CDW 2006 Annual Report Download - page 14

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Technical Support. Our technical staff is well-trained and maintains high levels of professional
certification from product manufacturers to assist our customers with technical questions and issues
during regular business hours. We offer technical support services by telephone 24 hours a day,
seven days a week. We believe that our commitment to service at the time of sale and after the
purchase maximizes sales opportunities and encourages repeat customers.
Proprietary Information Technology Systems. We use proprietary, real-time information
technology systems which centralize the management of key functions and generate daily operating
reports enabling management to identify and respond quickly to internal changes and to provide high
levels of customer satisfaction. We also monitor trends in the information technology industry. We
integrate our systems with our Web sites, CDW.com, CDWG.com, and CDW.ca, and our extranets,
CDW@work® and CDWG@work®, providing real-time information for our customers.
Effective Inventory Control. Our inventory tracking system, purchasing system, cycle counting
system, and use of vendor stock balancing programs allow us to minimize our investment in inventory
and to reduce inventory discrepancies and the risk of obsolescence while meeting customer needs
by shipping orders generally on a same-day basis.
High Quality Coworkers. We strive to attract, retain, and motivate high quality coworkers and
provide our coworkers with competitive compensation and incentives designed to maximize
performance and productivity. Our objective is, whenever possible, to promote coworkers from within
the Company to positions of increased responsibility. Examples of rewards and motivations for our
coworkers include short-term incentive programs, profit-sharing, and stock options and restricted
stock for coworkers at the manager level and above.
Purchasing and Vendor Relationships
We purchase products for resale from manufacturers, distributors, and other sources, all of whom
we consider our vendors. During 2006, we purchased approximately 51% of the products we sold
directly from manufacturers and the remaining amount from distributors and other sources. We
believe that effective purchasing from a diverse vendor base is a key element of our business
strategy. For the year ended December 31, 2006, purchases from distributors Tech Data and Ingram
Micro represented approximately 16% and 14%, respectively, of our total purchases. Additionally, in
2006, sales of products manufactured by Hewlett-Packard comprised approximately 26% of our total
sales.
Our marketing and purchasing staffs work together to identify reliable, high-quality suppliers of
products and then actively negotiate to achieve the lowest possible cost and expand vendor incentive
programs. We seek to establish strong relationships with our vendors. Several of our leading
vendors, such as Cisco, Hewlett-Packard, IBM, Lenovo, and Microsoft, have full-time product
specialists on-site at our facilities.
We are authorized by manufacturers to sell via direct marketing all or selected products offered
by the manufacturer. Our authorization with each manufacturer provides for certain terms and
conditions, which may include one or more of the following: product return privileges, price protection
policies, purchase discounts and vendor incentive programs, such as purchase or sales rebates and
cooperative advertising reimbursements. Vendors also periodically offer us opportunities to purchase
a large amount of product at reduced prices. Vendor incentive programs are at the discretion of the
vendors and usually require the achievement of a specified sales volume or growth rate within a
specified period of time to qualify for all, or some, of the incentive programs.
Inventory Management/Distribution
We utilize our proprietary information technology systems to manage our inventory in an
aggressive, cost-efficient manner, resulting in a rapid-turn inventory model. We generally only stock