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July 11, 1997updated 05 Sep 2016 12:52pm

COMPAQ BUILDS TO ORDER TO SLIM CHANNEL INVENTORY

By CBR Staff Writer

Compaq Computer Corp is still making all the right moves by adjusting its business model and leaving competitors on uneven ground rather than simply reacting to events, however yesterday’s implementation of the long-anticipated build-to-order (BTO) model on the 13 new desktop PCs it introduced is certainly a top ‘o the hat towards rival Dell Computer Corp. It’s going to begin building computers to order rather than trying to second-guess the market and end up with a pile of unsold inventory (CI No 3,125). Compaq’s objective is to reduce the number of computers sitting on its resellers’ shelves to a maximum supply of two weeks, from the current four weeks. That figure is itself down from 10 weeks in the fourth quarter of 1996. It will henceforth only build a computer when it gets an order from a reseller or a customer and says it will deliver highly-configurable products to the channel beginning this quarter. It says the model will enable it to create more modular PC designs and assembly processes, and plans to use a fewer number of parts and form factors going forward. The BTO process will be applied to other desktops, servers and portables as they are introduced through the remainder of the calendar year, with the goal of BTO being fully operational worldwide by the year’s end. Compaq says it will mean lower cost of ownership, faster introduction of new technology, better features, easy system configuration and lower prices for customers. Compaq has also introduced a limited form of a direct sales model – part of the Optimized Distribution Model (ODM) – where resellers will take orders and it will ship systems directly to customers. The ODM is intended to effect the manufacturing efficiency of direct sales while maintaining the value-added services of resellers. Primarily targeted at large corporate buyers, Compaq estimates it could be shipping between 30% and 40% of its products directly to customers within a year. Currently 98% of its business flows through the indirect channel, and the company stresses that the new initiative does not mean it will be competing with the channel for business. The company says its success was built on the channel and that it expects the channel to remain the dominant model for the industry. Compaq hopes BTO will drive growth even higher than the 34% it recorded in its most recent quarter. Retail business is now worth some 15% of its sales and is the company’s primary route to the consumer market. Its MMX-enabled PCs start at $1,200 – the non-MMX kit is from $1,000.

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