Dell's direc to order business model of selling customized computers seems to be approaching the end. Reports have been surfacing in recent weeks that Dell will be outsourcing their manufacturing and focusing on their core business of selling computers. The Statesmen writes:
Dell Inc. for years kept rivals at bay with a network of factories that custom built computers on the fly, but competitors have erased Dell's advantage and forced the company to reconsider its entire supply chain, a review that might include the sale of its manufacturing operations.
The Wall Street Journal reported Friday that Dell has approached various contract-manufacturing companies with offers to sell its factories. The company would rely instead on those outside firms to take over much of its computer-building operations.
If a full-scale sale occurs, it would mark yet another step away from the famous build-to-order, direct model pioneered by founder and CEO Michael Dell.
Dell spokesman David Frink declined to comment on the report, but he noted several instances in the past year in which Dell executives said they were reviewing all of the company's operations, including its supply chain and manufacturing processes. Company officials have often said they would expand partnerships with third-party manufacturers and designers.
Dell now assembles most of its desktop computers at factories in Tennessee, North Carolina, Florida, Brazil, Ireland, Poland, India, China and Malaysia. The company also uses several Asian manufacturers to build basic notebook computers, then it adds high-value parts such as processors and memory in one of its own facilities. Outsourcing its laptop manufacturing would eliminate one step of what Dell calls a "two-touch" model.
Industry analysts said the move was the natural result of declining profit margins in the mainstream computer business.
"You can say that the heyday of the direct model is over, but it is not totally finished," said analyst Roger Kay with Endpoint Technologies Associates in Wayland, Mass. "The value of customization is not what it once was."
He said: "Dell has twisted and turned and tried to find more ways to squeeze more money out of the business, but they have concluded that they have to go further."
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