It's been the "in thing" in the computer manufacturing industry to "build to order". What is enticing about the strategy is that experience has proven it to be a fruitful exercise in cost reduction.
Companies such as AST, Digital and Compaq have made significant investments into build-to-order facilities in recent months - each one citing cost-effectiveness and improved customer delivery as the major drawcards.
And all agreed that building to order has benefits for themselves and their reseller and end-user customers - with flexibility being the key word.
Ray Muffett, director of operations/manufacturing, Compaq Technologies, said one of the major reasons for its new plant in the Sydney suburb of Rydalmere is the ability to improve delivery performance by meeting individual customers' needs, thereby increasing Compaq's reseller channel's competitiveness.
"One benefit is that we get closer to the customer, with both the demand and the configuration. At the moment we offer about a dozen models for the customer to choose from, whereas under this process the customer will be able to order a system to any configuration, although initially we will start off building the standard products before we move into customer specific orders," Muffett said.
He said under the current system, if a customer orders an option with a computer system, the parts are shipped out for the reseller or distributor to assemble. "With the build-to-order process, the reseller can just order the configuration he wants and he will receive it, no assembly required," he added.
David Henderson, managing director of AST agrees. "Build to order really is presenting a wide spectrum of options for the customer from our viewpoint."
By only manufacturing to orders received, a company's finished goods inventory is reduced substantially and therefore high obsolescence is avoided, keeping manufacturing costs down.
This was a determining factor in the build-to-order decision, as Henderson said. "It gives us a benefit in as much that we don't have inventory or cash tied up in finished goods, we have cash ready to buy the components and build when we have demand.
"When we held finished goods, we might have had to carry four to five weeks worth of inventory. That's a very expensive situation, plus you tend to have to airfreight goods coming into the country to maintain service levels and again it's a very expensive option," Henderson said.
"Hopefully we will have a reduced cost structure which increases our competitiveness, so we get two benefits. One is that we are more cost effective and secondly we are more flexible for the customer. And so by that we can work very closely with the corporate marketplace, the government marketplace, and education, where they have very specific requirements for major projects," he said.
Return on investment
Digital has already reduced its costs substantially as a result of its build-to-order operation, says Shayne Bricker, Digital's manufacturing director in Australia.
Following the success of a pilot operation, Digital has moved its manufacturing plant to larger premises to cope with increased volume. "We reviewed the costs involved in doing both alternatives (build-to-order and importing products) and decided that this was the best business decision: it gave us improved inventory and delivery performance." Bricker said the build-to-order process improves cost efficiencies, as the flexibility of having more components ready for assembly means there is no double handling of equipment and machines are only assembled once.
All three of the new build-to-order manufacturing facilities seek to have a turnaround from receipt of order to delivery of about four days and all will be sourcing some components from the local market.