Dell Inc.
Don’t bother asking computer giant Dell Inc. about the prolonged slump in the high-tech market — the company just posted a 16% increase in sales for its most recent quarter, the sixth straight quarter Dell has enjoyed a double-digit revenue gain. Even more impressively, the hike in sales was accompanied by a 21% increase in profit. All told, Dell expects to reach $40 billion for the year, a substantial improvement on the $32 billion in sales it had last year.
The secret to Dell’s success is really no secret at all — the company has said all along that its direct model works because of a single-minded adherence to supply chain excellence. The company manufactures more than 50,000 computers every day, but carries only three to four days’ worth of inventory, when many of its competitors carry between 20-30 days of inventory. However, Dell isn’t exactly sitting on its laurels.
“We’re on the tip of the iceberg,” says Dick Hunter, vice president, Americas Manufacturing Operation. “Most people think that Dell has reached the ultimate goal in supply chain management — an inventory of three days. We disagree; every day we work to bring that number down. Our current goal is to get down to two days. Long term, I think we can get even lower.”
The key to that will be transition management.
“We sell what we have and we don’t sell what we don’t have,” explains Hunter. “We don’t tolerate excess inventory. We do whatever it takes to move inventory, even if it means creating demand. Working through our direct model and having such tight control of the supply chain allows us this significant competitive advantage.
The company keeps what it calls a supplier report card on every supplier, and tracks each supplier’s performance against a set of metrics maintained by Dell.
Against the charge that Dell’s remarkably low inventory levels come at the expense of its