CDW in a Nutshell: Much More Than Just a Computer Discount Warehouse

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Until last week, my experience with CDW consisted of purchasing a replacement battery from them after finding that they had the best price for one of my APC backup units. Last week I visited their Vernon Hills, Illinois warehouse, and now I know that they are much more than just a supplier of IT products.

So to back up for just a moment … In 1982, Michael Krasney placed a $3 ad in the Chicago Tribune to sell his used computer. Upon its sale, he made several hundred dollars in profits, and that’s when he realized that there was a “ripe market for PCs.”

Krasny became a computer broker, buying and selling computers for a small profit. He originally named his company MPK Computers. That company later became CDW.

CDW is now a Forbes 500 top company, and it specializes in full service technology solutions provider. Not only is the company a place where you can buy a laptop or 3D printer for your home or small business, it is also a turn-key solution for those who want to outfit their business with hardware and/or cloud services.

CDW Logo

One of the keys to CDW’s new cloud services utilizes their 2006 acquisition of Berbee Information Networks, a Madison, Wisconsin company. Over the last 3 – 4 years, CDW has strategically worked on growing this business.

Last week I was included in a group of seven bloggers who were given an inside “Red Carpet” peek into CDW’s 2/3 complete Vernon Hills Redundant Enterprise Command Center. The goal behind the redundancy site is that should any catastrophe ever occur, their customers would never experience any downtime. In Madison, Wisconsin, CDW employs about 60 workers running a 24/7/365 support for the wireless infrastructure of about 200 customers, some of which are Fortune 500 companies. One of their popular customers is Buffalo Wild Wings, so (for instance) “when you are in the bar tweeting and doing all of that cool social media stuff, [CDW] is making sure the network is up and running.”

The Madison Enterprise Command Center does about 1000 tickets a day, and they oversee about 25,000 configuration items for their various customers which include switches, routers, servers, and various infrastructure components; the Vernon Hills facility will complement that.

This is cool, because this is the heartbeat of a lot of people’s organizations, and they’ve entrusted us with this. When you listen to Tom Richards, our CEO, give discussions, the one thing he repeatedly says over and over again in terms of what keeps him up at night is “staying relevant in a world of IT that is constantly changing.” The Enterprise Command Center is about taking that services business into the 21st century and enabling us to be successful. One of the things that the Enterprise Command Center is going to do is really embrace the cloud, and when you talk about monitoring a traditional physical environment, that’s easy, right? You’ve got hardware, you’ve got monitoring equipment, you’ve got alerts, and you’ve got tickets. Well, when you take all that and you put it into the cloud, people start scratching their heads, going “oh my gosh — how do you watch that? How do you monitor that? How do you oversee that? How do you manage that? Who manages that?” And we are really running into that space as fast as we can.

When comparing themselves to other companies, CDW’s US based support is something that they really pride themselves upon. All support is done out of Madison, Wisconsin and will soon include Vernon Hills, Illinois.

The space that we visited was originally a CDW Business Technology Center, which was where people would come and buy hardware as well as get tech support. CDW made the decision to close that several years ago because it was a money losing unit, and they used the opportunity to reinvent themselves and showcase what CDW does today.

CDW started in the midwest and does the majority of their services business there, but it is also branching into the east and west, working to penetrate those markets; they are also looking to grow their international footprint. So when you decide that you are ready for CDW to manage your services, which includes traditional monitoring of hardware and infrastructure anywhere, they have a huge field team that will come to your local facility to actually do the work. They have technical architects, design people, and button pushers who actually come out and press the buttons — who you’d work with for maintenance and support of all of the above. They have warranty business for all of the major hardware vendors, so they can deliver those warranty services for you on their behalf.

What makes CDW different is that we are solution agnostic. We have a portfolio of vendors — hardware and software — we’ve got a portfolio of locations, geographies. You come to us, and we’ll say “what do you want?” And we will work with you to architect the best solution for you. So we’re not an HP, we’re not a CISCO, who might drive the conversation into their solution — because we don’t care. We list our partners as platinum, gold, silver, and bronze; and based on that is the amount of work we can do for you. So the answer to that is “All of the above,” and that’s what makes us different and easier to work with. We make a commission whichever part we sell, so we bring the best one to you.

