Compaq Message Board - Msg: 4709324

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Technology Stocks : Compaq

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To: rudedog who wrote (27034)	6/3/1998 5:06:00 PM
From: Roads End	Read Replies (1) of 97611

Rudedog..There has got to be a point in the model that builds inventory to a level that is claimed here that results in negative benefits. Dell to cut inventory levels by half before year's end: newsbytes.com How can suppliers justify the risk of holding inventory until Dell orders it without passing on the cost of that risk? Does a 4 week inventory vrs one of 4 days by itself really give an advantage to the shorter period? My guess is that much of the claimed benefit is marketing and Wall Street vapor. The 4 day model is subject to the same miscalculations as the longer model. Lets say all server buyers want to have Apha processors. It would not be unreasonable to assume the 4 day model would not be first in line for them if they are in short supply. In that case you would have the opposite of the glutted channel and the impact would be negative, biased against the shorter model. There are many other possibilities that could cause this condition but I am interested in your thoughts as to what point the risk/reward lines intersect in optimizing PC inventory levels. Steve

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