> the same things that make a system "efficient" also can often be viewed as making it fragile.
Apart from the Toyota approach, discussed, Dell pioneered a different system: they forced "SLA"s on suppliers for whom Dell was a major customer. This was back in the mail order build-to-order business of the 90s; I don't really know what Dell does these days.
It worked like this: Dell took a truckload of parts. They hit the loading dock; were (in the finance sense "received"); Dell accepted the invoice (to be paid 30 days later or whenever) and the goods appeared on their balance sheet. They used them in computers they built, sent out, and then charged the customer's credit card for, getting paid immediately. When they ran low on part P they called up the vendor and said "deliver us some more right away". What was "right away"? Why pretty much immediately; the vendor had them in a truck outside Dell's facility. If they didn't, well, they stopped being Dell's vendor.
Pretty clever: the contents of those trucks were still on the vendor's balance sheet until Dell asked for them; Dell got to use them and get revenue for them long before they needed to be paid for, but basically not before they were needed. They made so much money on the float, and all at their vendors' expense.
They did the opposite too: if they had inventory ready to go but without a customer (prebuilt configs) they put it in trucks and drove the trucks away from the docs. I don't know how they got their auditors to accept it as GAAP but they did and were lauded by Business Week, the WSJ etc for their cleverness.
While impressive, this is only sustainable in a non-sustainable world. The burden that Dell unnecessary put on their suppliers have to be absorbed by the economy at some point. The single most important point that Toyota makes is stressing the importance of supply chain wide sustainability. Eg. by paying your suppliers ASAP and shortening credit lines, you should be able to get the parts cheaper than what you make of the interest.
Apart from the Toyota approach, discussed, Dell pioneered a different system: they forced "SLA"s on suppliers for whom Dell was a major customer. This was back in the mail order build-to-order business of the 90s; I don't really know what Dell does these days.
It worked like this: Dell took a truckload of parts. They hit the loading dock; were (in the finance sense "received"); Dell accepted the invoice (to be paid 30 days later or whenever) and the goods appeared on their balance sheet. They used them in computers they built, sent out, and then charged the customer's credit card for, getting paid immediately. When they ran low on part P they called up the vendor and said "deliver us some more right away". What was "right away"? Why pretty much immediately; the vendor had them in a truck outside Dell's facility. If they didn't, well, they stopped being Dell's vendor.
Pretty clever: the contents of those trucks were still on the vendor's balance sheet until Dell asked for them; Dell got to use them and get revenue for them long before they needed to be paid for, but basically not before they were needed. They made so much money on the float, and all at their vendors' expense.
They did the opposite too: if they had inventory ready to go but without a customer (prebuilt configs) they put it in trucks and drove the trucks away from the docs. I don't know how they got their auditors to accept it as GAAP but they did and were lauded by Business Week, the WSJ etc for their cleverness.