Feedback of the Week - On The New Supply Chain Lessons from Dell:
This is a topic you covered to some extent in August last year with your article How Many Supply Chains Does Dell Need Now? The Dell business model and go-to-market strategy have both changed with their mass entry into the retail channel. As any good supply chain strategist knows, supply chain strategy is subservient to a company business model and go-to-market strategy. The direct go-to-market model has been served very well by renowned Dell BTO supply chain.
The indirect (i.e., retail) go-to-market model is not as well served by this. It is kind of overkill as the optimal supply chain is very cost-focused and leaned-out, with an emphasis on limiting variety (as opposed to the almost limitless variety enabled by the BTO model).
I do not see what Dell is doing as a complete abandonment of their supply chain strategy, but rather a tweak to the existing supply chain model (more outsourcing, less variety) and an additional supply chain to their portfolio (potentially build-to-stock to support retail). Dell has been a one-trick pony for many years, albeit a very good one-trick pony. I think what we are seeing is a natural supply chain evolution as the business at Dell evolves.
Kudos to Mike Cannon for having the guts to go after such a sacred cow. I would imagine that one of his biggest challenges is to convince Dell employees that the supply chain model they helped perfect and the one that has been put on a pedestal year after year has got to change.
Supply Chain Manager
High Tech Company
Name withheld by Request
Response from SCDigest Editor Dan Gilmore:
Just my quick response..
In the presentation, it was presented as a lot more than a tweak. It was presented as a major transformation.
I agree with you at one level, but:
-- it has been Dell MTO model and all that went with it, really, that has been held up as the paragon. Other PC makers, rightly or wrongly, were often criticized for the failure to get there.
-- For a long while, Dell got to compete on its own playing field. Now it has to compete on the same playing field - and it is starting almost from scratch. In that regard, it is all about execution, and the differences between the leaders will be small. Before, Dell got to compete on SCM design - and for awhile that gave it some huge advantages.
So, I think this is really big news. As I said to someone else, I doubt we will see any more How Dell Does It (real book) any time soon. And that ends an era.
Response back from Subscriber:
When I said tweak (as opposed to plain tweak) it was meant to imply a a fairly major change. Keep in mind, however, that Mike Cannon, as part of his MOC effort, needs to beat the drum loudly. Dell is suffering badly in the marketplace and rapidly losing analyst mindshare on Wall Street. If Mike Cannon, Michael Dell, and the rest of the Dell management team do not impart to the world that they are doing something major to fix things, this slide will become even more rapid. Mike has to position this as a blow-up. The fact that their BTO model was so lauded only makes this harder. From inside the company I can only imagine...it is a blow-up. Step back, however, and I do not see this as a blow-up. Yes, it is a major change for Dell.
Other manufacturers did get there, by the way, doing so in a different way - all the while preserving one of our biggest assets...the channel. As it turns out this channel model is a whole lot harder to deploy effectively than a BTO model.
You are right, it really is big news....news that many of us in the industry have been predicting. No new How Dell Does It books in the near future. Perhaps How Dell Did It with the subtitle ...And Why This Does Not Work Anymore.
Yes, that ends an era.
More on Dell:
A solid, comprehensive grasp of the supply chain industry and ODM's capabilities. Dell needs such leaders who can leverage the partners and extract maximum value from them at a competitive price. Thanks for publishing this presentation.
All I can say is, "About Time!"
I pointed out this trend to Dell management over 5 years ago and was told the Dell Direct Model will not change. It will be the diversity of channels marketing, in combination with more low-cost country manufacturing, that will impact the computer industry. Some developing markets can only be entered through their distribution channels - such as China.
The good old days of upselling from the base model worked during the growth period within U.S. and Europe, but a different approach is needed for other markets.
On Wal-Mart and RFID:
As always, great work.
Archimedes is said to have remarked about the lever: "Give me a place to stand on, and I will move the Earth." This statement is quite impressive. Someone had actually claimed (and proved in theory) that they could move this massive body called Earth if they only had a lever large enough and a place to stand!
I was first introduced to RFID when I conducted an assessment for a $5 billion player in the semiconductor industry circa 1996. I was exploring the possibility of eliminating a barcode scan & subsequent labor on Kanban deliveries that were delivered JIT to the manufacturing site. The challenge was to have their Kanban deliveries contain unique RFID chips that would identify the contents, its terminal location, supplier information, et al. When the deliveries came in, the would be placed on an unmanned conveyer and an active interrogator would determine the appropriate flow along this massive conveyor system into the correct manufacturing facility. The savings were significant. The problem: size and cost. At that time, the “chips” were the size of license plates and cost about $20 each (I think). We are now in a new century, the technology is better, the savings potential are greater, and we are still stuck on cost to implement.
I had hoped that the promise of reducing the size & cost of an RFID chip would help us “move the Earth” what with Moore’s Law and all! Today, I think that RFID is a solution in search of a problem that is expensive enough to be worth the effort.
Just like Archimedes, we must ask ourselves if it is worth the expense to “build a lever large enough & find a tenable spot to stand” just to capture more data with less labor than a bar code scan???
The Supply Chain Center