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Technology Stocks : Dell Technologies Inc.

DELL 138.94

0.0%

Dec 5 9:30 AM EST

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To: kaka who wrote (175767)	1/25/2007 10:50:03 PM
From: TigerPaw	Read Replies (4) of 176387

I was thinking some more on the price of efficiency. Dell grew from a garage company to a huge company in a piecemeal fashion, and that meant that many of it's processes grew with it in an ad-hoc fashion. This was especially true of it's build-to-order techniques. The potential customers and suppliers and the important customers changed frequently, as did the technology to implement the process, as did the scale and variety of the orders. The result was a fairly labor intensive set of procedures which could be duplicated with changes by adding a few more people and a few changes in how they worked. It was very flexible and delivered a huge amount of choice to the very pleased customers at a good price. It was basically an expansion of the original Michael Dell business of providing what the customer asked for from his dorm room. It was enhanced by Mort Topfer's relentless push into selling online and on-phone instead of in stores. Enter the MBA driven ideas of Kevin Rollins. The manufacturing processes which had to be revised and replaced with every new iteration of the product were seen as unproductive. The idea was launched that an extreme price cut would finally destroy all competition and the way to pay for a price cut was with extreme efficiency. Every process came under scrutiny to cut a step, or eliminate a floppy disk, and above all, to get someone other than Dell to do the work because they could be pressured to compete for the privilege at a lower cost. This efficiency came with a hidden cost. The new processes with their lower overhead and personnel requirements were also much less flexible than the old way. No longer did the the process change with each new customer group or technology, but instead the suppliers and customers were expected to change to match the streamlined Dell new way. Dell embraced single suppliers and outsourced experts in a fit to cut costs even though the volume Dell customers were actually more concerned about responsiveness than initial cost. When the single suppliers stumbled with broken commitments like Rambus or non-English speaking support, there was no redundancy or flexibility left to cover for the mistakes. An extremely efficient organization has insufficient resources to avoid or correct missteps. TP

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