Hewlett-Packard Goes Factory Direct, CTO With Laptop Line

Palo Alto, Calif.— Hewlett-Packard is not the first company to offer a configure-to-order program for notebook computers, but HP hopes the twist it is putting on the program will give it an edge.

HP's variation centers on eliminating the middleman by delivering the notebook from the factory directly to the customer, said Jim Burns, director of HP's worldwide supply chain, mobile computing division. Instead of going from the factory to the HP or retailer's warehouse prior to final delivery, the notebook will be sent by Federal Express from the factory in Taiwan directly to the customer's home or the local retailer where the purchase was made.

"We've noticed an improvement in product quality with our 'one-touch' delivery system," Burns said, "With it being delivered straight to the customer there is less chance of damage and if there is any problem with the computer we know the source of it."

The one touch method also cuts supply chain costs by half, he added.

The CTO program goes online this month at the HP Web store and retailer kiosks. At a later date the CTO engine will be made available to retailers for use on their Web sites. HP expects the notebooks to be delivered in one week.

HP has had a PC desktop CTO program for the past several years, but Burns expects the notebook computer version to be much more successful. Because of the limited number of drive bays and different type of displays available consumers cannot always get exactly what they need when buying a laptop off the shelf.

"There are more choices for the various features in a notebook," he said.

This added flexibility should prove to be a major benefit for HP and its retail partners because it will allow the vendors to refresh the notebook line on the fly. When a new processor, operating system or drive becomes available, customers can gain instant access to the latest technology. When buying a pre-configured model, a customer must wait several weeks or months for something new to be integrated into an existing model and then a little longer for that product to make its way into the channel, said Bob Nitzberg, retail marketing manager for HP's mobile computing division.

Overall, the portion of HP's notebook sales derived from the CTO program will comprise between 10 percent to 20 percent of its laptop sales, said Nitzberg. However, this figure could rise significantly during periods when customers jump at the chance to quickly obtain a cutting edge feature, like Microsoft's recently launched Windows XP operating system.