Hewlett-Packard launches new global strategy

By Staff -- Logistics Management, 11/1/1998

Hewlett-Packard Co. has announced a strategy designed to reduce distribution costs and create a seamless interface between the company, its distributors, and worldwide customers of its Electronic Components Group. Under this plan, distributors Arrow Electronics Inc. and Avnet Inc. will take on added responsibility for providing customers with product support and value-added services on behalf of HP.

Both distributors will sell the full line of HP electronic components, which includes light-emitting diode products, fiber-optic components, radio frequency and microwave products, infrared transceivers, and image sensors. HP will place greater reliance on its partners for managing and expanding logistics-service roles with customers as well, says HP spokesman Northe Osbrink.

"In the past, customers may have called the wrong operation or division at HP with their questions or service concerns," says Osbrink. "Essentially, they got shuffled around the company because they didn't know who to contact. We now plan to give distributors a greater level of visibility--and the training--to provide the first level of customer service."

The shift takes advantage of what HP sees as its distributors' strengths. Electronic component distributors have become "more specialized and they offer more value-added services [than traditional distributors]," says Osbrink. These services--including kitting, just-in-time delivery, design support, and specialized billing cycles--may overlap with those provided by HP manufacturer representatives, so the company has decided to place complete responsibility for them in the hands of its distributors.

Osbrink says the strategy is a response to HP's "disappointing" financial results from the first three quarters of 1998, due primarily to struggling Asian markets and the tremendous competitive pressures placed on its personal computer and ink-jet printer lines. "We needed to look at ways to become more efficient," he reports.

The announcement comes at a time when HP sees significant opportunity for its distributors. "It's expected that our total distribution business will quickly grow from 25 percent of our overall business to in excess of 40 percent," says Colin Chin, the HP Components Group vice president of worldwide sales and marketing.