Case: Dell Inc.: Improving the Flexibility of the Desktop PC Supply Chain
It was June 2005, seemingly a good time for Dell Inc. Since the dot-com bubble burst in 2001, the price of the company’s stock had roughly doubled. Both the company’s revenue and net income were reaching new heights. In spite of the confidence and optimism, however, Dell’s desktop PC manufacturing division found that its manufacturing costs had continued to surge. Tom Wilson, one of the division’s directors, revealed: “The recent increase in Level 5 manufacturing is alarming to us at Dell. From Dell’s perspective, this adds cost to our overall manufacturing process. We are not able to take as much advantage as we ...view middle of the document...
The first widely and successfully sold desktop computer was the Apple II introduced in 1977 by Apple Computer.
In the 1980s, computers became increasingly cheaper and gained great popularity among home and business users. This trend was partly driven by the launch of the IBM PC and its associated software, which enabled the use of a spreadsheet, a word processor, presentation graphics, and a simple database application on a single relatively low-cost machine. In 1982, Time magazine named the personal computer its Man of the Year. Laptop computers truly the size of a notebook. also became available in the 1980s. The first commercially available portable computer was the Osborne 1 in 1981, which used the CP/M operating system. Although it was large and heavy by today’s standards, with a tiny CRT monitor, it had a near-revolutionary impact on business, as professionals were able to take their computer and data with them for the first time. However, it was not possible to run the Osborne on batteries; it had to be plugged in.
Personal computers became more powerful and capable of handling more complex tasks in the 1990s. By this time, they were becoming more like multi-user computers or mainframes. During this decade, desktop computers were widely advertised for their ability to support graphics and multimedia, and this power led to increased usage of desktop computers by movie studios, universities, and governments.
By the end of the 1980s, laptop computers, truly the size of a notebook, were becoming popular among business people. By 2005, high-end PCs focused more on greater reliability and more powerful multitasking capability.
Dell’s Company Background and its Direct Model
Dell was founded by Michael Dell in his University of Texas–Austin dorm room in 1984 based on a simple business model: eliminating the retailers from the sales channel and selling directly to customers. By using this model to deliver customized systems to customers with lower-than-market-average prices, Dell soon started to enjoy business success, joining the ranks of the top-five computer system makers worldwide in 1993, and became Number 1 in 2001. With three major manufacturing facilities in the United State (Austin, Texas; Nashville, Tennessee; Winston-Salem, North Carolina) and facilities in Brazil, China, Malaysia, and Ireland, Dell’s revenue for the last four quarters totaled $56 billion. Dell employs 65,200 people worldwide.1
1Dell Company Web site, Company Facts.
In addition to personal computers, Dell’s current product offerings include a variety of consumer electronics: workstations, servers, storage, monitors, printers, handhelds, LCD TVs, projectors, and so forth. Some of these products are manufactured by Dell factory associates; other products are manufactured by other companies but sold under the Dell brand.
Throughout the company’s history, Dell’s fundamental business model has not changed: selling directly to customers has become Dell’s key strategy...