RE: The second potential downside in a JIT plant is a shortage of components or a disruption in supply. In Dell's case this would likely be the result of problems with INTC. Successful implementation of JIT systems depends on excellent communication between the two companies. I don't know the details of how that works with Dell and Intel, but I would be very surprised if there weren't a very efficient, fully automated electronic ordering system in place.
My point is that With a 8-12 week cycle for wafer starts and build time,
Despite how good that comunication is, INTC wants more visabality.
Why can't component prices rise ?
Is that not the reason MU went to $90 once upon a time ?
Capacity is sitting idle today to produce just about everything.
If demand were to surge, I think it would take more than a day or two to bring that capacity back on line. Then another 2-3 months to actualy get the finished out the door.
What I am talking about may be 5 years away.
By then, DELL may be the only PC maker that cares about making money on PC's. The other intergrated companies, CPQ IBM HWP won't.
This is what the whole thing comes back to.
DELL need to make money on every box they sell because that is all they sell. IBM CPQ HWP are putting very competitive BTO programs and soon won't care weather they make money on the boxes or not. They are after a much bigger and much more profitable contract for service and support ect.
If HWP CPQ IBM get serious about this concept, they are going to drive the price of the PC into the ground just like the cell phone market. Why ? you need more support for more computers. Give the PC's away and you need more support. Long term contracts.
So, CPQ is willing to give firm orders to INTC, INTC likes that.
And DELL is only willing to give flexable orders. You have to fill the Firm order first. They are the ones with the most options.
DELL has the fewest.
I appreciate the accounting, but you are talking about past inventory. It does not exist anymore.
CPQ actualy has better prices on some configurations that DELL. But I figure these are sales that DELL does not want anymore. After all DELL only wants to sell the best of the mix.
My point is that a part shortage would not be resolved quickly at the rate capacity is being shut down. That could hit DELL the hardest as they are the least reluctand to deviate from their current model as that would hit their stock price. Of course, should this situation arise, not abandoning their model will hurt their stock price.
Jim |
