Explaining Dell's Transformation – Managing Profitability
from the in-retrospect,-everything-looks-easy dept
An interesting look behind the scenes at how Dell jumped from second-tier status to the number one computer supplier using “profitibility management”, which at first just seems like a catchy new name for inventory management. The difference is that it goes one step beyond inventory management to tie sales efforts into inventory issues. This way, Dell adjusted prices and sales incentives to continuously push whatever products they had on hand, rather than push what they wanted to sell. The results of this process surprised even those involved with it. It apparently had some unexpected consequences as well. For instance, not only did they save from having shorter inventory lead times, they found even larger savings in the fact that component prices were regularly dropping – so when they did have to order new components the prices were much cheaper than if they had had to order them earlier.