What the Dell?

Jeff Taylor | October 20, 2004

Aren't tech manufacturing jobs fleeing the U.S. for low-wage countries? American workers cannot compete, right? Soon we'll all be working part-time at Wal-Mart without health benefits and selling junk on eBay just to stay afloat.

Someone forgot to tell Dell, which is expected to announce plans for another U.S. PC plant soon.

"The issue has become one of logistics: The cost of moving a PC around is more expensive than the cost of labor" to build it, Dell CEO Kevin Rollins tells CNET.

Comments

Sourav|10.20.04 @ 9:53AM|#

It costs money to move 40lb parcels around the world? Feather, knocking over, etc.

What's interesting here is that perhaps the price of moderately-skilled tech labor has bottomed out.

fyodor|10.20.04 @ 10:38AM|#

"The cost of moving a PC around is more expensive than the cost of labor"

But that might not be the case if the cost of that labor were to be, one way or another, raised. Omigod, it's economics!!!

M1EK|10.20.04 @ 10:39AM|#

Sooner or later, ripping up our freight railroads and oversubsidizing trucking is gonna bite us on the ass here big-time.

|10.20.04 @ 11:04AM|#

"cost of moving" -- from taiwan, perhaps. so build your plant in monterrey.

i obviously haven't worked out the cost-benefit in detail, but that argument seems specious on its face.

sourav|10.20.04 @ 11:24AM|#

So Central and South America is the next frontier in the commodity electronics industy? Cool.

|10.20.04 @ 11:27AM|#

What I dont understand about this argument is this: Dell only assembles computers from parts made mostly in Asia. The cost of moving the individual components before assembly is the same or more as shipping the finished machines after they have been put together. As far as I know this is true not only for things like the microprocessor (which are quite small and light), but for the bulkier components such as the case and power supply.

|10.20.04 @ 11:31AM|#

Josh, I think an assembled PC would take up a lot more space than it's components, maybe that accounts for the difference.

|10.20.04 @ 11:51AM|#

There are 2 kinds of freight shipments in Mexico:

-Those that have been stolen.

-Those that are going to be stolen.

This is, of course, anecdotal information. But the place where I work, like so many other places, moved its manufacturing to China & Taiwan.

Sometimes, we pay a lot more in air freight charges to bring our products back than we ever did in labor.

And, as it turns out, a lot of our labor force had bought their social security numbers in Macarthur Park.

|10.20.04 @ 12:53PM|#

I think Todd has hit the nail. I've read several places that because of cost of shipping the assembled unit, televisions for domestic consumption are assembled in the US, mostly from parts made overseas. If this works for a TV (which has a CRT that comprises the most of its volume and weight) why wouldn't it work for computers?

|10.20.04 @ 1:11PM|#

A humorous look at the subject of "Smell Computers" outsourcing to India:



http://www.microchp.org/shockwave/tech.swf



Keep the sound turned down if at work and/or around children. Lot's of profanity.

|10.20.04 @ 1:37PM|#

Isn't this a question for the likes of Flextronics or Solectron or FedEx? I was under the impression that Dell's just a marketing machine and front end for a string of contract manufacturers, logistics suppliers and support subcontractors. Is it not?

"Advanced Micro Devices "has gotten much better" at producing technology, Rollins said, but he indicated that AMD would have to overcome several impediments before Dell would buy its processors. For one thing, Dell customers aren't really asking for AMD processors, he said."

Considering the way AMD's server chips are beating the stuffing out of Intel's offerings, and considering that per this article at The Tech Report (http://www.tech-report.com/onearticle.x/7493), Intel's dual core Xeon's won't be shipping until six months after AMD's Opterons, I find this statement by Rollins to be highly questionable.

|10.20.04 @ 3:00PM|#

Todd: I don't think so. The volume of the assembled PC will be the same as the volume of just the case, and the mass of the assembled PC is just the sum of the masses of the components. While shipping costs are not necessarily proportional to volume and mass, in sufficiently large quantities, it should cost the same to ship the parts as to ship the assembled product.

sourav|10.20.04 @ 4:57PM|#

CodeMonkeySteve: except that each of the computers is custom, so they don't end up going to the same place or all at the same time.

|10.20.04 @ 5:58PM|#

it should cost the same to ship the parts as to ship the assembled product.

Actually, no. To ship the parts from the supplier to the manufacturer is cheap. You've got finite types of item in truckload configurations all coming to one point. If your forecast planning is good enough (which for Dell I would imagine that it is), you're not wasting storage space on components beyond deprecation or obsolescence, so you generally already have the parts on hand when it's time to create the assembly. With careful forecast planning it costs you pennies per completed unit to get the parts to the assembly line.

The kicker is that demand fulfillment/promising (which is done at POS) means things have to be timed from assembly on. Sure, conservation of mass holds, so the unit is roughly the same weight and volume as the sum of its parts, but weight and volume on this scale don't mean much unless you're shipping cookies to grandma "over-the-counter." To ship the components in for 100 assemblies may only require two trucks going from one fixed point to another. Shipping them out to the customer, OTOH, requires less-than-truckload and transportation management calculations which are literally logistical nightmares. It may take 3 trucks, it may take 5, or 2 planes and 2 trucks, etc. 30 shipments to Ohio might fit on truck A, but then may have to be moved to truck B in Columbus because a fire on the tarmac at the airport (or something) means the units now have to be driven to Illinois. Generally speaking the more legs you need on a trip the more expensive the transportation planning and execution becomes. That's why Amazon is so successful - they minimize shipping legs.

This is of course assuming that Dell handles its SCM on its own.

|10.20.04 @ 6:29PM|#

"The volume of the assembled PC will be the same as the volume of just the case"

Not necessarily. The assembled PC will require more protection and padding than the empty plastic and metal box would require.