Is your head spinning just a little bit? Mine was, as I sat there listening, and it still is as I write this.

CDW was brought on board to handle two major sporting events at the end of last year: one called the Super Bowl … anyone remember that? And the other was the College BCS (Bowl Championship Series). CDW was brought on board to create the solution, support the solution, and that was the first time that CDW was responsible for our customers’ experience. Our deal may be with the NFL (or whomever), but at the end of the day, our customer is you. And we are morphing into that very quickly; the Super Bowl was the number one most socially mediaized event ever; who’s been to a game and tried to take a picture to send to your friend? It’s like, “oh my gosh …ridiculous!” But it wasn’t like that at all. The fan experience was incredible; people were tweeting, sending pictures, sending videos! Not gigabytes or terabytes, but petabytes!

During our tour we had a chance to learn more about what CDW can do for their customers. We had a chance to check out their Services Center, where they configure customer’s hardware, as well as their 500K square foot distribution center and its operations. Interestingly enough, the Las Vegas CDW hardware distribution warehouse is even more automated and efficient than the Illinois facility. Between the two they have over a million square feet in total. I have to admit that touring the warehouse facility, about a 1.5 mile round trip, was probably the most interesting part of the day to me. Unfortunately, we weren’t allowed to take any photos, so I’m going to try to tell you about it and paint a visual.

Of course, the first thing we got was a warning that this was a working warehouse, and that we needed to stay within the yellow line which designated the safe walkways. Not wanting to get squashed like a bug (accidentally or otherwise), I made sure to comply. 😉

Jennifer, our lovely guide, mentioned again that this was the Vernon Hills Distribution Facility, and that in combination with the North Las Vegas facility, CDW has just under a million square feet of floor space, and access to about $220 million in inventory. Last year, CDW turned their inventory 26 times, so “on average every two weeks, we are fully refreshed.” The Vernon Hills facility was built in three stages starting in 1997, the next section was built in 199. 2000 saw the construction of the third.

Every time we built, we built [the next warehouse section] expecting it to last for 10 years. We actually hadn’t finished construction on this first area, before we’d already outgrown this space. Our founder, Michael Krasney, wanted to be very conservative in his estimates on our growth expectations, because we definitely didn’t want to end up with extra space that we couldn’t leverage.

The three sections are named “Warehouse One”, “Warehouse Two”, and “Warehouse Three”, and as Jennifer joked, lots of marketing research went into those naming schemes.

CDW ships an average of 25 – 35,000 packages per day out of this facility, with a 99.997% accuracy rate.

Of course, they do have a number of quality control guards in place that allow them to be that accurate. The first is that when an order is complete, they take a picture of the contents of the box before it is sealed, and they also weigh the box. In terms of the weight, they know what should be in each box, so they know how much it should weigh. If the weight is wrong by 8 ounces or more, the box is flagged and diverted to be looked at by a coworker to explain the discrepancy. The picture of the open box comes in handy, because every now and then they will get a call from one of their customers saying (for example) that they ordered 20 networking cables, but there were only 5 in the box.

  • The first thing that they’ll do is pull up the photo of what was in the box. With the safeguards that they have in place, the odds are that they will see that they actually sent 20 cables.
  • Their first question to the customer will be, “Can you just make sure that the technology is not already there?” A lot of times, what happens is that someone else has already opened that box and either deployed some of that equipment, or well … sticky fingers can be a problem for some customers’ coworkers.
  • Their last question to the customer when there is a discrepancy, is “What does the box look like?”, as odds are that it might have been damaged in transit. If that’s what happened, they send the customer the items that are missing and fill out a claim with the carrier, because they have damaged the order and lost some of the product.

These pictures are kept for three years after the order has been placed, and then stored for an additional six years.

The customer has nine years to order something, stick it on the shelf, forget about it, find it, open it, realize that it’s not right, and we can still offer mediation.

When I asked what tech was still relevant nine years later, Jennifer laughed and said “not many.” 😉 The longest that she had really seen is 3 or 4 years, when companies make large single buys, or when government contracting partners buy in bulk for 4-year contracts, and then they’re just pulling things off the shelf, and by the time they get to the end of the contract — 4 years later — they may find that “whoa, this isn’t right.”

