Case Study: HP Masters Procurement Risk

Volatility of component costs, product demand, and supply availability can significantly increase procurement risks for high tech companies. Legacy supply chain software can help forecast demand and balance supply, but does not provide a holistic view of risk factors that can contribute to better procurement decisions. Contract life-cycle management software helps to ensure that supplier pricing and performance conform to contractual requirements, but fails to incorporate forecast scenarios into the valuation process. To close this gap, HP's supply chain teams, taking matters into their own hands, in 2000 began to develop the Procurement Risk Management (PRM) framework. This solution set includes a process methodology and software tools for quantifying risks, applying these insights to procurement decisions, and monitoring results throughout the contract life cycle. Seven years later, HP has realized $425 million in savings from PRM, $128 million in 2006 alone, with an upward trajectory.