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IBM was asked 23 years ago to improve its supply chain Huawei's supply chain resilience is | Learn from the top 500 supply chains

author:Palm Chain Media
IBM was asked 23 years ago to improve its supply chain Huawei's supply chain resilience is | Learn from the top 500 supply chains

Huawei mobile phones have fallen out of the top five, and in the third year of the new crown epidemic, under the continuous pressure of the United States, Huawei mobile phones have not yet been carried. In 2020, Huawei ranked first on the 5G mobile phone report card of JD.com 618.

Although Huawei's industrial ecosystem is changing after breaking its arm and expanding new businesses, the world's first smartphone king has to look at the supply chain reconstruction with a long way to go.

In this issue, "Learning Supply Chain from the Top 500", The First Logistics Network focuses on the logistics and supply chain management layout of Huawei Investment Holding Co., Ltd., which ranks 44th in the world's top 500.

First, the world's top 500, Huawei occupies a strong position

The latest Fortune Global 500 list shows that Huawei has been in the top 50 in the past two years, far exceeding more than 300 domestic millets.

Huawei and Apple are more than 30 different, but the gap is not as big as imagined. Recently, Huawei has developed rapidly, and the more difficult the period, the more it attaches importance to its investment in the future. In 2021, Huawei's R&D expenses were RMB142.7 billion, accounting for 22.4% of sales revenue, and the amount of R&D expenses and expense ratios were at the highest level in the past decade.

According to the 2022 global R&D investment ranking data, Huawei's R&D investment ranks second among global enterprises. Apple ranked fifth with 110 billion yuan, and the investment in research and development was less than 5% of Apple's sales revenue.

Apple, Huawei, Xiaomi World Top 500 Ranking:

IBM was asked 23 years ago to improve its supply chain Huawei's supply chain resilience is | Learn from the top 500 supply chains

Source: Palm Chain Finishing, Wealth Chinese Network

In April, Brand Finance, a British brand value consultancy, released its 2022 Global Brand Value 500. Among the top 10 brands, American companies occupy 7 seats, and Apple, Amazon, and Google occupy the top three.

But Chinese brands are not to be outdone, with Industrial and Commercial Bank of China and Huawei ranking 8th and 9th respectively.

Top 10 global brand value rankings 2022:

IBM was asked 23 years ago to improve its supply chain Huawei's supply chain resilience is | Learn from the top 500 supply chains

Source: Brand Finance

Huawei's performance in 2021 also fell by nearly 30% due to the comprehensive sanctions imposed by foreign capital due to its strong scientific and technological power. However, its brand value has not decreased but has risen, increasing by 28.6% compared with 2021 to 71.233 billion US dollars, and the ranking has increased by 7 places, which fully confirms Huawei's strong strength.

On April 28, Huawei announced its operating results for the first quarter of 2022, achieving sales revenue of 131 billion yuan, down 13.9% year-on-year, and net profit of about 5.63 billion yuan, down 66.5% year-on-year.

Yu Chengdong, CEO of Huawei's terminal business, said on Weibo on the results of the first quarter, "Last year's supply was indeed tight, but this year's mobile phone production capacity has gradually recovered." "The chip problem is still a hot potato.

As early as 2001, Ren Zhengfei published a classic article "Huawei's Winter" that mentioned, "Huawei has not yet succeeded, and we must always think of danger in times of peace." ”

Second, Huawei is prepared for danger in times of peace and improves the supply chain

IBM was asked 23 years ago to improve its supply chain Huawei's supply chain resilience is | Learn from the top 500 supply chains

Huawei founder and president Ren Zhengfei Source: lanjingtmt

In 2020, in the face of the stranglehold of the US supply chain, Huawei specifically pointed out in its 2020 sustainable development report that the sustainable development management of the supply chain is extremely important to Huawei's operations and interests.

IBM was asked 23 years ago to improve its supply chain Huawei's supply chain resilience is | Learn from the top 500 supply chains

Huawei is also developing into a multi-product business, and while the volume is increasing, the products are complex and diversified, making the supply chain need to focus on demand.

In fact, Huawei discovered this key point as early as the end of the last century and proposed an important strategy to innovate the supply chain.

(1) ISC integrated supply chain innovation

In the process of rapid development of Huawei's business, a series of supply chain management problems have been exposed to the attention of managers, including untimely delivery, low inventory turnover, long inventory cycle, lack of systematic demand forecasting tools and methods in demand forecasting, inaccurate information data, and inability of information systems to effectively support supply chain operations.

Twenty-three years ago, in 1999, Huawei spent $100 million to introduce IBM Consulting to implement the ISC Integrated Supply Chain reform, which was one of the few companies at the time that noticed the important impact of supply chain management and then played a strong competitive role in the development process.

An integrated supply chain is a network of suppliers, partners, manufacturers, distributors, retailers, customers, etc. that provide raw materials, components, products and services to each other. Through the establishment of efficient and collaborative cooperative relations, the establishment of a special integrated supply chain management department, overall planning of logistics, information flow, capital flow, etc., to achieve supply and demand matching, while meeting the service level, so that the cost of the entire supply chain is minimized.

