Anniversary of CTO

The implementation of true Configure To Order capability on our US website last November was a significant milestone.  It was groundbreaking for Lenovo and a necessary change to provide the online ordering experience our customers had come to expect.  We needed an easy to use interface which allowed our customers to select a starting model from any product series, customize, and buy it.  Click, click, click. Delivering this experience was necessary, but doing it within the first 18 months of becoming Lenovo was unprecedented for us.   To put this in context for those who may not know, prior to this change, any selection of different components made during the order process ultimately resolved to a preplanned Machine Type Model, or MTM.  MTM's were the IBM way of defining and identifying a particular system configuration and have been a cornerstone of the PC product line since the first IBM PC model 5150 in 1981.  The MTM is comprised of a 7 digit code - the first 4 digits were the identifying machine type, followed by a dash, and a 3 digit alpha-numeric code that specified all the configuration features down to the preloaded operating system. Turn your system over to find this.

To appreciate the complexity this drove, let's examine a single Thinkpad model - the plain R61.  Not the R61e, or the R61i, just the R61.  On the web today there are 6 CPU options, 3 display options, 5 Memory configs, 2 pointing device options, 7 hard disks, 2 turbo memory cache options, 3 optical drives selections, 3 more expansion slot options, 2 possible bluetooth choices, 3 batteries, and 5 operating systems.  That's 680,400 possible combinations in all.  Obviously we didn't have that many MTMs, so for the customer it meant compromise  and for Lenovo it meant at least 50 MTMs to have to forecast, plan, and build.  Now multiply this across all notebook and desktop system families and you develop a sense of the sheer volume. While MTMs are still a part of our business, vital to the support of many routes to market,  they weren't the right answer for a high velocity channel like the web.   Dependence upon the MTM business model, meant that every conceivable combination of parts had to be pre-defined, released into all logistics systems, and planned for.  Planning meant that we had to anticipate the mix of what our customers wanted to buy, order the parts and build according to plan, then hold inventory of those models.   This added tremendous overhead and  limited the ability to quickly respond to supplier or industry price and model changes. After reliance on MTMs for almost 25 years, the move to CTO in just 18 months was no trivial task.  Enabling CTO required far more than just a new web interface.  It required changes to IT infrastructure, catalogs, product structures, manufacturing, logistics, warranty entitlement systems, etc, etc.  These changes benefit our customers through improved price competitiveness, flexibility of configuration, and overall ease of use. As with any change, however, comes new challenges.  Lead time changes for individual components may impart volatility in the estimated shipping dates displayed.  Custom configurations are just that - custom.  Unopened, returned products, though technically new, cannot be put back into inventory.  If a system needs to be replaced, it must be re-ordered and built through the same custom build process. These challenges will be met through large scale transformational changes in our end to end supply chain and IT infrastructure which are well underway.  Look for an inside view of some of these in upcoming posts.