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Dell + JIT Inventory Management
Transcript of Dell + JIT Inventory Management
"Whirlwind on the Web" from Business Week
April 7, 1997 So, why did Dell believe it needed to change its inventory process? Because Computers deprecaiate at a very high rate. Sitting in inventory, a computer loses a ton of value. "The longer you keep it the faster it deteriorates - you can literally see the stuff rot...because of their short product lifestyles, computer components depreciate anywhere from a half to a full point a week. Cutting inventory is not just a nice thing to do. It's a financial imperative."
Dell CEO History of JIT:
JIT is a production model first implemented by Toyota Motor Corporation in the 1960s. It emphasized the need to have just the required accessories, just the required quantities, and just the required time needed for production and distribution. Dell, as a company, has grown at an extreme rate since its inception solely due to how it has structured its company. Dell Today Thirteen years ago, Dell carried 20-25 days of inventory in a sprawling network of warehouses. Today, Dell has no warehouses. And although it assembles nearly 80,000 computers every 24 hours, it carries no more than two hours of inventory in its factories and a maximum of 72 hours across its entire operation. Simply, by changing its inventory method, Dell experienced an immense change in its finances, and gained an enormous competitive advantage. Dell continues to strive for company-wide improvements. However, one thing is for certain: the company will never stop using Just-In-Time inventory practices. Questions?
Managerial Accounting by, hWeygandt, Kimmel & Kieso (5th edition) Jessica Cecere