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Dell To Sell Its Computer Factories
Anti-Globalism sends us to a Wall Street Journal for a report that Dell plans to sell its factories in an effort to revamp its production model. Quoting:
"Dell's plants are still regarded as efficient at churning out desktop PCs. But within the industry, company-owned factories aren't considered the least expensive way to produce laptops, which have been the main driver of growth lately and are complex and labor-intensive to assemble. Rivals such as Hewlett-Packard Co. years ago shifted to contract manufacturers -- companies that provide production services to others -- to build their portable computers. H-P builds "less than half" of its PCs in facilities it owns, wrote Tony Prophet, H-P's senior vice president for PC supply chain, in an e-mail. Contract manufacturers can generally produce computers more cheaply because their entire operations are narrowly focused on finding efficiencies in manufacturing, as opposed to large firms like Dell, which must also balance marketing and other considerations."
...as opposed to large firms like Dell, which must also balance marketing and other considerations [like environmental health, worker safety, taxes, social security, living wages]. Just send it to China! --edfardos
All managers move into the same direction, it's like some psychic force.
While it may be cheaper to outsource production of your primary product, quality control might not be as good.
Besides, it seems kinda wrong that a company that manufactures computers is outsourcing manufacturing of computers.
"Contract manufacturers can generally produce computers more cheaply because their entire operations are narrowly focused on finding efficiencies in manufacturing, as opposed to large firms like Dell, which must also balance marketing and other considerations." - So Are Marketing and Other (Design, Reliability, QC? ) considerations no longer important?
While Dell and HP try to make cheap computers that aren't broken, Aplle will continue to make good computers that aren't cheap. Apple has been gaining marketshare from these guys steadily for a long time now.
So that is why Dell makes better computers than HP, imho.
...Rivals such as Hewlett-Packard Co. years ago shifted to contract manufacturers -- companies that provide production services to others -- to build their portable computers. H-P builds "less than half" of its PCs in facilities it owns, wrote Tony Prophet, H-P's senior vice president for PC supply chain, in an e-mail...
To me, this is the crux of the matter. Dells indecision tells it all. I have had close interaction with folks at DELL and what strikes me, is their apparent indecision when it comes to matters that require immediate attention.
I cannot be convinced that with all the "spying" that goes on withing the PC and Notebook markets, DELL did not know that HP was outsourcing and saving a bunch. They knew but did nothing!
To make matters worse, HP produces better hardware as compared to DELL, in my opinion. So they must be doing something better than DELL.
The company owns factories in Texas, Tennessee, North Carolina, Florida, Ireland, India, China, Brazil, Malaysia and Lodz, Poland
I was surprised that they still did manufacturing in the states. I didn't really expect that any PC makers still did.
Damn_registrars has no butt-hole. Damn_registrars has no use for a butt-hole.
So...their quality will go down, like it hasn't done in the last 8 years...cough http://www.undeadcomputing.com/ablog.html
It's all fun and games till someone divides by 0. Then it's hilarious.
When did HP start getting written as H-P?
I'm trying to figure out why Dell seems to be the most popular office brand. Could it be they simply suck less than the others? Inertia?
Dell's driver downloads are pretty good, although it would be better to get the exact drivers for the service tag, rather than guess if it has a given video chip or option NIC upgrade.
That's brilliant! Just the way to sell fewer desktops!
Dell has had huuuuuge problems fulfilling laptop orders because of supply chain problems. So making their desktops the same (bad) way they make their laptops only makes cents. I mean... sense...
First they take the stupid move to eliminate the North American Tech Support Centers. Now I have no reason to buy DELL over HP, or Gateway. Save money in support and loose Sales.
Now to continue more selling of DELL. By
the middle of the next decade there will be no DELL.
Very soon this country will lose all its production capability, if the trend of outsourcing everything to MF Asia continues.
Such process, it's becoming a pain to watch.
I have this strange feeling that the quality of Dell laptops will go down fast once the factories are sold.
Dells' factories were in the US, where they had to obey all sorts of US regulations that are expensive to obey; like OSHA rules, making it cost-ineffective to have US factories.
By having a contractor do it instead; Dell can avoid the negative political implications of having to say "they're sending their manufacturing overseas". Instead it will be a matter of a private contractor further outsourcing their work later, and Dell will be insulated from the necessary ramifications of their decision to minimize short-term immediate cost at the expense of control & being a good corporate citizen.
