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CHAPTER
Working Capital
Managemen t
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Second, Dell uses information technology to collect
data that enables it to better customize products for its
customers. For example, a recent Fortune article
described how Dell has been able to capture most of the
Ford Motor Company’s PC business:
Look at what the company does for one big
customer, Ford Motor. Dell creates a bunch of
different configurations designed for Ford employees
in different departments. When Dell receives an order
via the Ford Intranet, it knows immediately what
type of worker is ordering and what kind of computer
he or she needs. The company assembles the proper
hardware and even installs the right software, some
of which consists of Ford-specific code that’s stored
at Dell. Since Dell’s logistics software is so
sophisticated, it can do the customization quickly
and inexpensively.
Sound working capital management is necessary if a
company wants to compete in the information age,
and the lessons taught by Dell extend to other
industries. Indeed, Michael Dell, founder and CEO of
Dell Computer, recently discussed in an interview with
The Wall Street Journal how traditional manufacturers,
such as the automobile companies, can use the
experience of Dell to improve their operations. The
ramatic improvements in computer technology
and the growth in the Internet have dramatically
transformed the computer industry. Some
companies have succeeded while others have failed.
Despite some recent setbacks, Dell Computer has clearly
been one that has succeeded: Its sales have grown from
roughly $5 billion in 1995 to more than $30 billion in
2000.
There are a lot of reasons behind Dell’s remarkable
success over the past decade. Perhaps the number one
reason is the company’s impressive success in managing
its working capital, which is the focus of this chapter.
The key to Dell’s success is its ability to build and
deliver customized computers very quickly.
Traditionally, manufacturers of custom-design products
had two cho