Dell Revamps the Business World of Computers
Dell Revamps the Business World of Computers
A new market niche proved to be proficient in the computer world. Michael S. Dell has revamped the way one does buying for computers. Dell had an incredible idea to build custom computers to consumers; “no one had attempted to sell directly to a customer”. Dell was able to cut the middle man and ensure that he used all valuable resources including time to get the right equipment to build a well suited PC. A customized computer led to Dell cashing in on this new market niche so fast that they could not keep up with the demand. Dell had a clear plan for his production of computers and this is what helped him beat the competition.
While competitors IBM and Compaq computers languish on dealer shelves for two months, Dell was genius enough to ensure ordering of components and assembling computers was done once an order was booked. This meant Dells parts on average are 60 days newer than those in an IBM or Compaq machine sold at the same time. This turns into 6% profit advantage in components alone. Dell also found a way to get most supplies to keep components warehoused minutes from its factory. Dell has done this by reducing its number of suppliers to those that will help with the warehousing plan. Keeping the flow of parts requires precise coordination. Dell was able to cut cost on components by building a relationship with close Suppliers like Caliber Logistics which is just minutes from its Austin assembly plant. Suppliers restock the warehouse and manage their own inventories in return Dell doesn’t get billed until the components leave the warehouse.
Dell was very strategic of where the assembly plants where located as this helped save time and make production seamless for consumers. Another way he made his business even more successful was Dell use to buy its main circuit board—the heart of a computer by bulk to get discounts, but instead now uses regional suppliers to save time.
Time is a valuable resource, Dell figured if we increase the cost of where we get materials then intern they can get more PC’s to consumers, and so they now trucked circuit boards from Mexico which takes 15hours instead of 22days by boat from its previous Indian supplier. Then their monitors are scheduled to ship once the shipper receives an E-mail message and is shipped along with the PC. By no longer shipping monitors first to Dell and then to buyers, dell saves some $30 per display in freight cost. The biggest earning where their commercial based clients as it accounts for 60% of sales. Dell was able to enter a new market and entering into the World Wide Web. Besides taking orders over the phone Dell plans to make attractive online sales to its biggest buyers Eastman Chemical, Monsanto, and Wells Fargo. By midyear Dell plans to deliver E-commerce set ups to 75 companies. Their employees will be able to order a PC and automatically receive a corporate price.