Revival begins at home for computer makers: Malcolm Wheatley on the benefits of manufacturing PCs closer to the market

PLUMMETING prices are forcing the makers of personal computers to rethink their manufacture. The industry leaders Compaq and IBM, which once had the UK market virtually sewn up between them, now battle against cheaper mail-order manufacturers, such as Dell. They have been forced to respond with low-cost ranges of their own, sold under different brand names.

Amstrad is rumoured to be getting out of the PC business altogether, while a number of start-ups, such as Ti'ko and Galaxy, have collapsed in recent weeks.

One survival trait emerging is the manufacture of PCs as close as possible to the end-user market. The advent of Amstrad, among others, was based around high-volume manufacture in the Far East, where labour costs were much lower. But the advantages of Far Eastern manufacture may not be that great.

While others were seeking overseas sources, the established UK manufacturers ICL and Apricot set about improving their efficiency at home. ICL's Ashton-under-Lyne factory invested heavily in training and developing its workforce in order to improve flexibility, and in raising standards through empowerment and quality initiatives. This has shifted the emphasis from how much an hour workers are paid to how value can be added in each hour that people are employed.

The approach has resulted in sharp improvements in quality, cycle time and productivity. From start to finish, a standard PC is built in 10 minutes.

Employee relations have also improved; labour turnover is only 1 per cent. Building on this, each member of the workforce receives a mandatory eight days of training a year. Joe Smith, the general manager, called it 'a genuine investment in our skills base, rather than simply replacing skills which have walked out of the door'.

Ron Birse, the general manager at Apricot's Glenrothes factory in Scotland, made a similar point. 'Our quality approach used to be more stick than carrot,' he said. 'We now spend much more time on communication.'

Although the company was taken over by Mitsubishi in 1990, the Japanese have apparently been careful not to interfere too much for fear of stifling the spirit of innovation. Manufacturing has been one of the few areas where they have made an input. 'We now have a much greater focus on design for manufacturability,' Mr Birse said.

The company has also borrowed from its parent in establishing quality teams, while workforce training has been given a far greater priority.

It is all a sharp rebuttal for those who painted the takeover as a badging exercise, with Apricot labels stuck on imported computers. In fact, there has been heavy investment in reducing the amount of imported content in each PC. The factory is part-way through a pounds 5.5m investment programme to manufacture its own printed circuit boards, having shown that local manufacture can achieve better quality at a lower cost.

The role of the workforce is only part of the story. Freight costs for every PC shipped in from the Far East adds just over 1.5 per cent to its cost. Import duty adds a further 4.9 per cent. Worse, the shipping takes at least four weeks.

With the maturing PC market demanding a greater degree of customisation, UK manufacture and its shorter lead time offer another plus. The new configurations can be built-in during manufacture, while importers will have to hold even more stock or go to the expense of unpacking, reconfiguring and repacking.

The risks of greater stock- holding are already becoming untenable for importers, as subcontractors in the Far East demand long runs and large orders in the face of a volatile PC market. As Amstrad notably found, the result may be large inventories of difficult-to-shift computers.

Not surprisingly, ICL is attracting interest from other PC vendors wishing to utilise its facilities. The company already manufactures printed PC circuit boards for Sun and Meiko, among others, and expects to announce PC assembly contracts soon.

Apricot is benefiting, too, according to Mr Birse. 'Only two months into the first quarter of 1993, orders are already 155 per cent of target,' he said.

(Photograph omitted)