If you have read about Dell in the past, chances are you’ve seen articles about the direct model—a process that allows us to build customized systems and ship them directly to customers. Many times, supply chain management is an integral part of the discussion. Our supply chain enables the build-to-order process behind the direct model. Recent coverage in the media and blogosphere, however, indicates that advantage is shrinking. What’s the reality?”
Well, it may depend on what part of the supply chain you are looking at … on the components or supply side of our business, Dell customers (along with all consumers of electronics) continue to benefit from the effects of Moore’s Law—as the density of transistors on a silicon chip continues to increase, we all get to purchase better technology cheaper and, though some suggest that the pace of Moore’s Law will slow down overall, it still helps us keep cost low. When component costs decline, it allows us to pass those savings on to customers. We don’t have to stock a bunch of inventory—as of Q2, we maintained about 5 days of inventory in the last year, and those levels have been pretty consistent over the last 6 years. Our productive inventory is measured in hours instead of days or weeks.
Have some of our competitors improved in terms of efficiency? Sure, but we’re not standing still. Another key strategy for us is building systems close to our customers. We currently operate a network of 7 manufacturing facilities around the world, and we just announced new manufacturing locations in Poland and India. This global reach allows us to deliver custom products to our customers in a matter of days. Our ultimate goal is to make it easier for consumers and business customers to purchase the latest technology at a fair price.
There’s a lot of work that goes on behind the scenes to make this happen. I’ve just scratched the surface of Dell’s supply chain management, and I look forward to sharing more details on a variety of related topics here in the future.