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IBM redoes assembly scheme

IBM is shifting more responsibility for parts inventory management and final computer assembly to 12 resellers and distributors.

IBM (IBM) is fine-tuning its distributed manufacturing scheme, a move the company believes will eventually shave the price of a PC.

Under the Advanced Fulfillment Initiative (AFI), IBM is shifting more responsibility for parts inventory management and final computer assembly to 12 resellers and distributors. These partners will receive parts directly from component manufacturers as well as IBM and then put the systems together according to orders from customers. A massive electronic data interchange system will link IBM, the parts suppliers, and the assembly partners.

Additionally, IBM has redesigned the chassis on its corporate computer models so that parts can be "snapped" into place, rather than hooked in through screws, easing the manufacturing process. The new IBM PC 300PL is the first computer to use the snap method.

In the end, the AFI is expected to reduce the cost of computer by streamlining the shipping and inventory processes. "We are creating a virtual enterprise so that we can operate more efficiently, increasing speed and removing cost," said Bill McCracken, general manager of sales and service at the IBM PC Company, in a prepared statement.

IBM projected that the AFI program would increase overall inventory turns to 24 times a year.

The AFI program stems from IBM's Authorized Assembly Program, a similar partner assembly program that started two years ago. Desktops are currently being assembled under the AAP program. IBM's first desktops to be manufactured on a distributed basis will come out next quarter.

IBM's AFI program represents one half of the "build-to-order" revolution sweeping the computer industry. Compaq and the mail-order manufacturers are staking their futures on classic build-to-order techniques. Under those schemes, manufacturing and inventory management take place at a central plant. Computers are built pursuant to phone calls or Web orders from customers.

Under the AFI-like programs being promoted by IBM and Hewlett-Packard, manufacturing and inventory management take place at a number of locations. Although a number of analysts have said that a distributed manufacturing scheme adds risk and can be more costly than classic build-to-order, it is nonetheless workable. Resellers and distributors already have the capability to build systems. Distributed manufacturing also cuts down a computer maker's overhead.