Dell Computer Corp upped the ante in the already cut-throat and competitive PC market this week, with the announcement that it plans to slash its inventory costs by half by year-end. At present the company’s total inventory is equivalent to approximately seven or eight days’ worth of sales. But we think we can reduce that by half, down to four or five days, by forging greater internet links with component suppliers, said Padraic Allen, Dell’s VP European manufacturing. The news will set the panic buttons off among its competitors who already lag well behind the Texas-based PC giant when it comes to speed of inventory turnover. Allen said Dell was able to reduce costs further because of its ‘manufacture to order’ process, which means it only makes a PC after it the customer has ordered and paid for it. That way we never have any goods just sitting around in the factory, he said. The company’s main competitors; Compaq, IBM and Hewlett-Packard, all sell their PC products via the indirect channel: a network of resellers, dealers and distributors. Allen added, This means they build their products to forecast quantities and stockpile them in factories, warehouses and shops until they’re sold. Often PCs end up sitting around for weeks on end. By reducing the inventory carrying costs, Allen said Dell was able to keep PC prices low and incorporate the very latest components in its products. The rapid pace of change of the IT industry, he said, means that other manufacturers can get caught short with piles out-dated stock. Compaq claims to be on track to resolve its inventory problems and cut backlog to four weeks by the end of the month.
