A Revolution, not a Religion

Dell Could Go Beyond Its Direct-Sales Model In Bid to Bolster Growth – WSJ.com

Dell's Founder Is Rethinking Direct Sales – New York Times

Dell Computer (now Dell, Inc.) is known for its famous “Direct Model.” It's almost trivia at this point, but my first PC for college was a Dell 386 PC bought at a retail store, “SoftWarehouse,” the store that became CompUSA, which is going through downsizing and store shutdowns, which is a different story.

After that experiment with retail channels (and having to let the retailer take their cut), Dell pulled back and went 100% direct (with “direct” sometimes meaning direct to a corporate wholesaler or leasing company, but consumers could only buy direct).

I think this is an interesting lesson in corporate dogma… Dell is now considering going through retail channels again.

Michael Dell, who recently came back as CEO, said:

“The direct model has been a revolution, but it is not a religion,” Mr. Dell wrote in a memorandum sent on Wednesday to 80,000 Dell employees.

I think this is, generally speaking, a healthy mindset. Any business that becomes so enamored with “how things HAVE been done” sometimes has trouble thinking about how things SHOULD be done. If customers want a PC “now” (meaning go to the store this afternoon to get one) and they don't care about customizing it, shouldn't Dell listen to the market? Is there anything that Toyota could potentially become enamored with? What about your business?

I recorded a LeanBlog Podcast interview with Dr. Mark Spearman, of Factory Physics fame, over the weekend (will be released in coming weeks). Spearman told me a story about how he did some consulting for Dell and asked them about building some “plain vanilla” PC's in a “build to stock” manner to help level out production for times when “build to order” volumes were down during a day or during a week. This idea was shot down as NOT the way Dell did things.

Dell used to be a “direct manufacturer” (with PC's), but they moved away from that model with new products (TV's, PDA's, printers, etc. that are built by contract manufacturers or partners). There's an example of moving away from how things used to be.

Then, this news came out that Dell is re-considering retail channels, basically doing what Spearman recommended, building some items to stock for certain customer expectations.

I'm writing about Dell in the Lean Blog because many experts lump them into the group of “Lean” companies. I've said it before, Dell might have low inventories (and other “lean” metrics), but they haven't traditionally subscribed to TPS philosophies. As I've also posted about before, that appears to be changing, if you look at this job posting. I'm happy to see Dell exploring TPS approaches (hopefully the management system, not just the tools). I'm glad to see “we've never been a TPS company” not being an excuse to look at how TPS can help them.

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