SCDigest Editorial Staff

Cannon Says:

We have to evolve our model because our competitive environment is evolving and changing. What Do You Say? Click Here to Send Us Your Comments Click Here to See Reader Feedback

The following is a complete transcript of a presentation Michael Cannon, Dell’s President of Global Operations, made to kick-off a company meeting with stock market analysts two weeks ago. In it, he describes the company’s plan for significant supply chain transformation. Last week, SCDigest Editor Dan Gilmore wrote in his First Thoughts column that these planned changes really do represent the end of an era – Dell is now just like the rest of us (See The New Supply Chain Lessons from Dell).

Michael Cannon’s Presentation:

I have actually been at Dell a little more than one year; in fact, I think it has been about one year and 3 weeks.  In some regards, it seems like a really short period of time and in some aspects it seems like a really long period of time, in a positive way.  Even though my tenure with the company is relatively short, I have a long association with Dell.  Some of my background - particularly as it relates to Dell – I was CEO of Maxtor Corporation, which is a hard disk drive company, for about 6½ years and Dell was my largest customer when I was running Maxtor, and I got to know Michael very well, and I got to know the Dell model very well.  After leaving Maxtor, I became CEO of Selectron Corporation, which is an electronics manufacturing services company, a contract manufacturer if you will – I didn’t have so much association with Dell during that 4-year period, but remained in contact with Michael on some level of frequency.

I met with Michael during a world economic forum a year ago from this last one. He actually talked to me about the challenges facing Dell, what he was going to do with the company, where he was going to take it – and I just got totally excited about joining up with them and really helping the company out.  I think there is some major things you will see us doing in global operations that I think will be enormously valuable to Dell in returning to leadership competitiveness and leadership in the industry and delivering every significant share holder value. 

So before I get into some of the specifics, let me first talk about how much things have changed.  You all followed me in history and you know this very well, but I think it is worth repeating or talking about before I talk specifically about the things the global operations organization is working on.  I guess the way I describe it is our environment has dramatically changed over time.  You look at the 23-year history of the company and how the company has evolved – there has been dramatic change in the competitive landscape affecting very significant areas of the company, particularly in the last 5 years.

(Supply Chain Trends and Issues Article - Continued Below)

It’s hard to argue that the direct model and Dell’s supply chain wasn’t the perfect answer for the company for a very long time.  You got the company to 60 plus billion dollars. It’s hard to say that didn’t drive consistent profitability and enormous cash generation.  But as you will hear throughout the course of the next day and a half, we have to evolve our model because our competitive environment is evolving and changing.  And that has to do with the direct model.  And you’ve all heard Michael talk about direct is not a religion, it is a business model. 

The direct model remains a primary focus of the company going forward.  It is still hugely relevant, offers enormous value for customers and helps us win a lot of business our competitors can’t reach.  So we are going to continue to perfect the direct model, but given how the market has changed overall, particularly in areas such as consumer, and the growth in emerging markets, we need more than just a direct model.  You’ll hear over the next day and a half quite a bit about how Dell is entering the consumer market, retail in particular, developing a channel business.  So that is an area where to satisfy our customers. We want to participate in growth segments, particularly the high growth segments where we have nice profit opportunity.  We have to offer our full range of products and services in the way the customers want to buy them, not particularly in the way we want to supply them and provide them.  So there will be quite a bit of change in that and I think some very exciting opportunities. 

Along with that, our supply chain needs to change dramatically.  When you look back through the history of the company, we evolved a supply chain here in a manufacturing strategy that focused on building pretty amazing levels of complexity customization with very short cycle times, meaning we could respond the fastest to the customer order when they wanted a very uniquely configured product.  Here again, we are going to continue to get better at that.  There is a terrific business with delivering customers the customization levels, the personalization levels that they want, and doing it better than anyone else. 

But there have evolved major segments of the market that don’t need that level of customization. They are quite happy with the fixed configuration or maybe very limited configurations, and they are quite OK with an extended cycle time or delivery time. So we can fulfill that demand with a different supply chain and lower cost geographies. 

That is very much the kind of transformational work we are doing in global supply chain, the global operations organization in order to evolve our supply chain and make us more competitive in each major market. So how are we doing that?  How are we making all those decisions about the supply chain? 

I will talk about specific areas we are working on for cost reduction. It kind of starts out with the premise, from my perspective, that what we need to do is to provide the customers with great satisfaction on their needs, better than our competitors, in a way that delivers total lowest landed cost, anywhere in world. 

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