As we left Warehouse One and entered Warehouse Two, Jennifer pointed out the large gray exterior wall with a door cut into the second warehouse we were standing in. As she had mentioned previously, CDW had outgrown Warehouse One before they had even finished construction. The city of Vernon Hills would not allow them to start construction on Warehouse Two until they completely finished the first project. So they had to literally had to put all of the finishing touches on, let the paint dry, drop three more walls and a roof on it, and knocked a hole in the wall of the first building.

Warehouse Two handles receiving; CDW takes in approximately $14.6 million in inventory per day, which is between 55 and 85 trailers that they unload each and every day. CDW employees unload the trailers, and that is their first glance at the technology. If there is anything obviously damaged and broken, they reload on the truck and refuse to accept it.

We don’t want to let broken tech into our front door, we want to spend our time getting our customers the equipment that they actually ordered.

Once they unload the tech off the truck, they scan each item individually by hand. Their scanner is linked into their wireless network, which links into their internal inventory system. That updates in real-time, so when a customer calls in asking for an inventory count, it is a real time count of what they have in-house at that exact moment. Warehouse Two is also where they hold overstock. Overstock allows CDW to take in large quantities of equipment at once so they get better prices from their partners which they can pass on to their customers. For their customers, CDW will generally delve into their overstock directly when something has gone catastrophically wrong: Hurricane Sandy, Hurricane Katrina, Hurricane Gustav … where a large swatch of our customer base has gone down. We can get them back on their feet as fast as possible.

Having overstock also allows us to respond to changes in demand in the industry. 4 or 5 years ago, due to flooding in Thailand, there was a dramatic hard drive shortage. When CDW knew that they were going to definitely blow the dam and flood the factories, they made the decision to pull overstock of hard drives. We metered them out to customers, where unless there was a contractual or emergency reason why, customers could not buy more than five at a time. This allowed us to protect or our inventory so we didn’t have someone buying and reselling them at a profit, but it also allowed us to maintain an inventory. By the end of the shortage, CDW was one of the only major partners in the industry that had real hard drives; no gray market, no shady warranties.

Having overstock means that CDW doesn’t have to sell all of their stock before bringing new stock in. Warehouse Three houses CDW’s enterprise Configuration Center and their ready to ship items. While in Warehouse One they pack for their customers, as in their order, their box, their item, in Warehouse Three they pick for quantity; pickers might pick out 200 laptops, and they won’t know if it is for one customer or for 150. Packing slips, shipping labels, tracking information — none of that gets assigned until the boxes and the devices reach the automated bar scanners that prioritize and pack the orders. There are about 5 miles of conveyors in the facility offers CDW the flexibility to commandeer and reroute items as needed for their priority customers. Warehouse Three also handles all of the shipping operations. CDW packs their own shipping trailers; they were the first company to ask UPS and FedEx to allow them to pack their trucks. Their drivers back up, and we load them. This gives CDW the ability to pack the trucks completely,manage the timing of their shipments, and keep an eye on quality control. Boxes that leave CDW are in perfect condition and they have pristine labels. The trucks and their cargo never go to a sorting facility, so they are able to extend the cutoff for the last order of the day; CDW is the last stop for all of their shipping partners before they reach the airport. CDW has an arrangement with all of their air freight partners: their last plane of the night waits for CDW’s last truck. This gives CDW a logistical advantage that they can then offer to their customers.

If we can’t get our stock out to the our customers in time, then we might as well not have any stock.

Anything that makes it easier for their customers to receive their items, they will take care of it for them. If customers want 200 laptops palletized and shipped, CDW will do it, or if customers want a pallet broken down into single orders, they will do that. They can also do welcome letters; anything they need to do to make sure that customers get what they want to their employees. There is one service that CDW offers which surprised me: their buy and hold section. Let’s say a customer purchases a bulk order or they want to maintain an inventory of spares, but they don’t have the space to house those items in their own facilities; CDW will house anything for a customer for as long as they want — even paper! For a large non-profit, they were housing foam and boxes, because they had their own customer kits so that when they had to deploy they needed to ship the items in their own kits with their own visibility.