Which will give them some protection against legislation, human rights groups, etc, and various issues that normally occur when a company simply builds factories offshore and shuts down US factories.
Their contractors can have the laptops assembled cheaply offshore then shipped to the US.
Although the quality of the workmanship may diminish dramatically (and Dell laptops will be more prone to certain defects such as say perhaps HP laptops), the cost will be much less for them, when they can pay the labor-intensive laptop assemblers the equivalent of US $0.05 an hour instead of having to meet US federal minimum wage.
Cost savings are unlikely to be passed directly to consumers, so pure profit.
At least in the short term, rather clear why they would see it as a clear win.
I work for a print publishing firm, and we've been experiencing a recent surge in customers, because publishers are starting to focus on their core competency, which is content generation. The "other" business of printing, quality control, packaging, and distribution is now being out-sourced to other companies who specialize in squeezing the last dollar of efficiency out of this (manufacturing it cheaply, transporting it somewhere cheap to be processed, then ship it out everywhere else), and whose entire purpose in life is to efficiently produce, and distribute printed matter.
I'm sure Dell has complete control of the design of their hardware, where every nut and bolt goes. And the specifications will no doubt be very detailed, if my experience in the print industry's any indication.
It's just a matter of letting the organization that does something very well do it, rather than trying to do everything in-house.
So, wondering if this would be a good time to buy a Dell, before the quality drops ?
If I were to buy, I would rather get a Dell Lattitude (D series) that most other laptops/brands.
No, they can buy more U.S. debt. Our fearless leaders will make sure that there are plenty of opportunities for foreigners to continue buying our asses into financial servitude. How the hell else do you expect to get socialized medicine, tax cuts for 95% of U.S. citizens, socialized pre-kindergarten, a G.I. bill for "community organizers," heavily subsidized alternative energy programs, continued funding for the Ponzi scheme that is Social Security, etc.? Most of us seem to have forgotten the lesson that our parents taught us: money doesn't grow on trees. If you put a dollar in one pocket, it first has to come out of another pocket. It's all just one big shell game, folks.
...'cause that would be great!
CEO Michael Dell, October 2007, on being asked what he'd do if he were CEO of Apple:
Since then DELL stock has gone up by 72%... while AAPL has gone up 3080%.
Dell's basic problem has been known for a while. They don't do anything unique. They were one of the first to "get" just-in-time custom manufacturing and they rode that horse for a long time, but everything they do, others can do better -- and apparently do.
Innovation, if it can be sustained, always wins over efficiency, because innovative hardware and software design can empower users by orders of magnitude, while efficiency gains approach an ideal asymptotically.
Yep, if the laptops are made in China you can use workers that make $80 to $150 a month.
And as a free bonus, you might get one of the 1,000+ fingers a day that are chopped off in industrial accidents every day.
Way to save a buck, Dell!
Having Worked for both Companies I can safely say, that both companies have the same quality of product.
Oem is Oem and quality is usually sacrificed for price and people usually buy the cheaper with the same specs.
Granted, sometimes you can't go out and build your own system for the cost of some of these Oems.
You get what you pay for.
----
Get your own sig.
1. Take everything that made you successful.
2. Throw it away.
Well, I mean, Dell became number 1 in PCs due thanks to a model where you could configure your PC in the web, get it built in good time with a guaranteed level of quality and receive it at your home/office.
First they started adding physical stores to the mix. That's perhaps not too bad, but certainly adds problems of inventory that previously were unknown.
Now they are trying to make themselves virtually indistinguishable from other providers by selling the one piece of their company that made them different, their make-to-order factories.
I suppose that's just one more example of clueless executives applying the reduce-costs recipe because that's the thing they learned in their MBA's. Because that's the easy thing to do, because the costs are written and can be studied. I suppose you need some kind of inventive mind to think ways about adding to the income column, instead of subtracting from the costs one. But what do I know? After all, they make fatter salaries than I do.
Is that contract manufacturers supposedly offer efficiencies because they don't have to listen to Dell's marketing considerations. It would seem to me, then, that Dell's marketing considerations would need to change and all this really is is a low wage subsidy of a fundamentally flawed business.
