Saturday, February 9, 2008

The World is Flat (and way smaller than you think)

Before you make up your mind about globalization, as if globalization cared, please read The World is Flat, Thomas L. Friedman's bestseller, subtitled A Brief History of the Twenty-First Century.

The book is endlessly interesting. I could pick any section to quote, but one chapter in particular held me spellbound. Friedman has just bought a Dell laptop, and he asked Dell to trace the "global supply chain" that led to his Inspirion 600m's arrival at his door.... (Note: nothing's changed here but the paragraphing: I just can't stand paragraphs hundreds of words long.)

"My computer was conceived when I phoned Dell's 800 number on April 2, 2004, and was connected to sales representative Mujteba Naqvi, who immediately entered my order into Dell's order management system.

He typed in both the type of notebook I ordered as well as the special features I wanted, along with my personal information, shipping address, billing address, and credit card information. My credit card was verified by Dell through its work flow connection with Visa, and my order was then released to Dell's production system.

"Dell has six factories around the world - in Limerick, Ireland; Xiamen, China; Eldorado do Sul, Brazil; Nashville, Tennesee; Austin, Texas; and Penang, Malaysia.

My order went out by email to the Dell notebook factory in Malaysia, where the parts for the computer were immediately ordered from the supplier logistics centers (SLCs) next to the Penang factory. Surrounding every Dell factory in the world are these supplier logistics centers, owned by the different suppliers of Dell parts.

"These SLCs are like staging areas. If you are a Dell supplier anywhere in the world, your job is to keep your SLC full of your specific parts so they can constantly be trucked over to the Dell factory for just-in-time manufacturing.

"'In an average day, we sell 140,000 to 150,000 computers,' explained Dick Hunter, one of Dell's three global production managers. 'Those orders come in over or over the telephone. As soon as those orders come in, our suppliers know about it. They get a signal based on every component in the machine you ordered, so the supplier knows just what he has to deliver.

"'If you are supplying power cords for desktops, you can see minute by minute how many power cords you are going to have to deliver. '

"Every two hours, the Dell factory in Penang sends an email to the various SLCs nearby, telling each one what parts and what quantities those parts it wants delivered within the next ninety minutes - and not one minute later.

"Within ninety minutes, trucks from the various SLCs around Penang pull up to the Dell manufacturing plant and unload the parts needed for all those notebooks ordered in the last two hours. This goes on all day, every two hours. As soon as those parts arrive at the factory, it takes thirty minutes for Dell employees to unload the parts, register their bar codes, and put them in the bins for assembly.

"'We know where every part in every SLC is in the Dell system at all times,' said Hunter.

"So where did the parts for my notebook come from? I asked Hunter. To begin with, the notebook was codesigned in Austin, Texas and in Taiwan by a team of Dell engineers and a team of Taiwanese notebook designers."

A few paragraphs later:

"Where did those parts come from? Dell uses multiple suppliers for most of the thirty key components that go into its notebooks. That way if one supplier breaks down or cannot meet a surge in demand, Dell is not left in the lurch. So here are the key suppliers for my Inspirion 600m notebook:

The Intel microprocessor came from an Intel factory either in the Philippines, Costa Rica, Malaysia, or China. The memory came from a Korean-owned factory in Korea (Samsung), a Taiwanese-owned factory in Taiwan (Nanya), a German-owned factory in Germany (Infineon), or a Japanese-owned factory in Japan (Elpida).

My graphics card was shipped from either a Taiwanese-owned factory in China (MSI) or a Chinese-run factory in China (Foxconn). The cooling fan came from a Taiwanese-owned factory in Taiwan (CCI or Auras).

The motherboard came from either a Korean-owned factory in Shanghai (Samsung), a Taiwanese-owned factory in Shanghai (Quanta), or a Taiwanese-owned factory in Taiwan (Compal or Wistron). The keyboard came from either a Japanese-owned company in Tianjin, China (Alps), a Taiwanese-owned factory in Shenzen, China (Sunrex), or a Taiwanese-owned factory in Suzhou, China (Darfon).

The LCD display was made in either South Korea (Samsung or LG Philips LCD), Japan (Toshiba or Sharp), or Taiwan (Chi Mei Optoelectronics, Hannstar Display, or AU Optronics).

The wireless card came from either an American-owned factory in China (Agere) or Malaysia (Arrow), or a Taiwanese-owned factory in Taiwan (Askey or Gemtek), or China (USI).

The modem was made by either a Taiwanese-owned company in China (Asutek or Liteon) or a Chinese-run company in China (Foxconn). The battery came from an American-owned factory in Malaysia (Motorola), a Japanese-owned factory in Mexico or Malaysia or China (Sanyo), or a South Korean or Taiwanese factory in either of those countries (SDI or Simplo)."

Friedman's description of the supply chain goes on for two more pages. Then, in Nashville, USA, it is made into the notebook Friedman will see when he opens the Dell box:

"That was thirteen days after I'd ordered it. Had there not been a parts delay in Malaysia when my order first arrived, the time between when I phoned in my purchase, when the notebook was assembled in Penang, and its arrival in Nashville would have been only four days.

"Hunter said the total supply chain for my computer, including suppliers of suppliers, involved about four hundred companies in N. America, Europe, and primarily Asia, but with thirty key players."

I don't know that I, your humble blogger, have anything to add. Anything missing?

The World is Flat, Copyright 2005 by Thomas L. Friedman
Farrar, Straus and Giroux, NY, NY


Anonymous said...

Hi Nice Blog .Some parts, such as hard drives and memory are commodity items and are interchangeable. However, other parts such as motherboards, keyboards, and batteries are proprietary in design and are only interchangeable within a manufacters brand and/or model line in laptop battery dell.

Unknown said...

Nice and quite informative post. I really look forward to your other posts.

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