Dell turns to outsourcing
The downturn in the PC market may lead to Dell outsourcing the production of its machines to allow it to focus on sales and marketing, a major revision to its celebrated business model.
The Wall Street Journal reported that Dell planned to sell its manufacturing facilities worldwide in a move to restrategise and enhance its competitive edge in the PC industry, following in the footsteps of rivals such Hewlett-Packard which have already outsourced assembly of its components.
Dell’s manufacturing formula has been for customers to place orders on the Web or by phone for a made-to-order machine. Dell has four manufacturing and distribution facilities in the US and one each in Ireland, India, China, Brazil, Malaysia and Poland.Taiwainese electronics manufacturers, such as Hon Hai Precision Industry Co, Compal Electronics Inc and Quanta Computer Inc, are among the companies that make notebook computer parts for Dell.
At the end of last month, Dell disappointed investors by reporting a surprising 17% drop in quarterly profit, even though its sales increased 11%. Dell blamed the profit drop mainly on being too aggressive in price cutting to gain market share in some regions of the world.
In a quarterly report to the Securities and Exchange Commission, Dell stated, “We are actively reviewing all aspects of our logistics, supply chain and manufacturing footprints.” It added, “We continue to evaluate and optimize our global manufacturing and distribution network, including our relationships with original design manufacturers.”