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Non-Tech : Iomega Thread without Iomega
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To: Naggrachi who wrote (6610)1/24/1999 11:56:00 AM
From: Cogito  Read Replies (1) of 10072
 
Zead -

Re: channel inventory "problem"

I think that the writer of that article for the Fool is absolutely incorrect when he says that "there is nothing build-to-order" about having 8 to ten weeks of inventory in the channel. He's wrong, plain and simple. Inventory in the channel was ordered by distributors. Since it wasn't shipped until after it was ordered, it doesn't affect the build-to-order strategy.

Inventory on hand has been reduced, and that's what's important. The Fool writer says that the channel inventory was "supposedly" ordered by the distributors. Do you suppose that with profit margins being what they are in computer hardware, the distributors accept shipments they haven't ordered?

I can recall a couple of years ago, when Iomega was having a lot of trouble getting Zip drives to market because of component shortages. For several conference calls in a row, Kim Edwards discussed the fact that there wasn't enough inventory in the channel, but that they were working to get it up to the 8 week level where they would be comfortable. Anything less than 8 weeks in the retail channel can translate into shortages on store shelves, as it did with Zip drives throughout 1996 and 1997. People can't buy products that aren't there.

I'm sure that if you ask Jodie Glore if he would like to reduce channel inventories to less than 8 weeks, he would say that he absolutely does not.

- Allen
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