SPM,
The Harvard Business Review interview with Michael Dell is the best thing I have EVER read on their business process. Anyone and everyone
interested in DELL should read this interview.
Excerpt from the Harvard Business Review interview with MD:
Q. Is that what you mean by virtual integration with your customers?
MD. It's part of it. There are so many information links between us and our customers. For example, we can help large global customers manage their total purchase of PCs by selling them a standard product. Then when the guy whose computer isnt working calls in from Singapore, the IT people dont have to spend the first 30 minutes just figuring out what configuration of hardware and software he's using. Selling direct allows us to keep track of the companys total PC purchases, country by country - and that's valuable information we can feed back to them. We sometimes know more about a customers operations than they do themselves.
Close customer relationships have allowed us to dramatically extend the value we deliver to our customers. Today we routinely load the customers software in our factory. Eastman Chemical, for example, has their own unique mix of software, some of it licenced from Microsoft, some of it they've written themselves, some of it having to do with the way their network works. Normally, they would get their PCs, take them out of the box, and them some guy carrying a walkie-talkie and diskettes and CD-ROMS would come to each employee's desk to hook the system up and loadd all that software. Typically, this takes an hour or two- and costs $200 to $300- and its a nuisance.
Our solution was to create a massive network in our factory with high-speed 100 megabit Ethernet. We'll load Eastman Chemical's software onto a huge Dell server. Then when a machine comes down the assembly line and says, "I'm an Eastman Chemical analyst workstation, configuration number 14," all of a sudden a few hundred megabytes of data come rushing through the network and onto the workstations hard disk, just as part of the progressive build through our factory. If the customer wants, we can put an asset tag with the company's logo on the machine, and we can keep an electronic register of the customer's assets. Tht's a lot easier thn the customer sending some guy around on a thankless mission, placing asset tags on computers when he can find them.
What happens to the money our customer is saving? They get to keep most of it. We could say, "Well, it costs you $300 to do it, so we'll charge you 250." But instead we charge $15 to $20, and we make our product and our service much more valuable. It aso means we're not going to be just your PC vendor anymore. We're going to be your IT deparment for PC's.
Boeing, for example, has 100,000 Dell PCs, and we have 30 people that live at Boeing, and if you look at the things we're doing for them or for other customers, we don't look like a supplier, we look more like Boeing's PC department. We become intimately involved in planning their PC needs and the configuration of their network.
It's not that we make these decisions by ourselves. The're certainly using their own people to get the best answer for the company. But the people working on PCs together, both from Dell and Boeing, understand the needs in a very intimate way. They're right there living it and breathing it, as opposed to the typical vendor who says, "Here are your computers. See you later."
We've always visited clients, but now some of our accounts are large enough to justify a dedicated on-site team. Remember, alot of companies have far more complex problems to deal with than PC purchasing and servicing. They cant wait to get somebody else to take care of that so they can worry about more strategic issues.
------------------------------------------------------------
Other excerpts:
"We tell our suppliers exactly what our daily production reqirements are. So it's not, "Well, every 2 weeks deliver 5,000 to this warehouse, and we'll put them on the shelf, and then we'll take them off the shelf." It's, "Tomorrow morning we need 8,562, and deliver them to door number seven by 7 a.m."....
And because we build to our customer's order, typically, with just 5 or 6 days of lead time, suppliers dont have to worry about sell-through. We only maintain a few days- in some cases a few hours- of raw materials on hand.We communicate inventory levels and replenishment needs regularly-with some vendors, hourly.
-------------------------------------------------------------
The typical case in our industry is the factory building 10,000 units a day, day in and day out. First the machines stack up in the warehouse, and then they stack up in the channel. And all of a sudden, the guy at the end of the chain hollers, "Whoa, hey, we've got too many of these. Everbody stop!" And the order to stop flows back through the chain until it reaches every component supplier. It's literally stop and start, because if you have a 90-day lag between the point of demand and the point of supply, youre going to have alot of inefficiency in the process. And the more inventory and time you have, the more variability, and the more problems. In our industry, there's alot of what I call bad hygiene. Companies stuff the channel to get rid of old inventory and to meet short-term financial objectives. We think our approach is better. We substitute information for inventory and ship only when we have real demand from real end customers..............
-----------------------------------------------------------------
The entire interview is 12 pages. The point I take from this interview is that this company is much more than "just a boxmaker." It is a service company, an effeciency engine with catlike reflexes, grown from the ground up, and one that knows no peer. For the longs...smile and feel comfortable. For the shorts...well, I hope you dont foul them.
stephen |
