Insiders have blabbed to the Wall Street Journal that Dell "has approached contract computer manufacturers with offers to sell ... its computer factories." Founder Michael Dell is a Texan, not a Valley guy. But he did build a $1,000 investment into the world's biggest PC maker, starting from his college dorm in 1984. Shedding its factories would be a huge change for Dell, which made its name on build-to-order sales. Why would Dell dump its plants?The WSJ recounts how Dell got from there to here:
Dell's plants are still regarded as efficient at churning out desktop PCs. But within the industry, company-owned factories aren't considered the least expensive way to produce laptops, which have been the main driver of growth lately and are complex and labor-intensive to assemble. Rivals such as Hewlett-Packard Co. years ago shifted to contract manufacturers — H-P builds less than half of its PCs in facilities it owns. Contract manufacturers can generally produce computers more cheaply because their entire operations are narrowly focused on finding efficiencies in manufacturing, as opposed to large firms like Dell, which must also balance marketing and other considerations. For many Dell notebooks, a contract manufacturer already partially builds each system in a plant in Asia. The half-built computers are then shipped to one of Dell's own plants where assembly is completed. Because each computer goes to two factories, Dell refers to the system as "two touch." Selling factories could be a culmination of a plan Dell started last year to increase its reliance on contract manufacturers, something competitors did first. "A lot of companies are already on that model," said Mike Cannon, Dell's production chief, in an interview earlier this year. "We're playing catch-up there."
(Photo by AP/Manish Swarup)