"The direct model remains our not-so-secret weapon,"
Key to the direct model was the build-to-order processes.
In the early 1990s a very bottom-up approach was developed that would get an order, schedule that order in the factory, have the parts kitted, build, verify and test, and ship. That process was key to the fast turnaround that gave them the inventory management and other advantages.
That build to order process was not purchased from SAP or IBM, it was developed by a bunch of people using MS-DOS batch files, and little databases, and custom programs, and a lot of institutional knowledge. I don't think Michael Dell or the others in management realized the true nature of the patchwork of cooperating departments and individual solutions that was the core of the direct model. They just knew from a business perspective that it worked.
By the late 1990s it was becoming clear that not all of the processes could be scaled as the company grew. You couldn't build twice as many computers wihout more than twice as many people (since you had to coordinate the new people and equipment). Great efforts were made to replace the hodgepodge of tricks and techniques and little programs and special widgets that was the build to order.
Somewhere in the replacement of all those ad-hoc steps and the push to outsource anything that was considered non-core an important part of the build-to-order system was broken, or at least damaged. The feedback cycle from customer order to verification was separated.
In the ad hoc set of processes there was a lot of complaints from customers filtering back informally to those who could change the process. These were very quickly fixed because the people working on their little part of the process could change it. A survey at the time showed that people who had a problem with their order actually had a higher opinion of Dell than people who had no trouble - because it was so responsive. Each problem resolved was a fine tuning for the whole system.
In the new system there is more reliance on process flow control that is purchased and supported from some outside vendor. Feedback from customer complaints is rarely communicated directly to those who work with the process. Summaries and filtered priority lists are used instead. This is the dark side of the call centers being so far removed from the development. Without the feedback the mistakes go uncorrected for longer which puts even more burdon on the call centers.
I think a problem was inevitable. The company was growing faster that some aspects of the build to order could expand to meet, and so the move to a scalable and unified system was inevitable. There just wasn't time to replace the process with an in house effort, and I'm not sure any one person understood it all. Something was bound to be left out, and nobody knew just what that was (customer feedback) until it was already left out of the process.
If there was one other mistake - a root cause - It was IMHO the endless effort to drive Compaq out of business. The obsession with Compaq kept the company expanding and dropping prices even at points where maybe they should have rested, and let the processes catch up with the new goals. I don't know, I never had the view from 40,000 feet. It was pretty exciting at the time, but I think it was more than the "direct model" could take.
TP
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