IBM was asked 23 years ago to improve its supply chain Huawei's supply chain resilience is | Learn from the top 500 supply chains

Huawei's organizational structure for integrating supply chains

According to IBM consultants, Huawei's implementation of the integrated supply chain has significantly increased customer satisfaction, inventory turnover, and order delivery lead times by about 20%, and supply chain costs have been reduced by about 30%.

(2) BCM business continuity management

In today's highly internationalized social division of labor, Huawei's procurement, manufacturing, logistics, and global technical services businesses inevitably rely on extensive cooperation with third-party vendors or professional organizations, and business continuity management is crucial.

After years of continuous construction, Huawei has established an end-to-end business continuity management (BCM) system from supplier to Huawei and from Huawei to customers in the fields of procurement, manufacturing, logistics, and global technical services.

IBM was asked 23 years ago to improve its supply chain Huawei's supply chain resilience is | Learn from the top 500 supply chains

(3) Supplier management standards and risk review

Huawei's Code of Conduct for Supplier Social Responsibility sets out clear requirements for its suppliers' CSR work, including five parts: labor rights, health and safety, environmental protection, business ethics, and management systems.

IBM was asked 23 years ago to improve its supply chain Huawei's supply chain resilience is | Learn from the top 500 supply chains

At the same time, Huawei uses CSR performance and other indicators to comprehensively assess the risk level, guide suppliers to adopt a five-step method of inspection, root cause analysis, improvement, prevention, and evaluation (CRCPE), identify common problems and formulate targeted improvement measures.

Finally, Huawei has established a sound responsible supply chain management process and mechanism from the sourceing acquisition stage to the formal introduction of suppliers to the entire cooperation period.

IBM was asked 23 years ago to improve its supply chain Huawei's supply chain resilience is | Learn from the top 500 supply chains

(4) Adhere to diversified procurement and supply measures

Huawei adheres to a global and diversified procurement and supply strategy, supports diversified supply solutions at the raw material, veneer, and product levels during the new product design stage, actively develops supply resources, ensures the diversification of raw material supply, avoids exclusive supply or single regional supply risks, and ensures the continuous availability of products.

Deep collaboration with suppliers, through the IT system to achieve demand forecasting, purchase orders, supplier inventory visibility, to ensure the rapid delivery of demand and supply capacity of the rapid response (Quick Response).

Steadily promote the digital construction of procurement, build an agile and automated procurement operation platform and a unified collaboration platform for supplier procurement, and basically achieve 100% full connection and collaboration of suppliers.

IBM was asked 23 years ago to improve its supply chain Huawei's supply chain resilience is | Learn from the top 500 supply chains

Huawei has established a Supply Center in Shenzhen, a Supply Center in Europe, a Supply Center in Latin America, and a Supply Center in Dubai around the world, and the four supply centers can back up the manufacturing and supply capacity of the whole machine between each other. It has also established long-term strategic partnerships with a number of electronic manufacturing service providers (EMS).

(5) Strengthen supply chain network security management

Huawei has established a comprehensive supply chain security management system in accordance with ISO 28000 to identify and control security risks in the end-to-end process from source material, manufacturing to customer delivery. We have established industry-leading material safety and credibility specifications, safety selection test standards and supplier safety and trust maturity standards, suppliers need to pass the safety system certification and safety testing before they can be introduced.

At present, 35 AEO (Authorized Economic Operator) certificates have been obtained in 28 countries and regions on five continents, and 25 logistics service providers around the world have obtained TAPA security certificates.

Huawei will continue to optimize the supply chain traceability system, with hourly hardware and software traceability capabilities from expected to customers, effectively supporting rapid problem repair and risk mitigation.

(6) Pursue a green supply chain

Huawei has always pursued green and sustainable development, and has continuously improved in terms of simple logistics packaging, resource recycling, and logistics technology applications.

Long-term implementation of the "6R1D" strategy, that is, the rational design (Right), pre-reduction (Reduce), recyclable (Returnable), reuse (Reuse), recycle (Recycle), resource recovery (Recovery) and degradable disposal (Degradable) with the center of appropriate packaging (Right Packaging).

IBM was asked 23 years ago to improve its supply chain Huawei's supply chain resilience is | Learn from the top 500 supply chains

Compared to traditional monolithic carton packaging, single module unpacking time is reduced by 85%.

At Huawei's 2021 performance conference in March this year, Yu Chengdong said that Huawei will return to the king in 2023; Ren Zhengfei said that Huawei's winter has passed and spring is coming. Meng Wanzhou said Huawei may have passed through its own "black barrier zone".

Huawei's supply chain technology will help Huawei move to a higher level.

Resources:

1. Huawei's 2021 annual report

2. Huawei Consumer Business Sustainability Report (2020-2021)

Edit: Larry