I'm really sick of MBA's getting American companies out of manufacturing because they lack the engineering knowledge and are too lazy to make it work. If there a company really well led by an MBA? I mean, President Bush has an MBA... look how well he's done.
This is my sig.
Here is an example of how you take something that is already not very good and make it worse.
Absolutely right. No one who has built computers for any length of time feels comfortable putting a Foxconn board in over the alternatives. Not saying a Gigabyte board or an Asus board will never go bad (I've had them go out on me before), but just hop over to newegg, search for motherboards, filter to those manufactured by foxconn, and just take a look at the number of stars (or eggs) they get. Then go in and look at the comments, and take a look at how many have died within a few months, or were just DOA.
I bet Apple daily ships boards back to Foxconn by the truckload as they show up dead on arrival and fail QA, but you've got to know that a lot of those 1-3 months of life boards are getting through. Have fun with Apple products!
And as a side note, if Apple products are so awesome, explain the whole iPod battery fiasco a few years back where iPod batteries were all dying shortly after the warranty, and Apple was just telling everyone to go buy a new iPod. Or go look at all the forums full of people complaining about how their iPod shuffle just randomly bricked itself one day (orange and green flashing light issue), sometimes due to the new version of iTunes, and sometimes just because. And how Apple's solution again was to tell everyone to go buy a new Shuffle. I had one of those, and I basically said, "Screw the crappy, short lived Apple products with no support, I'm buying a Zune." As All State might say, "I was NOT in good hands", and I was not about to be taken by Apple again.
Beware of bugs in the above code; I have only proved it correct, not tried it.
Doesn't this eventually lead to the contract manufacturer refusing to build Dell's designs [and does Dell even design their own laptops?] because the designs don't fit into the manufacturer's efficiency models?
Somehow this seems like it will eventually turn Dell into a company just reselling whatever laptop designs/models the manufacturer can make the most efficiently.
As for Dell's intellectual property? I'm sure it can be protected by their manufacturer, provided they sign a long-term deal and help the local party boss with whatever his needs are.
Dude, you're getting a Dell factory.
Carbon based humanoid in training.
They don't provide the services directly, they don't manufacture the hardware directly. They are now simply a middle man hoping to cream off some cash.
Can't think of a good reason to buy directly from them now.
Deleted
You honestly thought that by buying a Zune you would avoid cheap products and poor QA/QC? Just seven stories below this one on the main page is one about how the MS decided to ship a bunch of defective Xboxes just so they could get their console out before Sony's. Your post was informative and interesting, and then you go and spoil it all at the end by claiming that you've avoided this whole mess by buying a Zune.
Gentlemen! You can't fight in here, this is the war room!
later down it says:
So sure, they might make shitty products, but they make everyone's shitty products. Stop it with the irrational apple hate already...
Gentlemen! You can't fight in here, this is the war room!
In a way, now in america it does grow on trees. We chop down trees, make pulp, and print it. (oh, does that mean it devalues the dollar. Hmm, don't tell the fed!)
I have seen the same in the semiconductor industry. I was automating Asia during the 80's and 90's. They were quietly spending billions.
I always wondered why the American companies in the US for the most part, couldn't get their act together on production efficiencies. They opted to send manufacturing overseas.
While I understand the overhead costs here were higher, I feel it was so they could "scale down" easier.
For me, it was ok while we were building the supporting manufacturing equipment here, but how long till Asia had the know how, combined with the cheaper overhead's before we would be out of the loop entirely?
Same for dell, while having contract manufacturing, and tech support overseas, whats left? Just a name and a sales system. How long till that can be done overseas? Well it can be done now. There are companies with the pockets than can setup a company here, manufacture there, support from there, and guess what, more of the profit from selling another computer will go there.
Really, its sad to say, but I believe in 5 years, dell will not exist. There will be a tipping point, where the profits will dictate that, and some overseas company will be able to sell for 5% lower than dell can operate at, then game over.
How do you say "Dude, you're getting a Dell!" in Chinese?
IIRC, Apple builds its hardware using contract manufacturers in China and other countries outside the US.
/. loves and admires, how can Dell be wrong for following their lead?
Since Apple is pure, clean, and everything
Pity, in order of preference... when recommending companies
Desktops:
Apple, Dell, Sony, HP, then the crap like LG, and gateway emachines.
