HP catches build-to-order fever

HP catches build-to-order fever

Hewlett-Packard's personal computer division has jumped on the bandwagon of local customisation with the announcement of its intention to open a local build-to-order facility before the year's end.

According to Anthony McMahon, HP's workgroup products marketing manager, the company has studied at both its competitors and its own overseas operations in making the decision.

"We believe the flexibility that the configuration centre will bring to us will be able to make us better compete with some of the other multi-national vendors like Digital, IBM and, recently, Compaq," he said.

HP already allows some of its European partners to complete the assembly process on its PCs, but McMahon says the smaller volume of the Australian marketplace makes such an arrangement unlikely.

"More than likely it will be an HP-owned implementation because the volumes in Europe are much larger than here," said McMahon. "We're in the process of finalising the location and the logistics of what it is going to look like."

McMahon says the reasons for opening a facility in Australia are aligned more with marketing than cost savings. He believes it will also enable HP to get closer to its channel, especially those dealers selling to the mid-tier of the business marketplace.

Distribution emphasis

McMahon says at present only 15 per cent of HP's corporate PCs go through distribution, as opposed to direct resellers, but in the printer and peripheral side the balance is more even. "We have a huge market share with our printers and our peripheral products in small to medium business, but very, very low market share with our desktops.

"So there are a lot of people who know the HP name and sell the HP product - we're just not talking to them from the PC side. I could align myself with 40 to 60 per cent of those that are willing to take us on as a quality vendor, then there's a lot of room for growth."

Ultimately McMahon hopes the new facility will help Hewlett-Packard achieve its aim of being number two in the corporate PC marketplace by the year 2000.

The new facility will allow HP to bid for more government and large corporate work. McMahon says HP has often been locked out of these by being unable to locally meet certain customisation requirements in these contracts.

The most likely model for its build-to-order operation will see Hewlett-Packard maintain the same level of inventory in Australia, but in component form rather than as finished goods. Larger components that don't go out of date quickly, such as cases, monitors and keyboards, will be brought in by sea, while other components will come in by air. "The main thing from our point of view is making sure that we have the same processes that we have in place in our facility in Singapore, in terms of procurement," said McMahon.

McMahon says HP's experience in customer configuration elsewhere in the world will mean it will be able to take specific orders quickly, rather than having to ramp up over time. He says there was no option for the company to engage in build-to-order out of HP's main Singapore plant due to the long lead times this would generate.

At this stage build-to-order will only extend to HP's Vectra range of corporate PCs. While McMahon says HP has no plans to locally assemble Pavilion home PCs, nothing is out of the question. "There's no reason why we can't if we get a streamlined production line, a procurement process and customer ordering facility in place.

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