Compaq Message Board - Msg: 4710287

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Technology Stocks : Compaq

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To: Roads End who wrote (27069)	6/3/1998 6:02:00 PM
From: rudedog	Read Replies (1) of 97611

Steve - Yes, I have pretty much confirmed that Dell pays more for most components than CPQ, exactly how much overall is unknown but at least 3% to 5% on a couple of items where I know the costs on both sides. Allocation of scarce parts for existing orders (like a hot new Intel processor) usually is based on current commitments at time of allocation, but Dell makes long term commitments based on average volume so that's not a clear cut problem. I think how close Dell is to the practical minimum depends on where the savings are. I was having this discussion with Paul on the Dell thread. If the supply side is closely managed, then the problem does not arise unless the supply inventory is not enough to manage normal delays in delivery, which would shut down the factory. The auto companies deal with this in JIT all the time and it's one of those interesting management challenges, balancing risk (shuttiing off production) against reward (cash if everything goes well). CPQ is also driving hard to manage the supply chain and if you believe their procurement and IT people, has made great progress in the last 6 months as the global management system comes on line.

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