June 12, 2011

Lean Manufacturing at Dell

Dell has also used Just in Time principles to make its manufacturing process a success.  They leverage their suppliers use JIT. Dell is about quickly assembling the part which are sourced from their suppliers and delivering to customers. They force their suppliers to carry inventory and Dell stays lean on inventory. Short lead times are provided to customers and thereby shorter lead times are demanded from their suppliers. Quick assembling and quick shipping is the USP of Dell. They have been able to do successfully implement JIT because of variety of reasons. It has had a Dependable supplier base. They have been able to meet Dell’s demanding lead time requirements. Also it has a seamless system that allows Dell to transport its system requirements. The systems are very efficient as they arrive in time to help Dell fulfill its lead times. Somehow Dell has been able to fore the suppliers to carry inventory and this willingness of suppliers to carry inventory on hand allows Dell to have low costs on inventory.
Because of JIT it has been able to successfully reduce the inventory related costs.  In 1993 it followed a practice of carrying over 10 weeks of inventory. Since 2001 it carries 1 week of inventory. This saves it majority of costs now. Inventory costs are even higher in computer industry as rate of depreciation is very high. By this rate Dell used to lose roughly 10% of the value of inventory per year.  After implementing JIT it loses roughly 1%. By this calculation dell has been able to save 9% costs in inventory management.
References : www.inventorymanagementreview.org/justintime/
The writer of this article, Naman Jain, a PGP student of Indian Institute of Management, Raipur has worked in GE Healthcare Labs. He has done his B.Tech in Computer Science & Engineering from Vellore Institute of Technology, Vellore and can be reached at namanvit @ gmail . com

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