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Essay on Dell Computers, Meeting Supply and Demand
For most of business history, inventory has been a form of security. A warehouse bulging with components, or a distribution center packed with finished products, meant that even when a customer forecast went wildly awry, there'd still be enough supply on hand to meet demand. But ever since the 1980s, when General Motors began adopting Toyota's pioneering methods in lean manufacturing, fast companies have delayered, reengineered, and scrubbed the waste from their assembly lines and supply chains by slashing lead time and stripping inventory and spare capacity from their operations.
But no one has gone as far as Dell. It's well known, of course, for nearly eliminating finished-goods inventory by cutting out resellers and connecting directly to customers. What's less known is how it has transformed the back end of its operations -- its assembly lines and supply chain -- into one of the fastest, most hyperefficient organizations on the planet. Eleven years ago, Dell carried 20 to 25 days of inventory in a sprawling network of warehouses. Today, it has no warehouses. And though it assembles nearly 80,000 computers every 24 hours, it carries no more than two hours of inventory in its factories and a maximum of just 72 hours across its entire operation. Dell's vast, global supply chain is in constant overdrive. Says Hunter: "Speed is at the core of everything we do."
hat's why inventory is a four-letter word at Dell. To Kevin Rollins, who succeeded Michael Dell as CEO this past July (Dell continues as chairman), inventory is like fish. "The longer you keep it the faster it deteriorates -- you can literally see the stuff rot," he says. "Because of their short product lifecycles, computer components depreciate anywhere from a half to a full point a week. Cutting inventory is not just a nice thing to do. It's a financial imperative."...
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