Monday, February 3, 2014

Update on Dell

After reading the Fast Company article titled "Living in Dell Time", I was curious to know how Dell’s focus on lean manufacturing and just-in-time inventory management has developed over the past 10 years since the article was published.

Digging into recent business operations and management news, it is clear that Dell has continued to change in dynamic ways in response to market changes. In 2004, when the Fast Company article was written, Dell’s revenue came from selling PCs. As the 2000s progressed, the market share for PCs was dramatically reduced by the rise of the smart phone and tablet computers. In addition, Dell has had increased competition from rising Asian PC manufacturers who have been strategically selling products at cheaper prices and accepting lower profit margins in order to gain market share. Dell has responded in some untraditionally ways for a publicly owned product oriented business. In early last year, founder and CEO Michael Dell led a leveraged buyback, making the publicly traded company into a private company. The purpose of the buyout is to let Dell try their hand at providing IT and cloud services without causing large variability in their stock prices. As technology options have expanded, businesses have a growing need for outside expertise to provide advice on the best IT solutions. 

Dell has accepted the fact that fewer people want to buy PCs today than a decade ago. Lean manufacturing’s focus on letting the customer pull the product through the process and identifying value, likely helped Dell identify the market shifts early on, avoid holding a bunch of obsolete inventory, and respond in flexible ways. However, moving away from manufacturing and into IT services comes at a price. Making less product and providing more services requires a change in their workforce. Multiple manufacturing plants has closed in the last few years and the Dell layoff program is estimated to layoff around 15,000 people in the next few weeks.

The Fast Company article refers to an internal sales revenue goal of $60 billion which the company wanted to achieve within a few years of 2004.  In 2013, Dell reported $56.62 billion in revenue. Not quite $60 billion, but still impressive given the circumstances.
It will be interesting to see how Dell applies their history of lean strategies and speed to their new IT services division. How successful do you think Dell will be in transitioning away from products and into services? It seems like if the company have stuck with making computers and scaled back their operations instead, they would have been looked down upon and criticized. Why is there the prevailing attitude in business that growth is necessary for success?


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