Michael Dell started Dell Inc. in 1984 when he was an undergraduate student at the University of Texas. Two decades later, Dell has grown to become one of the world’s great computer companies, with a leading share in the personal computer and server businesses. In fiscal 2004, a year in which most computer makers lost money due to slumping global demand for PCs, Dell saw its revenues jump by $6 billion, to $41 billion, made $3.5 billion in operating profit, and gained over 2 percent in global market share. Approximately one-third of Dell’s sales were made outside the United States. Dell credits much of its strong performance in a tough environment to a cost structure that is the lowest in the industry. That cost structure is in part the result of Dell’s global manufacturing and supply chain management strategy.
Dell has manufacturing sites in Brazil, Ireland, Malaysia, and China, in addition to three sites in the United States (and a fourth now under construction).
The sites were chosen for low labor costs, the high productivity of the local workforce, and their proximity to important regional markets. Dell prefers to manufacture close to regional markets to reduce shipping costs and increase the speed of delivery to customers. (Dell still manufactures computers in the United States because its U.S workforce is very productive, and the United
States is its largest market, so it pays to be close to U.S. customers.)
In addition to manufacturing, much of Dell’s customer support operations are also performed outside of the United States with a major center in Bangalore, India (U.S. customers calling Dell’s customer support are likely to be connected to a service agent in India).
India was chosen not just because of low wage rates, but also because of the availability of an educated and English-speaking workforce. However, moving customer support offshore