Made-to-order no longer computes
TEXT OF STORY
KAI RYSSDAL: Back in the early days of personal computers Dell’s trademark was building its products to order. The computer company built a lot of factories, too. But now it’s looking to revamp its signature production process. The Wall Street Journal reports today Dell is talking about selling off most of its facilities and having somebody else make its computers. Marketplace’s Mitchell Hartman reports.
MITCHELL HARTMAN: Up till now, Dell has relied primarily on its own factories in the U.S. and overseas to custom-make computers that were ordered directly by customers. Analysts say that getting away from that production model would help the company cut costs in a very competitive industry. Dell is under pressure, due to sagging sales and lower quarterly profits.
Steve Biggs follows Dell for Zacks Equity Research.
STEVE BIGGS: While that model still works for the North American business market, a lot of Dell’s revenue now is coming from the consumer market and from international, which is a different model. And controlling the manufacturing assets may be less necessary.
Increasingly, Dell’s sales are to consumers shopping at retail stores, rather than to businesses that order a whole raft of customized PCs at once. Plus, people are buying more laptops, which can be churned out cheaper by specialized contract manufacturers.
Competitors like Hewlett Packard already outsource most of their production, which allows them to focus on marketing and design.
Technology analyst Steve Baker of the NPD Group says we can expect to see more computer manufacturing move abroad.
STEVE BAKER: It’s mostly happens in Taiwan, China, and in Vietnam increasingly. In the U.S., you know, a lot of those things end up in North America, end up in Mexico, because of the cost differentials there as well.
That means Dell’s overseas factories might be the most attractive to a buyer, if they’re put up for sale.
I’m Mitchell Hartman for Marketplace.
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