Tuesday, February 19, 2013
Supply Chains in Dell and Apple
After reading the article, living in Dell time, I was very impressive by its just-in-time manufacturing model, while many other companies question the wisdom of lean manufacture in the very uncertain world. It’s a natural law in manufacture that the faster you turn inventory, the lower you costs. Undoubtedly, Dell is a benchmark in apotheosis in lean inventory and manufacture. First, they focus on very detail in logistics to ensure the raw material arriving in factories as fast as possible. Second, they keep tracking the purchasing patterns and forecast demand three times a day. Third, choose suppliers who are willing to store inventories for them. Dell strives to get better faster supply chain without limitation.
I think Dell’s supply chain management deserves people’s admiration. Then I come up with Apple, the so called the best supply chain in the world. Then I found both similarities and contrast between the supply chain of Apple and Dell.
Supply chain experts still bring up the practice that Dell ended retail sales and took its business directly to customers in 1994. The first Apple store was opened in 2011. The reason why Dell starts direct-sale store is that they believe supply chain starts with customer. By cutting out retailers and selling directly to its customers, Dell can far better forecast the real customer demand. It also applies to Apple. Direct-sale store has greater benefits than retailer in observing customers’ need. Similar with Dell, Apple store can track demand by the store and by the hour, and adjust production forecasts daily.
Both Dell and Apple take attempt to reduce the complexity. For example, Dell cut the number of its core PC suppliers from several hundred to about 25. Apple always avoids customization, which has its advantage that they try to follow a much unified strategy and every part of their business is around the strategy.
The very difference between Dell and Apple is their inventory strategy. Dell uses real-time manufacturing and pursues zero inventories. While Apple orders large volumes of components ahead of time, locking in lower prices and also locking out competitors from getting them.
These two inventory strategies are very distinctive, but both reasonable if considering their own characters. Basically, they are both highly risky. But Dell and Apple apply completely different ways to deal with it. Dell focus on demand forecast with large database and data analysis. Extremely lean inventory is the core competence for Dell to get to low price and survive in the PC market. On the other hand, Apple’s outstanding products and marketing strategies cultivate tons of apple fans which make sure that people will buy their products and there will be no obsolete inventory left.
Some companies such as TOYOTA and Dell apply real-time manufacture successfully. I think the key in real-time manufacture is demand forecast which requires large amount of data, intelligent analysis of the data, good sale and marketing strategies to ensure the outflow of products. The threaten lies in real-time manufacture is quite large. I quite doubt whether it’s cost-effective or not. Is it a better strategy if company can control the inventory in a comparatively larger range rather than pursuing completely free inventory?