Laptops:
Toshiba, IBM, Apple, Dell, Sony, HP, then the crap like LG (*shudder*) and emachines/gateway.
Generally chinese and korean brands get a thumbs down for build quality, usually on the level of major thumbs down.
Asus and Gigabyte are the best motherboard brands if you are building something yourself, avoid MSI, biostar, or any company that doesn't update their BIOS once a year. New CPU's come out dammit.
MSI boards are found in eMachines, go figure.
The thing is, Dell slit it's own throat with outsourcing outside north america the tech support.
What kind of company do you have when both your product and your support are not in the country. What incentive is there for the outsourced company to just steal the designs (like China does with the iPod/iPhone ) and make counterfeit copies, or even make their own brand? Sure, they might not be re-importable back to the US if they still say Dell on it.
If you're going to outsource, first outsource to countries that aren't expensive to ship from and have equal intellectual property protection. Not India and China where the counterfeits flow freely in the streets. The main reason the counterfeits are not as prevalent in the US is that it's illegal to import, and it's hard to do a border run when there's 8000 miles of ocean or in the way. The bigger the counterfeit item, the less likely it gets here. Though go ask the US NSA how many counterfeit cisco routers they are running.
they can buy more U.S. debt. Our fearless leaders will make sure that there are plenty of opportunities for foreigners to continue buying our asses into financial servitude.
Except that in the last few years, they have made the buying of our debt unprofitable. The Euro is the new international currency and the US is waivering as a powerhouse. That's why Russia is getting suddenly imperialistic again, because we aren't a strong enough to be a global deterrent anymore. So militarily and economically we no longer have dominance which means that buying US debt is now a losing investment. I'm kinda looking forward to what happens when our foreign debt holders decide to call in thier markers and the economic size of our government is forced to cut in half. Especially because it's going to hit as the same time as the Social Security shortfalls are really setting in. US manufacturing will return in a major way in the next 20-30 years but we will manufacturing parts and toys for wealthy Europeans and Arabs.
We are all just people.
and wake up the fact that manufacturing in the USofA is not econmically sound. Embrace Asia and upskill your own work force just like Europe has been doing for the last few years...
... you mentioned a Zune. This either needs to be +1 Funny or -1 Shill.
How will you build you Hackintosh today?
And Michael Dell was found hanging by his toenails with ewe paint covering his genitals I would chuckle.
It doesn't work that way; the debt is not callable at will. The only thing the foreign debt holders can do is stop buying new debt. That would force the rates on treasury securities to go up, until the point those securities became attractive to buyers again.
Dell used to have an advertising campaign with "You Can't Get Good Chili in Taiwan" back In the PC Limited days.
As we ship our work elsewhere, so goes our wealth. Had we been smart, we WOULD have helped Mexico long ago. Even with NAFTA, we could have brought their standards of living way up, and solved some of our major problems along the way (illegal aliens come to mind).
My guess is that in the next year or so, America's consumption will drop by 10% or more. The good news is that if EU forces China to keep to their word concerning tariffs and freeing their yuan (it is based on a fake purse), then the dollar will plummet some more and we will get work back.
I prefer the "u" in honour as it seems to be missing these days.
CHinese gov. is already subsidizing their shipping. Have to say though, I am surprised that we have not moved to using nuke civialian ships or better yet a maglev going through the Bering straits.
I prefer the "u" in honour as it seems to be missing these days.
Much of what you say is so correct. Dell gets more and more vice presidents every year. Most of whom were consultants that more senior VPs hired to solve a problem. Getting anything done requires consultants, VPs and a year of studies. By the time they are able to make a choice the problem has changed and Dell has to hire another group of consultants to work on how the problem has changed. Nobody stops to ask the people, who have been around for a while and were responsible for Dell's success, how to solve a problem. It used to be Dell disparaged IBM for the same business model they now practice. "We have seen the enemy and hired him."
Boeing has experienced the same problems. Many of the parts for their airplanes come from over seas and other parts of the country and are assembled in Boeing's plants on a just in time basis. If a part has a problem it throws the whole system off.
If outsourcing is cheaper, can't Dell and the factory management just pretend Dell doesn't own them and conduct their business accordingly?
