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Technology Stocks : Dell Technologies Inc.
DELL 120.49+0.7%Jan 16 3:59 PM EST
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To: Chuzzlewit who wrote (46002)6/3/1998 1:05:00 PM
From: rudedog  Read Replies (1) of 176387
 
Chuz -
I think that you are exactly right about CPQ's attempt to emulate the Dell distribution model, and they are now shifting to a different path after a year of mostly wasted effort. But we need to separate that from the changes to CPQ's manufacturing model, which was not an attempt to emulate anything but to consolidate their strengths.
I think you hit on it when you said Compaq, by comparison, relies on large purchases to get best per unit pricing (better than Dell's), but leaves them vulnerable if their forecasting is wrong because prices have dropped so rapidly in the interim. CPQ is nearly complete on a global transition of manufacturing, inventory and cash management systems into a single integrated system. This has already started to show large benefits in reducing the supply chain risk while still maintaining the large purchase volume CPQ uses to get that 6 to 9 point advantage that they later throw away in the channel. The key to this will be a reduced dependence on accurate long term forecasts and a much smaller granularity in the size of production runs for given products, and a reduction in the amount of WIP and unshipped inventory as a result. This is a very different proposition than Dell's model but it still should provide an efficient production scheme which all by itself will move dollars to the bottom line.
If CPQ can then get the distribution side fixed they will have a pretty compelling leadership business case. Of course that last one is much harder to address as we have seen.
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