Toshiba Embraces Middleman in Bid for Efficiencies

Much has been made of the efficiencies of Dell Computer Corp.’s business model, which features direct sales. But Irvine-based Toshiba America Information Systems Inc. is out to show that the middleman is alive and well--and providing value just as efficiently.

Last week, Toshiba announced that one of its major resellers, CompuCom Systems Inc., had set up shop adjacent to Toshiba’s manufacturing plant to streamline distribution.

The program, which had been in a pilot phase for six months, is a response to the direct-sales model, in which a manufacturer doesn’t make a product until somebody orders it, thus allowing for customization and improved inventory control.

Traditional manufacturers have not successfully embraced that model because their sales go through established resellers who would be upset by being cut out.

In November, Compaq Computer Corp. launched a direct sales program that angered its resellers and failed to reduce the decline in its earnings. Since then, Compaq chief executive Eckhard Pfeiffer has been ousted.

Toshiba hopes that by better integrating its operations with those of its resellers, the company will be able to operate as efficiently as a direct-sales manufacturer while still offering the customization expertise of their resellers.

“The reseller channel now recognizes that it’s obvious that we have to work together very effectively, almost seamlessly, as we compete with other models, particularly the direct model,” said Gary Weaver, general manager of Toshiba’s personal computer manufacturing operations in the United States.

“We have combined operations to act [essentially] as one company with no redundancies.”

CompuCom’s operations ideally will work as an extension of Toshiba’s manufacturing line.

Toshiba traditionally made the computer and shipped it to CompuCom, which unpacked it and added peripherals and software to meet its own customer’s requirements. Under the new system, CompuCom will be on-site at Toshiba, so it will be able to reconfigure the computer before it is packed and then ship it directly to its customer.

Only notebook computers will be part of the integrated operations at first, but Toshiba’s desktop computers and servers will be included in the next two months, Weaver said.

Several other resellers will move next to Toshiba’s plant by the end of the summer, Weaver said.

Jonathan Gaw covers technology and electronic commerce for The Times. He can be reached at (714) 966-7818 and at [email protected].