It has been a fairly active week for news related to the world of supply chain operations and strategy, which provides this blogger some content for multiple posts.
The most interesting news was from Dell, which communicated to analysts and press its intention to attack $3B in needed cost savings, the bulk of which will come from a soon to be reengineered supply chain. Dell will be moving away from its 100% configure-to-order supply chain model.
In a specific article by CIO Magazine, Dell’s President of Global Operations declared that the sole Dell Direct distribution model, which is predicated on customer configured models, could no longer serve the long-term growth needs for Dell. The company instead plans to move more toward fixed configuration product offerings sold to retailers. Of more supply chain interest is an implied shift of ramping-up manufacturing and distribution to support new emerging markets, while ramping down some factories (presumed higher cost) , such as the announced intent to close Dell’s Austin Texas desktop production factory.
As an outsider looking in, I’m sure Dell senior management had many business motivators to embark on this strategy. But, I can’t help myself to mention that we’ve seen this type of “movie script” played out constantly in consumer electronics and other industries.
The script goes something like this:
Enter the CFO/CEO- The cost structure needs to be reduced, and the supply chain holds the keys.
Enter the VP of Ops- We are providing too many product configurations, and it’s too expensive to maintain.
Enter the VP of Supply Chain and Procurement- There are many other low-cost manufacturing and distribution options within the far east and eastern Europe that can support a high volume of limited product offerings.
Enter the Heads of Logistics and Distribution- Whatever you decide, we’ll figure it out and make it happen
Enter the Customer- What happened to all my choices? What if I want the product in or with different options? Who do I call to resolve my problem?
Before I run the risk of annoying the supply chain team at Dell, let me flat out state that I make no predictions pro or con with this post. It’s certainly important that Dell recognizes its supply chain holds the key to maintaining long-term competitiveness.
But I do make the point that in changes such as this, there needs to be a very strong voice coming from the supply chain side of the overall organization. We don’t have to remind Dell of its previous cost efficient decision to outsource technical and customer support to India, and what result that brought to bear for Dell customers, myself included.
We often point out that the most significant challenge for supply chains is the ability to balance the tradeoffs of serving customers vs. overall cost. In previous year’s, many texts cited Dell as having the best leveraged supply chain. Over the coming months, we will have the opportunity to observe Dell in its efforts to transform the supply chain and prove that it can balance both factors. Stay tuned for this next movie.
Let’s hear your comments.