Should HPE watchers be pleased that the company has “a really nice backlog” going into its first quarter of fiscal 2018? What makes a backlog “nice”?
If a vendor hasn’t managed to fulfil all its orders because demand has exceeded supply, I can see how that would be a good thing. If you were having to ramp up production to meet demand and still struggling to get enough product out the door, you could justifiably say that you had a smash on your hands and any backlogs would be money in the bank for the future.
But if there is a backlog because of disruption to supply or production, should that really be described as “nice”? Outgoing HPE CEO Meg Whitman seems to think so because that’s exactly what she said in a conference call with analysts regarding the vendor’s full year results for its fiscal 2017.
And she made it clear that the backlog was directly attributable to disruption to the supply chain, telling analysts that “Hurricane Harvey disrupted our supply chain in a reasonably dramatic fashion”.
Quoting HPE’s figures, Whitman said Hurricane Harvey had cost the company $93 million “and that does not include Puerto Rico”. She revealed that the vendor had been forced to “divert a lot of our Houston manufacturing to Europe and then airfreight those products back into the United States”.
She added: “The good news is we go into Q1 with a nice backlog, because we just simply couldnt turn the supply chain on a dime. So, we have got a really nice backlog going into Q1.”
This isn’t the first time the Houston facility has been disrupted by flooding. According to a report in the Houston Business Journal, the HPE campus (inherited from its acquisition of Compaq all those years ago) has been the victim of unprecedented flooding for two years in a row.
Climate change
All seven buildings on the campus, which employs 3,000 people, were damaged and according to the company, the manufacturing facilities on the campus were irreparably damaged by Hurricane Harvey”. The flooding has prompted HPE to seek to move to a new site in the greater Houston area. HP Inc already has plans in place to relocate its operations to a new campus in Houston.
HPE said it would not be retaining any manufacturing in Texas. “We have announced that we are no longer going to be manufacturing in Houston,” Whitman told analysts, any US required manufacturing will be done in Chippewa Falls, Wisconsin and then we are redistributing our manufacturing to locations around the world.”
The official HPE press release states that “given hurricane preparedness actions HPE took earlier this year, the company does not expect the manufacturing changes to cause any disruption for customers or partners”. But doesn’t the existence of that “nice backlog” suggest they already have?
HPE plans to try and relocate some of the 290 people it says are employed in manufacturing to Wisconsin or to its supply chain partner, Flex, in Austin. I suppose it’s only fair to wonder, is there a nice backlog of jobs for them to fill?
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