Cost of production would be less and as an added bonus, Dell would get whatever profit the pretend-for-profit-company would make.
You outsource everything, eventually the folks you outsource to will realize all they have to do is stick their own label on the same exact thing they are building and be able to sell it cheaper than the original company ever could,. and they will just cut the original company out, they won't need two complete sets of upper so called management, and they for sure won't be firing *themselves*. Heck, I have seen it happen within a few years in the trades, joe local big fatcat contractor is going to beat the local competition and save some money and hires a buncha recent arrivals at really cheap rates, well below even normal cheap rates *wink wink, nudge nudge*. They work hard and steady for awhile, learn the trade, and the next thing you see is "recent arrivals contracting inc" signs on brand new pickups, with both the old fatcat contractor and his competition standing in line for food stamps wonderung what the hell happened to their scheme.
Couple years in the trade, or 20 years for all the manufacturing, it is the same deal though.
Outsourcing or insourcing via fast labor arbitrage is a very short term way to increase profits, but eventually those bloody wogs and natives you are exploiting to squeeze out a few more pennies get hip enough and rich enough that they don't need your "guidance" any more, and they will want all the money, not just a smidgen of it. They will and are gonna take your lunch money, no way around it.
Anti-Apple FUD....been with 'em from day one and seems it'll never die off.
CLUE: The same way Apple ships Samsung LCDs that are cleaner than what you'll find retail (even tho many other vendors also ship Samsung LCD's) is how you see higher quality in Foxconn at Apple than retail.
There's no miracle - and no surprise. Further, Consumer Reports sampled almost 70,000 computer owners - the result shows that in the real world Apple's computers break significantly less that other brands.
-Matt
P.S. I don't even know for sure Foxconn is involved - you could both just be completely full of it. The proof, however, is in the pudding....Apple's computers are higher quality.
P.P.S. Don't go around blaming other people just because you bought a Zune.
Right now, the U.S. government is one of the largest purchasers of Dell hardware. It used to be IBM they purchased from until IBM sold its PC division to Lenovo. Now the government won't buy Lenovo because their afraid that the machines might be compromised to spy on the user. If Dell moves their factories overseas there's a good chance that the government may stop buying.
If "disco" means "I learn" in Latin, does "discothèque" mean "I learn technology"?
The kinds of manufacturing that are getting the squeeze due to shipping costs ship very bulky, heavy products. For example, the U.S. steel industry is getting a bit more competitive again, because steel beams are giant and heavy. A shipping crate full of laptops packs a lot more value into a lot less space/weight, so the shipping costs aren't nearly as big a proportion of the total costs.
10 PRINT CHR$(205.5+RND(1)); : GOTO 10
I am dead serious. I have already fired off an email of complaint about this move. If even a couple hundred people in a position like SysAdmin or manager would just sent off an email to their rep, it will send a message they won't me able to ignore. I have always liked Dell gear, but things are just getting worse and worse and they are becoming more and more like "everyone else." They pulled ahead of the crowd by being better than their peers and now they are trying to keep their executive pay higher by rejoining the crowd? I'm sorry, but NO! They will lose me and hopefully hundreds of other buyers from this move. I know they lost a lot when they sent their support overseas... and quickly brought business support back to the U.S. in response. They will listen when their bottom line is threatened.
I don't think either party is going to be able to do tax cuts - unless as you say they borrow money and pass it out.
Most of the things you seem to think are impossible are done in other places (you know modern sophisticated countries) with and most of the enlightened residents of those countries think its a good thing.
The really big problem the USA has is wasting (and I do mean wasting) billions and billions on military expenditures and military campaigns.
The GI bill is expensive because it is one of the few motivations for joining the military and fighting in a phoney war.
US industrial domination is over. This is just one of the minor side-effects.
Newsflash: It's never a good time to buy a Dell.
Dell doesn't manufacture in the US and as far as I know, never has manufactured anywhere. Dell only performs final assembly at these factories. Dell used to have server motherboards prototyped at Texas Instruments Division 14 Custom Manufacturing Services at Austin (which became Solectron Texas and is now Flextronics) and some desktop motherboards built there at the same time as Gateway had motherboards built there. This is the same site as where at least 40% of Cisco's products are built. I think Dell moved all motherboard manufacturing over seas by '98 or '99.
