The supply chain starts with the customer.
By cutting out retailers and selling directly to its customers, Dell is in a far better position to forecast real customer demand.
Replace inventory with information.
To operate with close to zero inventory, Dell communicates constantly with its suppliers. It sends out status updates three times a day from its assembly plants; every week it updates its quarterly demand forecasts. By making communication its highest priority, Dell ensures the lowest possible inventory.
If you can't measure it, you can't manage it.
Dell knows what works because it measures everything — days in inventory, cash-conversion cycles, the time to build a PC. As Dell slashed those numbers, it got more efficient.
Complexity slows you down.
Dell cut the number of its core PC suppliers from several hundred to about 25. It standardized critical PC components, which streamlined its manufacturing. Dell got faster by making things simpler.
Create a watershed mind-set.
Dell is not content with incremental improvement; it demands massive change. This year, it wants its Austin-based PC-assembly plant to improve production by 30% — and it's already ultrafast. Says CEO Kevin Rollins: "You don't get a big result if you don't challenge people with big goals."
A version of this article appeared in the November 2004 issue of Fast Company magazine.