I agree with most of what you're saying, Michelle.
There are huge efficiencies in implementing distribution automation. As you say, Dell has done a great job of this. However, in businesses where products are relatively interchangeable, once your competitors have made the investment in developing and implementing efficient online purchasing, production and distribution systems, margins will tend to fall. The companies that will get squeezed in this scenario are those that: 1. Stick with the old, less-efficient methods and don't or can't offer enough convincing value to customers to justify the inefficiency, or 2. Adopt the new Internet-based methods, but try to slap that on top of their traditional practices and end up losing focus. (Compaq may be in this category.)
Dell, as you note, has been successful both because it has been able to differentiate its products in terms of quality and because it has been the only, major producer to adopt the highly efficient methods and have that be their sole focus. We shall see if they are able to retain that kind of lead as other PC manufacturers begin to undercut price at the same quality level and adopt Internet-based ordering, production and distribution. |
