In April 200X, Zippy Computer, Inc., merged with Binger International, Ltd. The new entity was named Zinger Electronics, Inc. and began trading on the NASDAQ. Zinger Electronics, Inc., produces a variety of high-tech goods and services—computers and servers, Internet services, Web hosting, and business-to-business e-commerce applications. Their award-winning computers are sold under the ZingPC brand to business, government, education, and consumer markets.
The ZingPC division designs and manufactures a broad range of computer products that ranks among the industry leaders in technology, innovation, price, and computing performance. These award-winning ...view middle of the document...
The brand name was well respected, and the company appeared to be poised for great success in the computer hardware and PC industries. However, the good times in the PC marketplace for ZingPC were short lived. The industry changed quickly as competitors ramped up capacity, enhanced customer service, and reduced prices. ZingPC, on the other hand, was hampered by poor customer support performance and an inability to deliver finished goods on time. As a result, ZingPC lost market share, and its reputation was tarnished.
The Computer Industry
Over 95 percent of the computers in use today are PCs. Worldwide, yearly shipments of computers surpassed 90 million units in 200Y. Internet sales accounted for 5 million units in the United States that year. By 200Z, Internet sales were expected to double, prompting PC makers to focus on this distribution channel.
The computer hardware industry contains several major players including Dell, Toshiba, Hewlett-Packard (HP), Acer, Apple, Lenovo, and ZingPC. These companies serve slightly different niches. Companies like Apple, Dell, HP, and ZingPC tend to be PC-focused, while others derive the majority of their sales from outside the PC market. These companies also employ different marketing approaches. For example, Apple relies heavily on its retail network to generate sales, while Dell focuses on the direct sales model.
The direct model has emerged as a winning formula and has been adopted by many organizations. It is possible today for a customer to order a tailored PC online, at store kiosks, or over the telephone from multiple PC makers. This strategy, while profitable, flexible, and able to limit finished goods inventory, is challenging to organize. In order to experience success with the direct model, it is necessary to consistently adhere to several supply chain principles.
Computer Industry Supply Chain Practices
Configure-to-Order and Standardization
Heavy competition in the computer industry has driven many organizations toward a customer-focused product strategy. In an attempt to increase sales, several companies now manufacture computers on a configure-to-order (CTO) basis. The goal of a CTO system is to provide users with customized, lower-cost PCs while simultaneously addressing chronic supply problems on the vendor side. These PC vendors feel that CTO is a major part of the solution to recurring demand forecasting problems and the rapidly changing marketplace.
Leading PC makers appear to have concluded that the best approach is to build final products only after specific orders are placed. Dell and ZingPC offer a broad array of CTO systems, while several other PC makers (HP and Lenovo) offer limited choice CTO options. This strategy has already paid off for Toshiba. In the first six months of its basic CTO program, finished goods and parts inventories have dropped more than 65 percent. Even with this vast reduction in inventory, stockout and delivery time performance have...