CDW 2003 Annual Report Download - page 17

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Vendor incentive programs are at the discretion of the vendors and usually require the achievement of a
specified sales volume or growth rate to qualify for all, or some, of the incentive programs.
Inventory Management/Distribution
We apply our proprietary information technology systems to manage our inventory in an aggressive, cost-
efficient manner, resulting in a rapid-turn inventory model. Our information technology systems provide
information on each item of inventory from the time it is ordered until it is shipped to a customer. We generally
only stock items that have attained a minimum sales volume. All of our inventory items contain UPC bar codes
that are matched to our internal product codes which allow the systems to track and discern trends with respect
to product movement and inventory obsolescence. We also use vendor stock balancing and price protection
programs to minimize our investment in inventory.
Our distribution process is highly automated. Once a customer order is received, either by phone, online or
by fax, it is processed for credit approval. After credit approval is received, orders are automatically routed to
our warehouse for shipping. All product picking is performed using bar-coded labels, UPC bar codes and radio
frequency scanning. All product shipments travel through our warehouse on automatic conveyor systems with
in-line scanning and are subject to numerous quality control checks. Our sorting system automatically provides
a final quality control check and directs boxes to the appropriate commercial carrier.
We believe that the Chicago metropolitan area is an excellent location for our distribution center as it is
centrally located for purposes of shipping products throughout the United States and provides timely access to
our principal distributors. Our location enables us to obtain non-stocked items for same-day shipping. We
believe that competitive sources of supply are available in substantially all of the merchandise categories we
carry.
Marketing and Advertising Activities
We market to our current and prospective customers using catalogs, promotional mail campaigns,
advertising and a proactive outbound calling program. In addition, we promote the CDW brand through a
national branding campaign, which includes print media, television advertisements and other activities.
Catalogs are one of our main advertising vehicles and our catalog strategy has evolved to include specialty
catalogs for products such as networking communications and software. Our main catalog also includes articles
about noteworthy technology developments and interviews with industry executives. We also hold a Customer
Technology Seminar Series, hosting representatives from industry manufacturers and influential persons in the
technology field who discuss the latest information technology issues with our customers. Customers who are
unable to attend the series can access the presentations on the Company’s Web sites.
As a result of our relationships with our vendors, a substantial portion of our advertising and marketing
expenses are reimbursed through cooperative advertising reimbursement programs. These cooperative
advertising programs are at the discretion of our vendors and are typically tied to sales or purchasing volumes
and other commitments required to be met by the Company. To measure the effectiveness of our various
marketing activities, we track responses to our efforts by a variety of means. We use this information to further
refine our marketing strategy and to develop more effective programs.
E-business
We utilize our Web sites and extranets to implement our business strategy. Our objective is to make it easy
for our customers to transact business with the Company and ultimately to enhance our customer relationships.
Our Web sites include many advanced features to attract new customers and produce sales, including more than
80,000 computer products to search and order online, advanced search capabilities, product specifications, and
information on product availability and pricing. During 2003 and 2002, we generated $1,056.8 million and
$829.2 million, respectively, of direct online sales over our Web sites, representing approximately 23% and
19% of total sales, respectively. We also offer side-by-side product comparisons, links to product reviews,