Business Principles of Michael Dell and Dell Computer Co.

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Corporate Strategies

Execution! - The key word around which the entire philosophy and secret of Dell revolves. As to how Dell deals with its customer, the only differentiator that appears is how they execute their dealing with their customers. The way they interact with their suppliers is again a perfect example of their excellent execution. It's the art and science of execution that has given Dell an edge over their competitors.

At the core of Dell's business was the build-to-order strategy. Customers ordered PCs directly, and their order was routed through a credit check, then directly to the manufacturing floor. The order was then built, tested, and shipped to the customer, who received it 5-7 days after placing their order. This strategy afforded Dell some impressive results. First, Dell eliminated middlemen the resellers, who were part of the traditional distribution model. As such, Dell not only passed the savings to the customers in the form of lower costs, but was also able to understand customer needs first hand and adapt to market changes faster than competitors.

Second, Dell built computers directly for customers, not for inventory. This meant that the company did not waste resources building systems that may not reach a customer, need staffing positions to move inventory around the world, or spend time managing and tracking inventory, and reworking systems that become obsolete before purchased.
Third, Dell Computer practiced just-in-time manufacturing, where trucks with vendor parts pulled up to one side of the plant, and unloaded them altogether.

The Company's Philosophy

The philosophy of central planning with local implementation enabled the organization to grow at its breathtaking rate because it provided the capability of build to order for all parts of the organization and all
business processes needed to run the corporation. In addition to the principals of build to order and direct marketing, Dell Computer managers spoke of a few key principles that were fundamental to their business. These included:

* Exchange inventory for information - At the heart of the successes at Dell was their strategy of exchanging inventory for information. This meant that instead of keeping inventory on hand at Dell, or on hand in a warehouse, or on hand at a retail outlet, Dell kept information about customer orders, needs, and forecasts. This gave Dell an advantage in the marketplace for several reasons. Information was easier to store than inventory. Information was easier to move than inventory. Information was easier to discard than inventory. ...