Dell: Make or Buy?

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Dell rings Bell to run US – Sunday Times – Times Online:

It's a common phrase in the manufacturing world, the “make or buy” decision. One of my pet peeves came up in an article about Michael Dell returning to the formal CEO role:

“Dell has already stopped making digital music players, but its founder would not be drawn on what else might go. Dell has sought to apply its famously lean manufacturing model to many electronics products besides its core business in personal computers. It now makes printers, TVs and networking equipment.”

This is such a fallacy about Dell. First off, Dell isn't “lean manufacturing” (at least the way I define it). They don't make TV's or printers, never had. Dell chooses to buy them and re-sells them to you, in a “direct” model.

It's “direct” in that you buy right from Dell, as with PC's, but the supply chain is a little different. The TV's and printers are assembled in Asia and pushed across to U.S. warehouses, where Dell ships it out to you. That's not a whole lot different than HP's supply chain when HP sells it direct to you. Same thing with laptops, pretty much. They used to be assembled in Austin, now they're shipped from Asia.

People wonder why HP is “catching up” to Dell. It's because their supply chains aren't that different anymore. You could argue Dell is slipping back to HP.

Dell has never transferred its PC manufacturing model to other products. Even with a desktop PC or server, most of the “Value Add” (the components) is done by other companies, Dell's Asia vendors.

I wish they would try. Some companies (Olevia and Sony) ARE assembling TV's in the U.S.

Please check out my main blog page at www.leanblog.org

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Mark Graban is an internationally-recognized consultant, author, and professional speaker who has worked in healthcare, manufacturing, and startups. He is author of the Shingo Award-winning books Lean Hospitals and Healthcare Kaizen, as well as The Executive Guide to Healthcare Kaizen. His most recent book is the anthology Practicing Lean that benefits the Louise H. Batz Patient Safety Foundation, where Mark is a board member. Mark is also a Senior Advisor to the technology company KaiNexus. His latest book has been released as an "in-progress" book, titled Measures of Success.

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