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October 29, 2003
Wrap-up:
Strive for Perfection in Manufacturing, Dell President Says
By Amy Corenblith
Dell improved its business when it seemed it could not improve any more, said Anitesh Barua, the McCombs School professor of information management who facilitated a discussion with Dell President and COO Kevin Rollins on Tuesday, Oct. 29.
“They deliver again and again,” Barua said. “I thought three years ago, ‘OK, Dell has gotten it as good as it can get.’ But it has kept on improving, surprising everyone with how efficient it has become.”
That efficiency, combined with constant change and innovation, has driven Dell from a $5 billion company when Rollins began in 1996 to a $38 billion industry powerhouse today. So, how did they do it?
“Never let the concrete dry,” said Rollins. “Keep everything malleable. We’re always looking to make the process less. We want it to take half the time, three times less time to do things. It’s never, ‘10 percent less.’”
Dell looks for ways to drastically streamline their processes. The company does not accept their current practices as final and they constantly look for ways to improve, Rollins said.
For example, Dell reduced its inventory time from 21 days of inventory to just four. Even so, “We look at that and think, ‘That’s terrible,’” Rollins said. “We ask, ‘What would be the infinite possibility, the irrational possibility?’ And we try to come as close to that as possible. We ask, ‘Why do we have any inventory on the books?’”
Dell’s famous lack of inventory does not hurt suppliers, Rollins contended. Rather, it helps them become streamlined and efficient like Dell. “We substitute information for inventory,” he said. “We help them be efficient and know exactly what to make. It eliminates waste.”
This is where information technology plays an important role. “Perfect information gets done with excellent systems,” Rollins said. Companies need IT to create systems that will make these processes simpler and more economical. He stressed that now is an exciting time for IT professionals and students looking to enter the technology field.
“Don’t think that there aren’t jobs out there,” he said. “There are always jobs for great people.”
On outsourcing and offshoring jobs
“Most of the companies that have been outsourcing are doing
terrible. The outsourcing phenomenon is being overplayed.”
“The talent base in India and China is inexhaustible, but there is a huge opportunity for you. There is a shortage of management over there. The world is growing and using IT and you’d better be there.”
“If you think you will never have to go out into the world, that you can stay here forever, that is an antiquated mindset.”
On Dell’s manufacturing process
“We ask our managers, ‘It only takes five hours to put together
a computer. Why can’t we have it out in one day?’ And they say,
‘Well if I’m going to do that, I’ve got to change everything.’
Exactly. Change everything.”
On changing seasonal demand for Dell computers
“We are not to the point of having it perfect. Generally,
though, you would be amazed at how predictable sales are, even
to the day and the hour. We get better at estimating all the
time. I can tell you how much we’ll sell the day after
Thanksgiving, within three percent.”
“Only 15 percent of our sales are to consumers. The other 85 percent are to institutions. They don’t get up one morning and order 100,000 computers. They’ve been talking with our sales force for weeks so we know it’s coming.”
On saturation in the computer market
“None of you have bought your last computer. I haven’t bought my
last computer. Innovations and exciting new technology will make
you want to buy another computer. There will always be a
market.”
“There are huge markets out there that haven’t been exposed to computers the way the United States has. We are the largest computer company in the world, and we have 17 percent market share. For example, China is huge. You can’t imagine how big China is. There are 10 million, 20 million population cities that you’ve never heard of. The possibilities are endless.”
On special needs in foreign markets
“There are challenges. In China, there’s less income, but they
don’t want third-rate technology. They don’t want 386, 486
technology. They wouldn’t touch it. We have to streamline the
technology and find a product and price that’s right for that
market.”
On Dell’s expansion into other product lines
“Printers were a great product for us. We looked at printers and
realized that cartridges cost $30 to buy and they cost $1.50 to
make. We thought, ‘There has to be a better way.’ Competitors
were using ink revenues to subsidize losing PC lines.”
“Guess who buys the most flat-panel screens? Dell. So why don’t
we do it ourselves? Now we’re making flat-panel TVs. By 2005 or
2006 there will be no cathode ray TVs and monitors. None. We
want to make it affordable, so you can buy one. I know you want
one. I want one, too.”
On Dell’s expansion into the music business
“I’m not sure where the music downloading business will go.
iTunes said they sold their 10 millionth download, but they only
profited 3 or 4 cents a song. We get in early and see where
these things go, so we don’t get left behind.”
For information on specific programs at the McCombs School, consult our contacts page. For media information, contact the Communications Director by phone at 512-471-3314 or by email at CommunicationsDirector@mccombs.utexas.edu.
