Dell to Rid Itself of Factories by 2010
As Dell continues to shift business practices to embrace a changing PC market, it looks to sell its computer factories world wide.
It would appear Dell Inc. is looking to sell its computer factories in preference of outsourcing in an attempt to cut expenses. With many of Dell’s competitors, such as HP and Apple, already outsourcing production of many of their own computers, Dell seems to be simply following in suit. According to sources, Dell could be selling most or all of their computer factories within the next 18 months.
Dell currently does outsource part of its manufacturing process for many of its laptops, with just the final assembly taking place at their own factories, such as those in the United States. Although current means of production for Dell’s desktop PCs is considered efficient, falling yearly profits for Dell has forced it to reevaluate its business model to further cut costs. With manufacturing contractors being able to have greater focus on the production process, having greater specialization, and possibly having the use of an offshore labor force, the use of contractors could result in a cost savings. With rising oil prices, transportation costs are increasing as well, making manufacturing a product at fewer locations potentially cheaper. Some believe though that Dell may sell its factories to the same contractors who will continue to produce PCs for Dell.
Dell’s production strategy has also been affected by the increase in laptop sales over those of desktops in recent years. The past business of building desktop PCs for orders on-demand is being replaced by that of consumers buying a pre-configured laptop from a retail store. A switch in Dell’s business practice may result in increased profits, but Dell’s ability to continue offering customization on the level they are known for may possibly be threatened. Last December, Dell signed up Best Buy as a retail partner for the sale of Dell’s Inspiron and XPS PCs, a historical shift for the company’s business model. Many consumer purchases now are often driven by looks, rather than system specifications, giving the ability to purchase a computer in person an advantage.