Direct from Dell Micheal Dell

Michael Dell Saw an opportunity and grabbed it Saw an opportunity and grabbed it Turned a $1000 venture into a multi billion dollar industry. Turned a $1000 venture into a multi billion dollar industry.

Dell’s Direct Model v1.0  From product development to sales, everything revolves around CUSTOMER  Interactions through telephones and Internet  Helped Dell to align production with customer needs

Loyalty is the key Cannot compete on cost in long term Cannot compete on cost in long term Highest levels of services needed to sustain customers Highest levels of services needed to sustain customers

Disdaining Inventory  Inventory is the worst thing to carry  Especially in the case of DELL

Order of Business In 1993, Dell was in a spot of trouble. In 1993, Dell was in a spot of trouble. Very high levels of growth Very high levels of growth Instead of focusing on growth, they changed their priorities Instead of focusing on growth, they changed their priorities LIQUIDITY  PROFITABILITY  GROWTH LIQUIDITY  PROFITABILITY  GROWTH

A New Approach  Salesmen were able to see the profit margins on each product  Commissions were based on the levels of profitability rather than total volume

3 Golden Rules  Disdain inventory  Focus on customer  Never sell indirect

Product Development Agreement from all departments Agreement from all departments Phase review process Phase review process Monitor progress Monitor progress

Strategies for Managers Dual reporting for managers Dual reporting for managers Segmentation of business units Segmentation of business units

Dell Direct Model v1.1 Eliminate reseller Eliminate reseller Reduce inventory inefficiencies Reduce inventory inefficiencies Dell keeps inventory of 6 days, compared to competitors of 25 days Dell keeps inventory of 6 days, compared to competitors of 25 days

Inventory Velocity  Try to cover maximum market by keeping minimum variety  Just in time approach is necessary

More strategies Information and ideas sharing Information and ideas sharing Encourage innovative thinking Encourage innovative thinking Don’t try to perfume a pig Don’t try to perfume a pig