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Intel to manage PC inventories

What company is devising methods to beat direct vendor Dell at its build-to-order game? Ironically, it's chipmaker Intel.

What company is devising methods to beat direct vendor Dell at its build-to-order game? Ironically, it's chipmaker Intel.

During an analyst meeting today, the microprocessor giant said it is developing two new programs that will help computer vendors, distributors, and resellers micromanage inventories of computers and components down to the minute.

The programs are intended to insulate computer vendors from sudden fluctuations in price or availability by allowing them the luxury of purchasing components at the last possible moment. Dell and the other direct sales vendors have been using this capability to their advantage.

Built-up inventory lead to lower-than expected revenues for Intel, Compaq, IBM, and others during the first quarter of 1998.

But Dell, which builds not to forecast demand but rather to customer orders and ships PCs directly to end users, has been able to hold lower inventory levels, reducing overhead and thus achieving a pricing advantage.

"Inventory has become a life-and-death issue for our industry," said Sean Maloney, vice president of sales and marketing at Intel, while introducing the new programs.

Intel's first initiative, called the Supply Line Management Program, will involve creating network links between Intel, computer vendors, and component suppliers, enabling vendors to price their components on a real-time basis, said Maloney. Essentially, computer vendors will enter the schematic of a given PC into a database. The system will then track the pricing and availability of required components.

A second program will involve setting up e-commerce links between Intel and computer vendors, allowing allow vendors to order and also check the status of their purchases 24 hours a day. The system will greatly reduce phone and fax costs, he predicted.

Computer vendors will not be the only participants. Increasingly, computer resellers will perform more of the final assembly work for vendors in an effort to reduce the lag time between assembly and delivery of PCs.

Intel will further invest in training these reseller partners in the technological aspects of PC assembly.

All of these programs are currently in the testing stage, but will be implemented by the major vendors later this year. Substantially more partners will come on line over the next 18 months, Maloney added.

"We will make substantial progress by the end of the year," he said.

In the short term, however, "the disposition of old inventory will continue to impact the computer industry," he said.

Intel is an investor in CNET: The Computer Network.