Can You Really Buy An American PC?
News From PC Magazine: Can You Really Buy An American PC?
Yes you can, it depends on what you mean by “American.” Dell has always built desktop PC's and servers here in the U.S. By “built”, I mean “assembled”, as all of the components are made in Asia.
Dell has long resisted the appeal of cheap labor in Mexico (physically not far from Austin) and has kept building PC's in Austin. In fact, they built newer factories in Nashville and North Carolina. Laptops are primarily built and shipped from Asia, but PC's and servers are 1) more customizable and 2) more expensive to ship quickly. So, it makes sense to build them here. Unless you're HP (more on that later).
Even that said, it's probably considered big news in the industry that Gateway is building a new factory, also in Nashville.
A Gateway person said:
“”When we locate, we want to locate on the most efficient logistics supply chain location possible,” Riggs said. “Logistics is a much bigger deal than even labor costs. So the center for manufacturing really needs to be the closest proximity to the customer base. In that standpoint, Nashville is a better center of gravity.”
Gateway had tried American manufacturing when they started:
“Gateway's Bruce Riggs, senior vice president of operations, admits that operating costs are higher in the U.S. than they would be if Gateway manufactured in Asia, but the company believes it's worth another try. Gateway has had manufacturing facilities in South Dakota, Utah and Virginia, all of which are currently closed.”
Sure “operational costs” are higher, most likely defined as labor, which is a small percentage of a PC's costs. The “touch time” to build a PC is a matter of minutes. There's not much labor involved, even with PC's being built by hand on an assembly line.
But, Gateway is correctly seeing that there's more at stake than operational costs. If you consider “total cost”, including logistics and shipping costs, the U.S. makes more sense. If you consider the value of being close to your customers and being able to ship custom PC's within 5 days (as Dell does), China is less appealing. You can't economically get a large desktop PC from China to the U.S. in 5 days. Gateway used to follow the Dell model, then they got reliant on pushing PC's to retailers, which then led them down the “cheap labor” route.
Another competitor, Hewlett Packard, was amazingly weasel-like in their refusal to comment:
“Representatives from Hewlett-Packard said that they do have factories in the U.S., but declined to say where and whether those factories make actual computers or other electronics.”
So maybe by “factory”, they mean a place where returns are processed? I've read other places that 100% of HP's desktops are built in Asia. They're built using a non-lean “push” model, where machines are built based off of long-term forecasts and are pushed to retailers like Best Buy. This practice might look cheaper (on labor), but there's inevitable waste when HP builds (I mean, pays others to build) products that customers don't want. We call that the “Waste of Overproduction” in the lean terminology.
Is your company doing like Gateway or HP? I think the Dell and Gateway approach is clearly the more “lean” way to go.
Here's an interesting American-based competitor: “Union Built PC” company. If you are working on lean in a union shop, maybe you can build some goodwill by buying PC's from them? Don't consider this an endorsement, but I find it interesting that they wrap themselves around a union-driven marketing strategy.
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Actually, HP has a fairly large facility close to your new home in the Metroplex. They build components and high end servers and other “special” products. We are all more familiar with the HP brand on the grey desk top box than we are with the very high tech products that they make. The familiar low cost consumer product is made in Asia, and the less familiar high cost technically sensitive product is made here. Isn’t that the direction of Global Supply Chain Management and Global Business?
Chet – thanks for your continued readership and comments.
It’s funny that HP and Dell is back to a classic battle of Build-to-Stock/push and low-labor-cost focus (HP) versus Build-To-Order/pull and fast delivery focus (Dell). We’ll see who wins.
I’m not sure if a PC is a “familiar low cost” product yet. You’re right that the general conventional wisdom is what you described — high value/complex/custom stuff built here, everything else in a cheap place.
I’d really question the tradeoff between HP’s labor savings and all of the supply chain costs. Labor is much easier to measure definitively. What’s the cost of excess inventory at Best Buy and the cost of missing hot products at the Christmas season?