That issue would have came up long ago since Dell motherboards have been manufactured overseas since at least 2000. Dell was only performing final assembly at the state-side plants.
If you have the time, build it yourself. Getting something that 'just works' is fine and all, but you get a generic computer that is LCD (even when it comes to semi-professional workstations).
Invest the time and a little extra cash to custom tailor a workstation to your needs and you'll have a machine that is faster, more upgradable, and more reliable than the generic alternative. Just having a quality motherboard is 80% of the fight. Avoid products with cheap capacitors and gimmick technologies, you'll thank yourself later.
Just my $0.02.
If I mod you up, it doesn't necessarily mean I agree with what you've said, sorry.
It doesn't work that way; the debt is not callable at will. The only thing the foreign debt holders can do is stop buying new debt.
Thanks for the myopic gross oversimplification, but no thanks. Like most debt t-bills can be held or re-securitized in a whole plethora of ways. International banks can use it to boost their balance sheets and borrow against their own notional value. One man's debt is another man's asset and, as certain types of assets become more attractive than others, banks and other financial institutions will shift away from ones of lesser value and toward ones of greater value. That's why you see banks these days taking huge write-downs and trying to rid themselves of securities built on the unstable quicksand of NINJA-loan mortgages.
So, let's do a little thought experiment, shall we? As insane as it might sound, let's say international exchange rates pound the dog-shite out of the dollar due to currency inflation and a set of other problems that the four-horsemen would be proud of. Then the return on those t-bills purchased by sovereign wealth funds and national banks starts looking like a bad investment. Do you think those banks simply sit on them and say "Oh my! I sure wish I wouldn't have bought those. I guess I'll just have to sit and watch my money evaporate!" Pray tell, do you allow for the possibility that they might just consider _selling_ them in either raw or securitized fashion to anyone who will give them _something_ of value for them before they are completely worthless? In doing so, might the consider taking a little less, and more than a little less should things turn ugly against the dollar?
That kind of situation has played out _many_ times in history and it's not a pretty sight. True, it's not as simple as a bookie "calling" in a debt but the result can be just as bad or worse. When folks realize that your money is worthless, they'll take pennies on the "dollar" for your currency or any _debt_ that's denominated in that currency. That's certainly the case for t-bills. They pay out in dollars, not Swiss Francs. .... Also, besides fire-selling your nation's treasury bonds they also can do a hell of a lot more than "not buying". They can use the emerging markets in their own country and elsewhere to reduce their dependence on your demand. Thus, they basically can sit back and watch you drown in economic storm you created for yourself. The only reason they haven't fully pulled the plug on us yet is because we haven't finished cashing out all the equity in this country's real estate, natural resources, and other loot. If that sounds crazy to you just do a little research into the percentage of foreign ownership of real estate we have in the good ol' USA.
Put down the fiddle and smell the flames, dude. It's common sense that debt has serious consequences. If you think otherwise, try to stop making payments on your student loan for that economics degree and see what happens.
Huh? I've got three HP systems within arms reach... All built to order.
Building to order hasn't been unique to Dell for many years.
The only thing the foreign debt holders can do is stop buying new debt. That would force the rates on treasury securities to go up, until the point those securities became attractive to buyers again.
Once a few big countries decide they don't want to continue propping up the dollar, high rates won't do anything but highlight what a house of cards American wealth really is. High rates are meaningless if you can't get a return on your money invested. It's like the value of a Picasso paining that is proven to be a fake, when everyone thought it was legit it was worth millions, and as soon as they lose that faith it is worth a few hundred at best. The only thing that has changed is peoples perception. The move of the world to the Euro is an international vote of "no confidence" in the USA; perceptions are changing. When US debt become worthless paper backed by nothing, the purchasing power of the dollar (also backed by nothing) will follow. Most of our wealth is based on the global perception of value in America, the last several years have destroyed our image of strength, our image of morality, and our image of educated competence. Without that high value on the American brand, we are rapidly becoming a middle of the pack industrialized nation, and the size of our expenditures will soon have to reflect that.
We are all just people.
"...Contract manufacturers can generally produce computers more cheaply because their entire operations are narrowly focused on finding efficiencies in manufacturing, as opposed to large firms like Dell, which must also balance marketing and other considerations." --- So, does that mean Dell's manufacturing managers and engineers are inept at making their processes efficient?
