O.C. Company on PC Power Play
Ingram Micro Inc., the world’s largest distributor of computer products, jumped into the manufacturing arena Wednesday, opening a major build-to-order facility in Memphis, Tenn.
The plant is the first of five “super centers” the Santa Ana company plans to open to make customized notebooks, desktops and PC servers for Compaq Computer Corp., Hewlett-Packard Co., and IBM.
Ingram Micro hopes its new centers will help consolidate operations and cement its role as a major player in the PC world, said officials with the Santa Ana firm.
“Ingram Micro understands that, in order to survive in the long term, it needs to be more than the field’s most efficient packer of PCs,” said Tony Amico, an analyst who tracks distribution trends for the research firm International Data Corp.
“By opening this plant, they are positioning themselves to start building machines under someone else’s name” and ultimately launch a line of generic machines themselves, Amico said.
Ingram officials insist they don’t want to compete directly with their vendors.
“You’re not going to see Ingram Micro computers on store shelves,” said Paul La Plante, vice president of facility services for Ingram Micro. “We’re not competing against the IBMs and the Compaqs of the world. But we could build machines that other people could put their brand upon.”
Ingram said it expects to open the other four assembly sites by the end of 1999 in South America, Asia, Canada and Europe.
Within all those facilities, the computer distributor plans to pick up many of the assembly and manufacturing duties of its PC vendors: purchasing the components, configuring the machines and installing the software.
By shifting such assembly processes over to Ingram, vendors such as Compaq and Hewlett-Packard say their manufacturing costs could be reduced because parts are shipped and stored at one location. Also, machines can be built closer to the time a customer actually orders the machine.
For instance, a customer could order a series of IBM machines with an unusual amount of memory chips. Ingram Micro would take the order, crack into the computers’ hard drives, and reconfigure each machine to provide the requested amount of memory.
Ingram said it plans to be able to build and deliver a system in three days, a healthy jump over the estimated seven to 10 days it takes industry leader Dell Computer Corp. to ship products to consumers.
Dell officials acknowledged they may be slower in turning around product orders. But officials at the direct-sales giant insist they are not worried about the competition.
“Other companies have talked about replicating portions of our business model, and they haven’t been able to copy our success,” said Dell spokesman T.R. Reid. “There’s a difference between launching a venture and promising that it will work, and actually understanding what to do and making it work.”
The build-to-order business has become one of the hottest segments for hardware manufacturers in the past couple of years, thanks to the success of Dell, which has been able to reach both the consumer and corporate markets.
Since every computer is made to order, Dell makes sure it doesn’t stock parts that are more than two weeks old. By keeping their inventories down, Dell and other direct sellers can immediately pass on the savings to customers when component prices fall.
Although such a system has worked for Dell, analysts warn that Ingram Micro’s success rests on the whims of its computer vendors.
“Dell controls its own destiny because they secure all the components and build everything themselves,” said International Data Corp.’s Amico. “That’s not the case for Ingram. If IBM doesn’t move quickly enough with its product line, or Hewlett-Packard starts lagging behind, Ingram Micro is left hanging out to dry.”
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Ingram Micro at a Glance
* Headquarters: Santa Ana
* Founded: 1989, by the merger of Ingram Computer and Micro D
* Business: Computer technology products distributor
* Chairman/CEO: Jerre L. Stead
* Employees: 9,008
* Initial public offering: November 1996
* Exchange: NYSE
* 1997 sales: $16.6 billion
* 1997 net income: $193.6 million, up 75% from 1996
* Wednesday’s stock close: $38.63
Source: Bloomberg News, Ingram Micro
