Learning from Dell - the faithful implementer of 'Just in Time'

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June 25, 2007 As the world changes and China’s dragon stirs, new names will join the big consulting names we are all familiar with. With a clear goal of becoming the world’s number one consulting company, CCID Consulting is the first Chinese consulting firm listed in the Growth Enterprise Market of the Hong Kong Stock Exchange and a direct affiliate of the China Center for Information Industry Development. The company’s take on how local Chinese companies have tried to implement business models based on those from Dell makes fascinating and worthwhile reading for anyone even vaguely interested in understanding the evolution of Just-In-Time manufacturing and supply chain management.

The following article is by You Zeng of CCID Consulting’s Enterprise Strategy Consultancy Center:

Dell has gained outstanding sales achievements by resorting to the unique direct business model and highly efficient supply chain management systems. As a result, many domestic IT enterprises began to study and imitate Dell. However, their market performances have certain disparities with that of Dell, no matter whether they are the manufactures that are learning from Dell's direct business model, or whether they are like Lenovo, who is learning the supply chain model of Dell. CCID Consulting, China's leading research, consulting and IT outsourcing service provider, and the first Chinese consulting firm listed in Hong Kong, believes that by simply copying the model of Dell without fully understanding the management theory behind it is the decisive factor that leads to their failure.

Lenovo has also tried to make great efforts in promoting direct business models, however, different from other manufactures, Lenovo focused on learning the advanced supply chain management system of Dell and found huge areas of development in their supply chain management, which greatly reduced the lead production time and the level of inventory control, and it also improved the level of satisfaction from customers.

Also, Lenovo has poached many senior managers from Dell, after merging the PC department of IBM in order to integrate the supply chain system of Lenovo and IBM efficiently. But the inventory hour remained 18 days less than Lenovo, and with a higher efficiency of 90%. And, from a global point of view, the supply chain of Lenovo is obviously suffering losses compared with that of Dell -- Dell has consigned the production outsourcing to Taiwan manufactures that have strong manufacturing capacities and low costs from an early stage and also first finished the overall arrangement of their global supply chain. Lenovo's superiority is very much confined to China.

Dell model; born from JIT

''Just in Time'' was a production model which was implemented by Toyota Motor Corporation in the 1960s. It emphasized the need to have just the required accessories, just the required quantities and just the required time need for production and distribution. In the 1980s, many American enterprises copied the JIT model, however, with little effect.

JIT exposes all kinds of problems in management though reducing different sorts of inventories, and it analyzes the reasons before resolving the problem to make improvements. And, the pulling production that arranges the production according to customer demand is one of the most effective ways to reduce inventory.

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