The Cure Vs Direct From Dell

Dell has transformed the computer industry in recent years, establishing the direct sales model that many have tried to copy but without Dell's success. Dell moved away from the model whereby PCs were sold by manufacturers to wholesalers and dealers before reaching the buyer, going direct to the buyer. This has numerous advantages which result in lower cost to Dell, lower cost to the buyer and higher profitability, such as:
· Significantly lower inventory requirements.
· Ability to respond to consumer demand changes instantly.
· Getting closer to the consumer.
· Ease of introducing new technology.
· No need to dump "old" technology in the channel."
An efficient manufacturing system with just-in-time inventory ensures that not only are the costs of holding inventory low but there is no risk of holding out-of-date components. This means that, as new technologies or faster components emerge, Dell is able to integrate them more or less instantly into its products while competitors have to dispose of older products first.
The customer focus was routed through 360 degree feedback to employees and stock options called ROIC (expanded as return on invested capital). Employees themselves were actively part of the organizational decisions and policies. This created a system of checks and balances at every level and accountability was perfect.
Closeness to customers is also very important. Through dealing direct, Dell is actually talking with the customers, not the dealers. This means that they are better able to ascertain customer demands and requirements and adjust products and services accordingly. What is interesting is how the approach to consumers changed over time, increasing the detail of the segmentation so that appropriate products and communications strategies could be developed for customer types. Within that, the direct model with every PC manufactured for a specific consumer enabled much more accurate response to consumer needs.
Consumer focus and...