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Lenovo’s Secret Weapon

The PC market was shaken up this week as a leading researcher named {complink 9284|Lenovo Group Ltd.} the world's top PC maker. It's a big deal, but it's not entirely surprising in light of Hewlett-Packard's inability to right itself. (See: Saving a ‘Fundamentally Flawed’ Business.)

Gartner reported that Lenovo had a 15.7 percent share of the PC market in the third quarter, when it shipped 13.77 million units. HP, the perennial industry leader, had a 15.5 percent share.

Of course, the PC market is shrinking, so Lenovo's achievement may be less impressive than it would have been five years ago. But no matter the fate of PCs (which I'm not willing to declare extinct), Lenovo is innovating its supply chain in ways that may be giving it an edge. Let's not forget — that's what we said 10 years ago about Dell, now the No. 3 PC maker.

Lenovo is using the cloud as a supply chain collaboration platform, as Nicole Lewis writes in The Cloud & the Supply Chain: A Match Made in Heaven. (A whitepaper on the process is available at E2open.) The results are pretty impressive.

In addition, Lenovo is innovating on the backend. It's using Jabil Global Services and UPS Logistics to manage two segments of its after-market service and repair operations. (See: Recovering Lost Profits Through Reverse Logistics.) Although Lenovo is outsourcing some of its supply chain management, it's also breaking from the PC pack by leaning toward a vertically integrated manufacturing model. (See: Is Outsourcing Losing Its Appeal?)

Although the PC market is shrinking, it's still a pretty good proving ground for supply chain innovation. HP changed the game in the late 1980s by moving toward a demand-driven supply chain. Dell adopted the BTO model in the early 1990s. Lenovo is an early example of effective use of the cloud. Like automakers, PC makers have been under varying pressures over time to make their products better, cheaper, faster to market, smaller, more configurable, and now easier to dispose of. Lenovo is proving there's still a lot of room for inspiration. Although a supply chain may not make or break a company, it clearly remains a competitive weapon.

13 comments on “Lenovo’s Secret Weapon

  1. ITempire
    October 14, 2012

    Lenovo has been able to consistently encash on the legacy left behind by IBM's PC business. The role of supply chain in maintaining relationships with corporate clients that IBM had is impressive despite the presence of the reputable Dell who is always knocking on the door.

  2. ITempire
    October 14, 2012

    What I have noticed is that my company (PwC) has been buying Lenovo since its acquisition of IBM's business while buying few machines of Dell but recently it switched completely to Lenovo so I can correlate to Barbara's stats. Like my company, I believe it is the corporate side that is contributing to Lenovo's share.

  3. t.alex
    October 14, 2012

    What are the main factors that propel Lenovo to be number one today ? I think good supply chain management is one of them. But other than that? Quality? Prices? Customer loyalty ?

  4. Nemos
    October 14, 2012

    “Of course, the PC market is shrinking” Is this the reason that the prices (of the Pcs,Laptops) are remaining at the same level as the previous year ?

     

  5. Daniel
    October 15, 2012

    Barbara, one thing the market for PC and Laptops are declining for the last several quarters and market is still expecting further corrections. But I won't think that it may be get disappear from the market for another decade.

    I have a good video to say what will happen to the computers in future and who is going to get replace by it. Corning Glass

  6. Daniel
    October 15, 2012

    t.alex, obliviously Lenovo's' good business strategy helped them. Mean time HP had made a untimely declaration that they are planning to spin of their PC/Hardware business. Markets are always volatile and such inappropriate decision and declarations can turn bad.

  7. elctrnx_lyf
    October 15, 2012

    Certainly a great feat from Lenovo. With the continuous innovation in supply chain and manufacturing process, lenovo is winning over competeitors. The other PC makers are also look for such options of using cloud to bring down the operational expenses and improve the performance.

  8. SP
    October 15, 2012

    So true, supply chain remains a competitive weapon. If you have two companies with the same product, exactly same technical specifications, it makes a lot of difference how their supply chains  are managed. In today's market when the world is getting smaller I would say supply chain management is what makes the cutting edge. Whether its sourcing or logistics or operations all of this is equally important if you want to remain as the leader.

  9. Barbara Jorgensen
    October 15, 2012

    Hi: Here is what Gartner said about Lenovo's No. 1 ranking:

    Lenovo took the No. 1 position in worldwide PC shipments for the first time in the company's history, as its share increased to 15.7 percent, while HP's global PC share was at 15.5 percent (see Table 1). In addition to acquiring other vendors, Lenovo has also taken an aggressive position on pricing, especially in the professional market. As a result, Lenovo has achieved significant market share gains over the last two years, exceeding regional average growth rates across all regions.

  10. Barbara Jorgensen
    October 15, 2012

    Hi Nemos: Definitely that is part of the reason. The other is that PCs are expected to be replaced by the ultrabook, which are priced at around $1,000. Once these prices decline, look for PC prices to decline even further. But I still think the PC market has life in it yet, particularly in the business space.

  11. Cryptoman
    October 15, 2012

    @t.alex

     

    I agree that supply chain is only one factor in success. Quality, reliability and price are the other key factors in my opinion. It also helps if you are able to supply to corporate clients besides the home users.

    I think HP's quality has dramatically declined over the years and I would never consider buying an HP product anymore (including its printers). In my opinion, the quality and reliability of HP's laptops are nowhere near what they were a few years ago. I think Lenovo and Dell provide the best value for money in the laptop business. I also think that Asus is on the rise with the new slim and powerful models. The 11% growth is also a clear indication of this.

    My next laptop will be a Dell for sure purely because it offers an excellent customisable laptop purchasing option on its amazingly powerful Alienware models. At the moment I am on a veteran Asus that has been a reliable partner for quite a few years despite its old age. I personally prefer to buy a reliable laptop and pay the premium to make last for at least 3-4 years. Old is not necessarily bad as long as it is built properly.

     

  12. dalexander
    October 16, 2012

    @Barbara, I think the PC has a few more years left also. Today I saw a preview of the Sony Vaio Tap 20 all in one computer touch screen. It looks like a giant iPad to me. If you love your iPad, then this computer from Sony is their version of dare I say, Max iPad. It is a PC in all respects of the term, but it is also a tablet like product. So, we may see the PC evolve over time into new shapes and sizes, but no matter what it looks like, it will still be a computer. How personal it is will be up to the owners. I can really see Goliath digging this new Max iPad as he slips it into his size XXXXXXXL shirt pocket.

  13. t.alex
    October 17, 2012

    Cryptoman, you are right. HP laptop quality degrades. Sometime ago I did have one, and one day it was unable to boot up. I brought to HP sevice centre and after assessment they said I needed to pay quite big bucks to fix the LCD power supply. I decided not to, and managed to copy out all of hard disk content. Now I am happily using a Mac Book Pro.

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