CDW 2012 Annual Report Download - page 10

Table of Contents
Our distribution process is highly automated. Once a customer order is received and credit approved, orders are automatically routed to
one of our distribution centers for picking and shipping as well as configuration and imaging services. We operate two distribution centers: an
approximately 450,000 square foot facility in Vernon Hills, Illinois, and an approximately 513,000 square foot facility in North Las Vegas,
Nevada. We ship almost 35 million units annually on an aggregate basis from our two distribution centers. We believe that the location of our
distribution centers allows us to efficiently ship products throughout the U.S. and provide timely access to our principal distributors. In addition,
in the event of weather-related or other disruptions at one of our distribution centers, we are able to shift order processing and fulfillment from
one center to the other quickly and efficiently, enabling us to continue to ship products in a timely manner. We believe that competitive sources
of supply are available in substantially all of the product categories we offer. We continue to improve the productivity of our distribution centers
as measured by key performance indicators such as units shipped per hour worked and bin accuracy.
We also have drop-
shipment arrangements with many of our OEMs and wholesale distributors, which permit us to offer products to our
customers without having to take physical delivery at either of our distribution centers.
Information Technology Systems
We maintain customized IT and unified communication systems that enhance our ability to provide prompt, efficient and expert service
to our customers. In addition, these systems enable centralized management of key functions, including purchasing, inventory management,
billing and collection of accounts receivable, sales and distribution. Our systems provide us with thorough, detailed and real-time information
regarding key aspects of our business. This capability helps us to continuously enhance productivity, ship customer orders quickly and
efficiently, respond appropriately to industry changes and provide high levels of customer service. We believe that our websites, which provide
electronic order processing and advanced tools, such as order tracking, reporting and asset management, make it easy for customers to transact
business with us and ultimately strengthen our customer relationships.
Product Procurement
We may sell all or only select products that our vendor partners offer. Each vendor partner agreement provides for specific 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. We also resell software for major software
publishers. Our agreements with software publishers allow the end-user customer to acquire software or licensed products and services. In
addition to helping our customers determine the best software solutions for their needs, we help them manage their software agreements,
including warranties and renewals.
In addition to purchasing products directly from our vendor partners, we purchase products from wholesale distributors for resale to our
customers. Wholesale distributors, such as Arrow, Avnet, Ingram Micro, SYNNEX and Tech Data, provide logistics management and supply-
chain services for us and our vendor partners but, unlike CDW, typically do not have relationships with end-users in the U.S. For the year ended
December 31, 2012, we purchased 52% of the products we sold directly from our vendor partners and the remaining 48% from wholesale
distributors. Purchases from wholesale distributors Ingram Micro, Tech Data and SYNNEX represented 12%, 10% and 9%, respectively, of our
total purchases. Sales of products manufactured by Apple, Cisco, EMC, Hewlett-Packard, Lenovo and Microsoft, whether purchased directly
from these vendor partners or from a wholesale distributor, represented in the aggregate 56% of our net sales in 2012. Sales of products
manufactured by Hewlett-Packard and Cisco represented 21% and 13%, respectively, of our 2012 net sales.
Competition
The market for technology products and services is highly competitive. Competition is based on the ability to tailor specific solutions to
customer needs, quality and breadth of product and service offerings, knowledge and expertise of sales force, customer service, price, product
availability, speed of delivery and credit availability. Our competition includes:
7
•
National resellers such as Dimension Data, ePlus, Insight Enterprises, PC Connection, PCM, Presidio, Softchoice, World Wide
Technology and many regional and local resellers;
• Manufacturers who sell directly to customers, such as Dell, Hewlett-
Packard and Apple;
• e-
tailers such as Amazon, Newegg, TigerDirect.com and Buy.com;
• Large service providers and system integrators, such as IBM, Accenture, Hewlett-
Packard and Dell; and
• Retailers (including their e-
commerce activities) such as Staples, Office Depot and Office Max.