Wednesday, September 24, 2008


Dell continues its Supply Chain Transformation with Plans to potentially sell all remaining Factories to Contract Manufacturers
After announcing plans to more aggressively enter the retail channel and shutter a legendary computer plant in Austin, TX earlier this year, Dell is currently shopping its remaining company-owned factories, according to a report in the Wall Street Journal. The move follows another disappointing quarter in which Q2 earnings dropped 17%, from 2007, causing a sharp drop in Dell’s stock price as well. Unlike most computer manufacturers, Dell continues to build most of its own computers, in part to support the “build to order” model that had for more than a decade defined its supply chain greatness (Read article “Jit – The Dell Way”) and which the company said it was substantially abandoning in Spring 2008 announcements. It also said at the time it was planning to make greater use of contract manufacturers (CMs). Dell currently does use Asian-based CMs for first-stage production of many of its notebook computers, but the work is actually completed in Dell-owned facilities to add final options, a process Dell refers to internally as “two touch.” While the approach added extra logistics and manufacturing costs versus a single-touch system, for many years profit margins were fat enough to absorb the hit. But market conditions have changed, both in terms of lower prices and margins and a rapid shift to notebooks, making the two-touch process more of a financial burden than when notebooks were a smaller percent of sales.
Tata Motors may outsource distribution to a new unit
India’s largest auto maker is planning to outsource the logistics and distribution part of its business to a fully owned unit, TML Distribution Co. Ltd, which was incorporated on 28 March, according to the company’s latest annual report. Tata Motors Ltd’s plan to outsource distribution to a newly created unit may help it keep some costs off its books and make money from through contracts with other manufacturers, analysts say. Tata Motors’ distribution plan is not new in the Indian automobiles business. Rival Mahindra and Mahindra Ltd, India’s largest utility vehicle maker, has a unit called Mahindra Logistics, which manages the logistics business for the entire Mahindra Group and also for other manufacturers.
Videocon Targets Over 100 Logistics Centre Sites
Videocon Industries has identified sites in over 100 cities where it plans to set up logistics centres through a joint venture with Japan’s Mitsui and Hitachi firms. The report in the Economic Times said the JV is likely to be operational by the third quarter of this year, and will have Videocon offering its infrastructure for setting up back-end services, while Mitsui and Hitachi will provide expertise and know-how. They will initially provide back-end support to Videocon's retail businesses, including consumer electronics chain Next, cash and carry chain Bolld, and entertainment store Planet M. The centres may later on provide services to third parties, and become business centres in themselves.

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