Dell direct model still not well understood, VP says

Suppliers deliver to Dell's factories within 90 minutes

Dell’s direct sales model via the internet and phone is still not understood by many, says Dell executive Mike Gray, who visited New Zealand recently.

“It’s amazing that they don’t understand, even experienced IT buyers,” he says.

Gray carries the title of supply chain evangelist. He was in Wellington recently as part of a six-city Australasian visit.

The thing that is not well understood is Dell’s low inventory model. “That makes corporate customers anxious,” Gray says. “They think we buy components anywhere we can get them. The facts are quite contrary. We have ensured our network can supply anywhere, and that offers massive stability over time.”

Asia Pacific is serviced by a plant in Penang, Malaysia. That in turn is serviced by a holding warehouse that contains all the necessary componentry from Dell suppliers.

“We reschedule our factories several times a day,” says Gray. “Based on those schedules, we advise our suppliers and they deliver to our factories within 90 minutes.” The holding warehouse is stocked based on forecasts.

Dell assigns a serial number to each machine at the beginning of the assembly process, rather than at the end, which Gray says gives absolute traceability through the supply chain.

He says that, in many cases, Dell customers want to improve their own supply chains so they are adopting some of Dell’s techniques.

Corporate and institutional customers make up 85% of the customer base by revenue, currently at around $US56 billion (NZ$89 billion) an year.

That said, Dell this month issued a warning that second-quarter earnings and revenue would fall below forecasts.

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