I really wish I knew the entire story about Dell, but this simplified version has a certain amount of truth. It goes like this:
Dell was a pretty well run company over it's 20 or so year life span. They made a respectable profit.
Then the Wall Street analysts decided that per-share earnings should be about 50 percent higher. When Wall Street demands more money on the bottom line, smart managers either pay attention or dust off their resumes.
There are only a few ways to increase those earnings:
1) Cheapen the product
2) Screw over the employees - fire some, overwork others, steal the pension plan - all the traditional ways.
3) Reduce customer support to almost nothing.
This isn't done in one step. You can generally go though 3 or 4 rounds of each of these before it becomes obvious that you have screwed the pooch.
In one of these iterations, Dell exported customer support and order handling to India - and apparently not to the best firm they could have picked..
When too many of their newly cheapened machines showed up DOA, all of the people who knew how to fix the problems were gone. A customer service department that took 20 years to build was now toast. If you were one of the customers with a dead machine, the chance of getting the problem solved was close to zero.
This of course mean that marketing stopped working as the word got out.
Then they cut a marketing deal with Wal-Mart. It took them a while to figure out that when you make a marketing deal With Wal-Mart, Wal-Mart is the only one who makes any money.
Selling off their manufacturing will put a one-time addition to "earnings", and with any luck, all of the smart guys in management will have bailed out.
This one sort of relates to step 4: After you have totally trashed the company, lie on your financial statements while looking carefully for the Exit sign.
And in the mean time, the Wall St guys and the portfolio managers cashed their bonus checks and are now saying: "tsk, tsk - isn't it a shame".
When you are dancing with wolves, never limp
Like herding cats, how much work could you consistently get out of child laborers anyway? Would you want to risk your business on the productivity of kids? Not I.
It's not child labor. It's done with comparable wages and backing out the cost of government...
taxes set rents that set wages. A $1/hr wage with $30/month rent is the same as a $10/hr wage with $300/month rent. Each has to work 30 hours to live in their apartment for the month. Which worker is better/worse off? But the product that was manufactured by the second worker is considerably more expensive than the first when those "dvd players" arrive in a third sales market.
Every company needs to identify its core competence, and never, ever give that up or outsource it. On the flip side, every company should seriously consider outsourcing anything that isn't part of their core competence.
If you are a custom-software company, you had better be able to deliver custom software. You hire the programmers, you have good quality equipment for them to use, you have a good marketing team to generate demand for your programming team, etc.
But anything not directly related to custom software should be outsourced. You don't generate your own power, you outsource that to your local power utility. You don't outsource the manufacturing of your computers, you outsource that to an equipment vendor. You don't build operating systems, you outsource that to your vendor or organization of choice. (Redhat/Debian/Microsoft/Apple) An operating system isn't "custom software" - it's a commodity.
Just because, with your crack programming team, you *could* do many of these things in house, doesn't mean you should. Doing these kinds of things distract from your company's core competence, and provide negative value for your investment and increase your long-term cost of operation. (somebody has to *maintain* that operating system extension that you now depend on, etc)
But, when it's your core competence, you should never, ever, EVER give that up. Not for any amount of money, for any reason, whatsoever. Idiots that outsource core competence cause the crash and death of company after company because they can produce some Power Point presentation that has everybody oohing and ahhing about all the money they'll save.
Which is bullshit. The moment you outsource your core competence is the moment that your company ceases to have any reason to exist. From that point forward, it's only market inertia that keeps you alive until consumers realize that you offer no real value.
And while marketing may delay this process, the end is inevitable.
If you are ever in a management position, never, ever, ever give up your core competence. Strengthen it anywhere, everywhere, and anyway you can. Hire the very, very best possible people you can to strengthen it, and get rid of any possible distraction from that core competence.
Be the very best in the world at what you do, and the whole world will look to you for the best. And that's usually a very, very, very profitable position to be in.
I have no problem with your religion until you decide it's reason to deprive others of the truth.
Apple provides a better customer experience when there is a problem.
Apple users tend to be more careful with their $2000 wonder box than the buyer of a Dell $200 cheap box (even though the motherboard could be the same manufacturer!).
