The PDMA Handbook of New Product Development

31.5. Computer Industry Illustration

Dell Computer's approach to manufacturing and distribution has become the PC industry source model. Dell assembles computer systems as end consumers order them, thus reducing or eliminating anticipatory inventory commitment. As a direct marketer, Dell uses no resellers. In contrast, most PC vendors build, test, package, and ship systems to resellers. The reseller holds products in inventory in anticipation of customer purchase. Historically, that stocking period averages 6-8 weeks. At the time of sale, the system is opened and modified to meet the purchaser's specification.

Dell takes a very different approach to marketing its product, which necessitates using a lean launch method. Dell's strategy has been to focus almost exclusively on corporate customers. In contrast, most of their competitors have committed substantial resources to reaching consumers through conventional retail distribution. Dell developed flexible manufacturing techniques that allow the company to build computers to order. To support this assemble-to-order strategy, they run a lean manufacturing operation. By working closely with suppliers, component and material inventories are minimized. The close relationships and support of suppliers have allowed Dell to operate with nearly no work-in-process inventory. In fact, Dell averages less than one day's inventory and component parts stock supply. They "pull" parts from suppliers just as they are needed for production. Replenishment ...