Introduction
In his youth, M. Dell noticed that the computer industry had great potential but what he was quick to realize was that during that period customers had to pay huge amounts of money and could only expect poor services. His entrepreneurial spirit incited him to start rebuilding the computers he had bought and try to sell them to others.
The author mentions three golden rules at Dell that, in a way, represent a core of Dell’s business philosophy. The first one is that a large inventory is never a good thing. He justifies the claim by the fact that in the IT industry values of the products decrease tremendously fast. For that reason having a large inventory is a very bad idea because the longer the goods stay in the firm they lose their value. In addition, having that many goods are very expensive even if the goods did not lose their value because of the huge maintenance costs.
Main text
This is accomplished through their second and third main principles. The second main principle is constant contact with customers through market surveys, call centers, internet sites, and support. Basically, the entire concept of Dell is centered around the customers because they can provide information about what types of devices are needed at the moment as well as what can be improved on currently existing ones. That way the company can plan the production and avoid having huge inventories. The third principle derives from the second and that is never to have intermediaries and always sell the products directly to the customers. The benefits of this approach are twofold, having no intermediary buyers makes business simpler and more importantly, it presents an obstacle for getting feedback from the customer quickly.
The first very important logistical principle that Dell used was segmentation. It is crucial in quickly growing companies to divide increasing responsibilities because it is the only way to achieve sustainable growth. It is important to decentralize the company and reduce the workload of employees once it gets too big because too great responsibilities increase the risk of failure.
Secondly, Dell’s Direct Model, v1.1 represents great logistic strength. Its aim was to reduce the inventory inefficiency by eliminating the reseller and establishing more direct contact with the customers in order to get more precise information about what is needed on the market so that they could make it and sell it quickly without huge inventories.
Supplier management is the third very important logistic advantage that Dell has. They insist that the suppliers deliver the parts quickly and according to the precisely defined standards in terms of quality and quantity but also accurate timing. If a company wants to have quick production and selling of their goods it has to organize the supply impeccably.
Conclusion
There are also great innovations that Dell launched which are not in the domain of logistics. First in the line is information sharing. The idea is that innovations and successes in any part of the company’s global network are quickly shared and adopted in all its parts in order to be certain that the company is functioning as one and in a successful way.
Next, Dell tries to motivate the employees to think like the owners. This is achieved by ensuring specified incentives for any improvement in their work which is paid after the profit is collected. That way the company provides strong motivation for the workers to give their best effort in any domain because they are sure that the effort will be appreciated.
Finally, what is most important for being certain that the company is working at its full potential is strictly defined metrics. According to the author, at Dell metrics is everywhere, each salesperson, lawyer, engineer, or manager has to be able to tell whether he or she is achieving what is planned. This is absolutely crucial because it enables the workers to spot the problem as soon as it emerges and solve it quickly before it grows into something bigger.
References
Dell, M. (1999). Direct from Dell: Strategies that Revolutionized an Industry (Collins Business Essentials) (Reprint ed.). Harper Business.