I asked how large of a customer you had to be to get this kind of service; Jennifer told me that you can be a one man shop.

For the first 30 – 45 days, there is no fee. For the remaining period of time, it is 1% value of the remaining stock that they access, although CDW will sometimes eat the fee. The CDW facility is temperature controlled, secure, and constantly monitored in real-time.

One of the reasons why it might be more advantageous for a company to negotiate a 4 year contract for the amount of stuff that they think they will need for the full four years and to store it at the CDW warehouse is that many times CDW is able to negotiate that the warranty won’t start until the device leaves their facility. That gives the company the security of knowing that a device that has been stored for them at CDW for four years is not out of its warranty; it still has the warranty attached to it.

The last section we looked at in Warehouse Three was their Enterprise Configuration Area. Between Vernon Hills and Las Vegas they have about 50,000 square feet of configuration area. 120 engineers that are averaging about 5,000 up to 7,500 configurations a day. They do basic and enterprise configs, so everything from desktops and laptops to servers, switches, routers all the way up to populating full racks and turning them into plug and play devices.

Generally, our customer’s imagination is the only limit. I understand that sounds whimsical, so allow me to set the bar. Several years ago for the military we did a project where they wanted to deploy populated quarter racks on airplanes and have them work when they hit the ground; we made that happen. Using the bar as throwing things out of airplanes and they still work, pretty much everything that goes with that. For that project, for a three-week period, we actually had workers on the roof of this facility throwing servers, racks and builds into the parking lot. For that project, one of the things we weren’t allowed to d at that time was classified work. What we did instead was set up a VPN on those devices. The military tunneled into the devices, and configured them themselves. We were blocked out, and they simply let us know when they were done. When they were, we boxed the devices up, sent them out, and the military quite literally dropped the shipments to the troops. The troops didn’t need to know anything about the technology; they simply needed to drive up, uncrate it, toss it in the back of their Humvee, hit the power switch and keep on going. in a moment, they were connected. There is really nothing that we cannot or will not do for our customers, but we will be the first to tell our customers if we do not have a service or a resource that is up to snuff. Some of our customers don’t mind being guinea pigs, but that is a choice that we give them.

Rather than give a customer a poor or mediocre experience, CDW will always tell a customer no, and then point them in the direction of another provider that can offer them what they are looking for. A lot of CDW’s customers like to have their devices acid etched, because (for instance) if their employee lists an iPad on eBay, it is hard for them to explain why their iPad says property of ____. In this space, the minimum quantity for CDW to do something is ONE. So as long as a customer needs something done to something, they can step in and help. The only limitation is that the item being etched has to have an etchable surface, and it has to fit in their machine. CDW offers disk imaging surfaces; there is no charge for CDW to house the images, they only charge when they images are burned onto a device. This allows them to help a customer to order a full group of devices that are set up exactly the same, and ready to be deployed. Every single device that passes through this space is turned on and put through quality control. If something doesn’t work or if it is dead, it doesn’t go out — they go into the warehouse and grab another. CDW has had cloud services for 5 – 6 years, and they have more than 200 offerings. Not all of their customers know that they offer these services, and not all of their customers know the extent for what these services entail. Because I’ve never had to give any thought to deploying a force of employees with standardized devices, it was hard for me to even grasp the scale of what CDW does on a daily basis. I really wish we could have taken pictures in the warehouse; it was an experience in and of itself.

This is the Technology Experience Center (in Woodland Falls), where CDW has a mini server room which showcases hardware from their vendors including APC, EMC2, and others. Interestingly enough, unlike other server rooms I’ve seen, this room wasn’t on a raised platform to keep things cool; there were fans in between the server racks.

You can read more about our day from Matt Renwick’s perspective.

Disclosure: CDW paid for my travel, room, and meals; there were no conditions or expectations made regarding what I chose to write about with regard to my experience.

 

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About the Author

Judie Lipsett Stanford
I've had a fascination with all types of gadgets and gizmos since I was a child, beginning with the toy robot that my grandmother gave my brother - which I promptly "relieved him of" in 1973. I'm a self-professed gadget magpie. I can't tell you how everything works, but I'm known world-wide for using a product until I have a full understanding of what it does, what its limitations are, and if it excels in any given area — or not.