Toshiba is the latest PC maker to turn to build-to-order programmes to boost margins, as it faces a massive loss in its critical notebook business.
The Japanese giant, which has seen its share of the US notebook market slip from 30 to 20 per cent in a year, will introduce BTS (Build to Stock) this month, aiming to eliminate excess inventory and bring the division back into profit this year.
Analysts predict that Toshiba?s notebook business, whose leadership once seemed unassailable, will incur operating losses of $79 million in the fiscal year ending 31 March in the US alone - a sad reversal from fiscal 1996-97, when notebooks contributed $713 million in profits, 60 per cent of the group?s total.
Vice president Tetsuya Mizoguchi claims BTS will enable the company to recover its market share within a year and believes excess inventory in the channel will be cleared by the end of March in the US and Europe.
Under BTS, Toshiba will manufacture notebooks based on sales results so that stock levels are kept below one month?s sales. The next step will be full build-to-order, with resellers or large customers specifying their requirements.
Toshiba said it would not consider writing off current inventory though, but believes that, once it is cleared, its margins will improve.
But resellers do note believe BTS will be enough to solve Toshiba?s problems on its own. It has suffered lower than anticipated sales in the past year, as competitors launch high functionality or low cost models, and faces far tougher market pressure than in the early years of notebooks. It also needs to solve delivery problems, which have plagued it for months.
One approach that Toshiba plans to take is to simplify its range and to construct different models using standardised components such as modular disk drives. This should help solve some of the supply bottlenecks it encounters by using different drives and other elements for each of its 18 models.
Finally, Toshiba will seek to boost its volumes with its first move into a low cost, consumer oriented notebook. The low end product, starting at $1,699, was unveiled this month, a turnaround for the company, which traditionally sticks to expensive corporate lines.
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