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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."
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.
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.