And more Apple users are "forgiving" of problems, because they tend to feel barely worthy to even type on "such a work of art" - and must have somehow been at fault for the issue.
Or they are a little embarrassed that they spent $2000 on a wonder box that broke as fast as their neighbor's and they have already spent months raving about their new purchase.
Eight years ago, I was working for Celestica, a Canadian company, building Dell servers. They were outsourcing heavily even then.
Interestingly, given the slant of the above article, we were also building HP servers.
A little observation about the difference in the two companies and their style (or, more to the point, what they were willing to pay for): HP servers were shorts-tested, power-up functional tested, built into boxes, temporary HD's installed, a full OS install done, the boxes run for 2 hours, turned off, the OS *reinstalled* and a complete functional test done, and shipped out.
In contrast, the Dells were shorts-tested, and 1 out of 3 were power-up functional tested, and after that they were shipped out to the company that turned them into complete systems.
It's possible that the next company down the line did a full burn-in functional test. But HP did that, too, in addition to the burn-in functional test we did.
Nostalgia's not what it used to be.
It's the people, not the MBA, that cause the problems.
The MBA, or Engineering, or Art, or Medicine degree just gives someone a toolbox of concepts to build upon and condensing what would otherwise be a lifetime of practical experience into a couple of years of classes (from whence the additional practical experience can then be added to).
It usually begins with a room full of opinions on what the company should do next... and the CEO has to figure out who is backing the right one... the mild-mannered genius, the fiery marketing guy, the grumbling manufacturing head, the three lackeys that worship his presence, or the now animated maverick? It's tough to figure out.
And Dell's "made in China" chips and motherboards that got assembled in those US assembly plants didn't have any spying equipment pre-built in them?
Dang! Now I'll have to figure out another way to spread FUD.
One day, some contract manufacturer will notice that most people are using their hardware, but with a Dell badge.
So they will start selling the same product with their own badge - slightly cheaper. And drive Dell out of the market when people realise that they are the same product.
I am anarch of all I survey.
Translation: Hewlett-Packard laid off thousands of workers and shipped its manufacturing jobs to countries where it's legal to employ blind children for 30 cents an hour.
Translation: Even though the economy has tanked, there's no need for Dell to cut its CEO's $150 million salary just to keep profits up. Instead, it can keep its stockholders happy simply by firing those employees who worked to build Dell into a successful operation in the first place.
factory!
The thing about running a public company - if most shareholders think short term, they will kick you out if you start thinking long term and you don't hold most of the shares.
;) )
If you hold enough shares, they'll still try to kick you out - minority interests etc.
The big problem is the long term is not clear either - how can you build computers in the USA and still be competitive in the long term? Where is the country heading?
So if you're the CEO the easiest thing to do is "slash and burn" and take the golden parachute if you're caught holding the parcel when the music stops.
Seems the rats are leaving the ship.
(Have I got enough metaphors in there yet?
That child labour thing always comes up. But where's the evidence there's that much child labour?
I hear that minimum wage in the USA is not far below 8 USD per hour.
That's what many mid ("have used source control") programmers and engineers get in cheap countries - and they're not children (even if they behave like them sometimes ;) ).
The minimum wage in Australia is about 14 AUD per hour, and that's a LOT in a cheap country. A typical cost of a decent lunch (meat, vege, carbs) in a cheap country can be less than AUD2.00 or USD1.50 (and that's _eating_out_). In some places even cheaper if you go without the meat: http://www.gonomad.com/traveltalesfromindia/2006/01/how-far-100-rupee-note-will-go.html
Other costs like rent may not be high either.
Go look at this (from some googling):
http://www.bticonsultants.com/res/previous/sg/bti/en/document_center/btiasiasalaryguide.pdf?ObjectID=97810&ViewMode=0&PreviewState=0
You can use google to convert the figures to USD. e.g.
130000000 rupiah in usd
70000 myr in usd
Go look for countries where your stuff is made then google for salary guide, and do some comparisons. You can also google for lunch followed by the currency of the country and you can get more comparison info.
BTW CEOs in Japan don't really make that much, and the popular stereotype is they're expected to commit suicide if they make a really serious mistake, rather than get USD20 million and a job in another company ;).
Look beyond the media hype about child labour. Do some searching and get a better picture of the world.