Updated: Wal-Mart and Dell New Bed-Fellows?
I recently wrote about Dell’s move away from strict adherence to the direct selling model (and Mark Spearman talked about the idea and how Dell shot him down in a LeanBlog Podcast recorded before Dell’s announcements).
Dell has announced they will sell 2 desktop models and 1 laptop model through Wal-Mart stores. I’m curious to see if pallets of PC’s will pass through the massive Wal-Mart distribution centers or if Dell will ship direct to stores (with each store taking the traditional role of “customer”).
Another question — will Wal-Mart force Dell to ship containers full of PC’s from Asia instead of trucking them from Texas, Tennessee, or North Carolina, where they currently build desktops for the U.S. market? (Laptops already come from Asia). Kevin Meyer had an excellent post at the Evolving Excellence blog recently that talked about Wal-Mart discovering how long, slow supply chains from Asia lead to inventory problems.
Wal-Mart often gets lumped into the “lean” category in the business press because they have low inventory. I’d argue that Wal-Mart isn’t lean because they are famous for pushing suppliers to China, except the one that famously said “no” (and another link to Kevin). Dell has also done the same thing over time — I know many electronics are ONLY made in Asia and Dell might have no control over that. But, the PC cases used to be built in Texas, but Dell shifted production overseas in the chase for cheap labor. That’s another reason I don’t like to consider Dell a “lean” company (in the Toyota sense), although they are working on that recently.
Dell’s saving grace has been the realization that it’s better to continue building the bigger and heavier PC’s and Servers in the U.S. instead of Mexico, where the labor is cheaper (but logistics are slower and more complex). Other than that, it seems that, from a sourcing standpoint, Dell and Wal-Mart are already like-minded (sourcing laptops, components, TV’s, etc from Asia), so Wal-Mart might as well sell Dell’s products.
Updated: A few more thoughts after reading a few more sources while traveling today.
Unlike tech-focused retailers such as Best Buy, Wal-Mart won’t force Dell to create big shelf displays or keep certain models in stock, he says. They’ll just stack and sell whatever PCs Dell sends them, he says.
I wonder how true that really is. Does that mean Dell can update the specific configurations without informing Wal-Mart? How will Wal-Mart know how to label and price the PCs? Or is the price set for “PC Model #1” and Dell can ship different models that meet that price point? Interesting retail model.
The other thing that occurred to me — all of these articles ignore Dell’s earlier forays into retail in the early 1990’s. My first PC, for college, was a Dell 386 PC that my parents bought for me at a “Softwarehouse” retail store in Michigan (the chain was then renamed CompUSA). It just amazes me that the press misses details like this. They make it sound like Dell has always operated under the direct model. Dell moved out of retail because they could make more money selling Direct. If that equation changes, of course Dell would move back to retail channels (at least with a very small percentage of their production) if they thought it would be more profitable.