Interesting Costs Cutting Techniques By Companies

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Dell – Innovation in Distribution & Supply chain

Dell – an American multinational firm which changed the way distribution and supply chain was working in computers/services industry. Dell’s first approach was to remove the ‘Middlemen’ in supply chain system became famous as ‘Direct from Dell’. Removing middlemen from traditionally run distribution system was a risky move but it helped the firm to reduce their operational costs drastically and thereby improving their margins. Dell started out as direct seller to its customers. They initially started with mail-order system, and later with evolution of internet it became one of the first companies to develop a website which generates online sales. Another cost reduction technique was ‘Virtual Integration’ on manufacturing side. Dell asked its suppliers to have their inventory hubs near to its assembly plants. It helped the firm to have components available on Real-Time or ‘Just-In Time’. Third technique used by Dell was to implement ‘Manufacturing Cells’ in assembly lines rather than having long, tedious assembly line with each worker repeatedly performing the same/single task. Because of these cells, workers were able to form a group near to workstations to assemble the entire PC as per customer requirements. It not only reduced the overall space in assembly plant but also improved the timings by 75%.

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