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- August 30, 2007 -


Supply Chain News: Amid Myriad Business Challenges, Dell has Supply Chain and Manufacturing Issues in Delivering New Notebook Line


Demand Exceeds Forecasts, Leading to Some Supply Squeezes; Painting Process “Adds Complexity” to Make-to-Order Flow; No More White Covers



SCDigest Editorial Staff

The News: Dell, long an icon of supply chain excellence, has been struggling to regain growth in revenues, profits and stock price, amid fierce challenges from HP and other competitors. Acknowledging that the company had room for supply chain improvements, founder Michael Dell earlier this year hired the company’s first ever chief supply chain officer after retaking the CEO role. (See Dell Names New Supply Chain Chief.)

SC Digest Says:
What exactly went wrong in the supply chain isn’t clear, . . . either the colored models were released to market before the supply chain was really ready, or else the painting process just doesn’t work well in a make-to-order mode.

What do you say? Send us your comments here

In recent weeks, however, the company has been struggling to deliver new notebook models, especially those offering color choices. On its web site, Dell has published posts saying delays in the ultra-portable M1330 and newer Inspiron models were caused by a shortage of key components for the backlit displays, as demand has exceeded Dell's forecast, and challenges in meeting quality requirements in the painting process for non-black colors.

The Impact: First, it is amazing how closely a company’s perception for supply chain excellence is tied to its overall business results. While in general operating its supply chain as it always has, when the overall company results are shaky, as they have been recently, we don’t hear much about Dell’s supply chain greatness, and do hear it seems a lot more about its inevitable supply chain glitches.

Second, market and competitive conditions change, and companies need to be aware that as they do, the supply chain will also need to evolve – and perhaps require new skill sets. As we note elsewhere (See Dell Will Have a Lot to Learn as it Embraces Retail Sales Model), there is some evidence Dell is finding challenges early on, as one would expect, executing the supply chain in the very different world of retail, as it begins selling PCs through Wal-Mart and other reseller channels, rather than make-to-order. 

And while the details of the notebook cover painting process aren’t clear, the acknowledged quality problems, in a process clearly part of the make-to-order strategy (i.e., painting is done, in some way, reactive to real orders), it is certainly worth asking whether Dell would not have been better off to pre-build/paint covers to a forecast, perhaps using an outside contractor which really understood the painting challenges.

The Story: In August, Dell has posted two commentaries by company execs explaining the delays in getting customer orders for notebook PCs delivered.

Last Friday, the blog-like posting noted “To date, color options are the main source of delay on Inspiron notebooks. Basic colors like black are easier to produce. Premium colors and finishes like we use on the Inspiron models introduce complexity into the process, and that's holding things up.”

Also noted were supply-demand issues: “While premium colors are the main reason for delay of our Inspiron notebooks, displays are a secondary reason—some screen sizes are in short supply.”

The company has also discontinued a pearl white option for the cover, which it said required five coats of paint to get right.

As Dell, by most reports, continues to lose some market share to HP, the bad PR was another blow to Michael Dell’s efforts to generate a recovery. What exactly went wrong in the supply chain isn’t clear, but for a company that says it treats Sales and Operations Planning “like a religion,” it seems likely that under the pressure to increase sales, either the colored models were released to market before the supply chain was really ready, or else the painting process just doesn’t work well in a make-to-order mode. While pre-ordering painted covers would increase inventory and some risk if consumer demand is different than the color assortment ordered, in retrospect that decision would probably look pretty good.

What are your thoughts on Dell’s latest supply chain glitch? Any lessons to be learned? Let us know your thoughts at the Feedback button below.

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