of the critical components. The supply chain becomes robust when HPs vendors too are in a position give commitments to their suppliers as they receive from HP (SupplyChain Brain). To manage uncertainties, HP has created a new software solution known as HPHorizon, essentially to forecast product demands. Taking into consideration historical data, the software provides two extremities – low and high, demand possibilities. In true sense, these are two ends encompassing a range that fall between10th and 90th percentiles. Cost variability of the components is also measured with similar tool. The company has developed analytics that is used to develop a model to forecast the cost dynamics of volatile components. These analytics can also be used to forecast the cost uncertainty related to manmade commodities. The information generated through this model helps the company to develop several procurement contracts that are used to share risks with suppliers. This is different than what usually is done by manufacturers while dealing with their suppliers. For a low demand uncertainty, HP makes contracts with suppliers that have a fixed-price to deliver fixed-quantity with staggered deliveries (SupplyChain Brain). HP has also developed an IT solution known as HPRisk that essentially does contract valuation analytics. At any given time, many contracts are in operation, the HPRisk solution would look into current demand, its price and component availability and compare it with the terms of contract that are in vogue. The HPRisk solution provides possible scenarios with the different set of contracts to help determine a particular set of contract that is closest in meeting the objectives in hand. Objectives are not same, always; sometimes, cost reduction may be an objective and at other times, just meeting the market needs could be an objective. Then, it is up to decision makers to choose the best option. The solutions are user friendly; it is all hidden math within the solution that provides end results. The HPRisk solution is quite different than what usually is available with ERP solutions. It says how much risk one is exposed to based on different future scenarios (SupplyChain Brain). Conclusion Thus, it is amply clear that information system is extremely crucial for Hewlett Packard. It has not only helped the company in strategic planning but also provides a competitive edge to the company. The important thing that one must notice is that most of its information systems are proprietary in nature; it has helped the company to augment its supply chain reducing the overall costs and optimizing available resources. Beginning with suppliers’ uncertainties to the demand forecast about its vast portfolio of products, the information system has been instrumental in synchronizing all activities to the benefit of the company. The company has been able to take substantial discounts from the suppliers by committing order quantities in advance through its proprietary PRM tool; thus, saving a huge sum of money. There is no doubt that information system has helped HP to achieve competitive edge in the market place across number of product segments. Its HPRisk solution is different than what has been provided with Enterprise Resource Planning tool as it measures the amount of risk based on future scenarios. So is the case with HPHorizon that comes handy in decision making after knowing about several possible scenarios. In short, HP has achieved a strong foothold in several new areas through its information system capabilities. Works Cited Eddy, Nathan. HP Launches Business Process Outsourcing Analytics Services. Web. 11 Apr, 2014 Hewlett-Packard Company. Key Statistics. Web. 11 Apr, 2014 Laudon, Kenneth; Laudon, Jane. Management Information Systems. 13th ed. Pearson. New York. Steinberg, James. Information Technology and Development: Beyond ""Either/Or"". Web. Apr 12, 2014 SupplyChain Brain. HP Invents New Framework for Managing Supply Chain Risk. Web. 11 Apr, 2014 HP: 2013 Annual Report. Hewlett Packard Company. Web. 11 Apr, 2014 HP Invent. Social and Environmental Responsibility Report: Innovation, community, sustainability. 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