Lenovo CEO Amelio Impatient with Pace of Supply Chain Improvements

William Amelio, president and chief executive officer of Lenovo Group, is losing patience with efforts to revamp the company’s supply chain—a critical part of the company’s ongoing restructuring drive.

“It’s still not where I’d like it to be, and I’m getting impatient,” Amelio told analysts Thursday in a meeting that was broadcast over the Internet.

Lenovo CEO Amelio

The second quarter of Lenovo’s fiscal year, which ended on Sept. 30, was a tough one. The company reported a 1 percent increase in revenue, to US$3.7 billion, and turned a profit attributable to shareholders of $38 million—a drop of 17 percent from the same period last year.

“It’s a tough, fiercely competitive market,” Amelio said.

While PC shipments soared in China, Lenovo saw shipments fall in Europe and the Americas, where pricing pressure was acute. “Our operations outside China are still a work in progress,” Amelio said, adding that a transactional sales model that targets consumers and small businesses is being rolled out worldwide and should improve things.

“We’re closing the gap, but it’s going to take a few more quarters and a lot more work,” Amelio said, noting that the company is particularly focused on improving its operations in the Americas during the current quarter.

Part of the problem is Lenovo’s supply chain, which was hobbled during the second quarter by inadequate IT systems and too much “complexity,” he said.

To remedy the situation, Lenovo has invested heavily in the rollout of an updated IT system based on software from SAP. That process is under way and will be completed by early 2008, Amelio said, declining to specify how much it will cost. “Suffice it to say, it’s a sizable investment,” he said.

Lenovo is also cutting down on the number of models it sells and is changing the design process to reduce its reliance on components that come from a single supplier, he said.

Once these changes and the rollout of the new IT system are completed, Lenovo’s performance will show significant improvement, Amelio said. “We will be a PC powerhouse like no other,” he said.

-Sumner Lemon, IDG News Service (Singapore Bureau)

Related Links:

• Lenovo CEO: The Action Is in Emerging Markets

• Lenovo Sees Slimmer Profit as Sales Rise

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