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Feedback is coming in at a rate greater than we can publish it - thanks for your response.

We're now reallyl behind - be patient if your letter has not yet been published.  Big Changes Next Week!

Catching up on a variety of feedback this week. Our feedback of the week is a long letter from Shashank Tilak on our pieces on Dell's challenges and management changes, including a quick search and find of its first head of an integrated supply chain organization. We also received an interesting letter from a blogger with the pen name of Retread Rose, who not surprisingly doesn't think allowing Mexican truckers in the U.S. is a good idea. One writer suggests our trivia question about the 4 M's of Lean needed a few more entries, and another says Wal-Mart also faces some challenges.

Keep the dialog going! Give us your thoughts on this week's Supply Chain topics. As always, we’ll keep your name anonymous if required.

Feedback of the Week – On Dell

In a sense I am certainly surprised that Dell did not have an integrated supply chain group until now. But there must be an informal or loosely defined control group in place. Maybe with senior people like Michael Dell and Kevin Rollins managing the supply chain 'hands on' they did not really need a formal group which spends days and hours in meetings.

I have been watching and and studying Dell Supply Chain model with complete fascination for last couple of years. Dell has always focused on actual performance. They have watched their KPIs like hawks and have always made suitable small corrections necessary to keep numbers flying off their assembly lines. The feedback loop, monitoring, empowerment of people, on the spot decision making have always helped them to make most of every (may be 'almost every') opportunity for sale. I believe they almost invariably managed to net each call on their phones and most hits on their website - into a sale. IN fact their idea of price adjustment to divert orders from shortage components to those in sufficient supply has been a great execution success. In the bargain they have managed to sustain high production levels and have also managed to push up value per unit.

This success cannot be built without a well thought out strategy and well maintained group in place.

With this story in background, here are some more items that do raise a few questions -

• Focus on new product is perfect idea. Building business in Enterprise Server and Storage business is another good idea. Similarly focus on Services is another step in right direction. What is not clear is how the three are going together. If Dell had set up datacenter to service client needs - it will possibly make better sense. It will provide services, provide a perfect ground for testing high end equipment and improve the new product cycle. There is no mention about it in the memo. Possibly this is because it is of strategic importance and will not be meant for “mass consumption”. But some clarity on this would have helped.
• Focus on CE (Customer Experience) is a perfect action item. There is no mention about what solutions and services are target. Idea about database marketing and targeting smaller customers also do not seem to indicate nothing new. But chances are that these additions in sales would come at substantial increase in sales cost and overall operating expenses. This will run counter to targets mentioned here. How this will be managed is a real question.
• There is a good focus on cost cutting. I hope this would not mean (usual “American”) means of lay offs and otherwise cutting number of people. One of the things that strikes is about (still) excellent operations parameters. I am primarily referring to details financial and operating position for three months ending on Nov 3 2006. Some of the real good points are -
• Total Days Supply of Inventory is at 5 days. This seems to have gone up from 4 as of 3rd Feb 2006.
• Days of sales outstanding are at 33. This seems to have gone up from 29 as of Feb. 2006.
• With total $ 11,749 million in cash and investments, why are the days of accounts payable still at 78 (against 77 in Feb.)? One would think that a cash rich company will obtain good discounts by offering earlier payments. Even if one were to offer a 2% discount for payment in 30 days it will save about $ 310 million. (This is based on figure or current liabilities of about $ 15.927 billion in last annual statement as of Feb 06). The basic number involved here may be different but opportunity of saving couple of hundred million dollars exists. In past (may be in 2004 GE has done precisely that to reduce overall CP burden and saving of interest on that. For such a cash rich company again a liability of som $ 236 Million again does not really fit well. All of this must be high interest burden and there would be good scope to reduce this burden as well.
• Focus on quality is another well deserved item. I have bought a Dell Inspiron 600 Notebook - back in May 2004. It needed service total 3 times. Once in US and twice in India. Each time service and delivery of the necessary components etc was perfectly timed. But basic question is WHY? Apart from that the battery recall again was an issue. Once again, web page, phone and other support as well as actual delivery was excellent.
• There is no doubt about basic execution capability in terms of supply chain. But there are definite opportunities for improving quality and overall processes.

Main point of sending this feedback is about covering all bases. I am sure that Mr Dell and his team is experienced and skilled in their job. But so far their fanatical focus has been on execution and supply chain excellence. May be there are other areas that they should look at.

Shashank Tilak

On Mexican Truckers in US:

This is all tying in together: the speed limiters, the push to change the work VISA/immigration laws, the EOBRs and HOS changes. All being pushed by the ATA and its member clients. However, how many of the Mexican trucks coming into this country will be required to comply with those same changes being recommended on the U.S. carriers. Also, remember, some of those same "big box" carriers also have investments in Mexican carriers.

Does anyone know which Mexican carriers have investors from U.S. Carriers and if they are included in the list of Mexican carriers allowed into the U.S. with next months influx? Something to consider. There's more than one way to defeat the competition and address the "driver shortage." What are the possibilities there are other arenas this is being played out in as well.

The driver shortage is actually a shortage of decently paid drivers. Drivers’ wages have stagnated for decades with periodic ups and downs. Presently the wages being earned by drivers are the same as they were in the 80s by some drivers. Unfortunately, wages have not kept up with the advances in the Cost of Living. I am far from alone in this opinion. Many more opinions and comments on this issue are available at the provided link as well. This is one of a few key issues being discussed which will affect safety on our Nations highways, as well as the costs to consumers, both in goods purchased and in potential lives lost. As a good attempt at first impressions, those Mexican carriers coming across the border will be hand picked with the best equipment and best drivers (possibly bi-lingual drivers). Will this be the case once the programs year long period is over? We already have read the reports of Mexican carriers coming across the border beyond the current 25 mile commercial zone. Mexican plated trucks have been witnessed in Oklahoma and Northern California. Accidents with similar trucks have been reported by the media reporting as being driven by Mexican licensed drivers who can not speak, understand nor read English resulting in not understanding road/construction signs and becoming lost in the process.

Retread (Rose)

On Wal-Mart:

I think the challenge for Wal-Mart is more one of perception than technology.

You have to wonder what percentage of Wal-Mart's every day store shoppers are also online shoppers.

Meanwhile, Wal-Mart has had well-publicized problems attracting better-heeled shoppers into its stores - witness its problems trying to bring in more fashionable clothing. The shoppers who could afford the new lines didn't want to buy their clothes at Wal-Mart. Meanwhile, traditional Wal-Mart shoppers were put off.

Will those higher-end shoppers buy from Wal-Mart online, or would they still rather go to Amazon or another site for reasons of perception.

Bob Trebilcock

Editor-at-large

Modern Materials Handling

On the 4 (or 6?) M's of Lean:

Regarding "What are the "4 M's" in Lean thinking that can be manipulated to produce value? (Material, machine, man and method)":

I have always been aware of 5 M's: the four you list plus measurement.

Occasional, I have heard of a 6th - Mother Nature.

David Armstrong
Sr. Manager, Worldwide Inventory

Flextronics

Q.  What is Jidoka?

A. An element of the Toyota Production System, focused on building quality into each step of the supply chain and reducing irregularity/variance.