Computer Component Costs on The Rise Again
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- Written on: November 20th, 2012
Every year my company, Schrock Innovations, builds an amazing computer called the Holiday Special that we sell at our cost. Because we sell them at cost we have to limit the quantity to 150 units and we have to watch component prices very, very closely.
Typically we price out the components for our Holiday Special PC in October, build the prototypes and start the sale in November each year . We do our best to order the hardware for the computers in 150 quantity lots to reduce the cost per unit and shipping costs as much as possible.
At times there are pieces of hardware that do not offer quantity discounts or efficiencies when shipped in large lots. These items are ordered on an as needed basis as units are sold throughout the sale.
Non-Technical Components Increasing in price
Take for example a simple plastic tray designed to allow a 2.5″ solid state hard drive to be mounted in a PC. In early October that tray cost about $4.99 in the retail marketplace on Newegg.com.
Today that same tray is retailing for $6.99 after a coupon code. That is a 40% increase in just a month and a half!
The prices of more technical components like hard drives are coming down, but are still higher than they were before the Thailand flooding that leveled much of the world’s hard drive production capacity about a year ago.
Smaller On-Hand Inventory Levels
In addition to slightly higher component prices in the fourth quarter, I have also noticed much more restrictive quantity limitations and smaller inventory levels at our suppliers.
Most of the hardware that Schrock buys for new computers is ordered in 30-100 unit lots to achieve the best efficiencies in per unit pricing and shipping costs. In some cases there are special offers or discounts available to the general public on websites like Tiger Direct or Newegg that offer lower promotional pricing.
While it is common for these companies to place a restriction on the number of units that can be ordered at the lower price, the maximum order quantities have dropped form 10, to five, and as low as 2 in some recent cases.
Even when we are ordering in larger quantities we are often waiting up to 30 days to receive monitors, cases, speakers, keyboards and the like because wholesalers are just not carrying as much inventory as they used to in the past.
While I am not an economist, it would be tough to avoid the fact that at least a portion of the price increases we are seeing are the result of a weakening dollar when compared to other currencies (aside from the Euro at the moment).
I think it is pretty safe to say that manufacturers, wholesalers and retailers are all waiting to see what will happen with taxes and budgets in the coming year. In the mean time everyone seems to be playing the “how close can I shave it game.”
Sometimes when you cut things too close and something unexpected happens, it can mean a world of monetary hurt. Unfortunately there are a LOT of threats lurking in the darkness ahead that is 2013.
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