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By Tony Hallett, 30 January 2003 16:49

COMMENT From the online sales, to the super smooth manufacturing facilities, to the billionaire boy wonder boss, how does Dell do it? Tony Hallett has been behind the scenes at the company's Round Rock, Texas HQ looking for the secret of Dell's success… Dell is a company that has a certain swagger about its walk right now. Perhaps the scariest thing - for the company's competitors, at least - is that it has been able to keep on growing during the downturn. Few quarterly results statements stick in the mind but its Q3 earnings release last November was one. The hardware specialist reported record three-month revenue of over $9bn, a yearly increase in units shipped of 28 per cent and profits up 31 per cent. Expect its upcoming figures to send similar shock waves. COO Kevin Rollins has famously said - boasted, even - that the company can hold its breath underwater longer than anyone else. Those figures suggest something more akin to SCUBA diving. And one of its senior VPs has even been named-checked in an Al Pacino movie. That's what we call brand visibility. You've read the editorial, maybe even bought one of their products - 43 per cent of shipments of PCs for business are now Dell - but what makes Dell tick? Two things: the way its people work and the way Michael Dell himself leads them. Dell, the company, looks in many ways like other top-flight vendors. From the nondescript campus HQ - just outside somewhere you've heard of - to the live-eat-and-sleep 'The Company' approach of the hard-working, MBA'd top brass, to the European beachhead in the Thames Valley, you've seen it before. Yet there are things that make Dell unique. Most customers probably don't even notice the 'Be Direct' slogan anymore but it is central to what makes the whole operation tick. The company sees little value in middlemen, in almost every area. A retail foray a decade ago confirmed this view and recent partnership break-ups show Dell's preference for working alone. If you want a job done right… right? Or as Brian Wood, Dell VP and 15-year veteran, puts it: "Tiers of distribution add cost and relatively little value." So there's the direct model, the website sales - over 50 per cent of sales have some internet component if not a fully blown e-transaction - and the legendary strategy of entering markets at the right time, when standards are apparent and products are becoming commodities. But what about that ultra-sleek supply chain and manufacturing? Dell's main competitors have outsourced their PC making operations and still can't keep up, which Michael Dell says he finds "ironic". Steve Cook, Dell senior materials manager, is Mr Supply and Demand, a man whose job is all about harmony. An ex-US Navy officer he doesn't wait for straggling journalists in their protective goggles as he leads them up aisles at Dell's Parmer North 2 factory, also known as the Morton L Topfer Manufacturing Center after the silver-haired, former vice chairman who helped the company's processes so much. And there are quite a few aisles. The facility is about the size of four football pitches and there isn't a wasted space. "Three lines work in parallel," he shouts, "850 of a total of 2,000 staff on the floor at any one time." There are similar set-ups at the Dell facilities in Nashville, Ireland (Limerick), Malaysia (Penang), China (Xiamen) and Brazil (Eldorado do Sul) but unlike other companies, Intel say, these are not 'copy exact', allowing for local differences. The constant whirr is caused as much by man as machine, each employee - sorry, stock-optioned 'associate' - working to a set of basic metrics. The atmosphere resembles that of another famous just in time operation, McDonalds, which isn't meant as an insult. Only at Dell, each assembler - non-unionised but typically loyal, "especially for a college town", adds Cook - is putting together PCs or other kit. And yes, it's one worker per PC, meaning good and bad build quality can be traced back to individuals. On the wall hangs a blown up cutting from a magazine, talking about Dell's 'secret sauce' - WebMethods and i2. Yet it's apparent there's much more to everything than software or a Dell-only data centre (now the Sun servers have been replaced by clustered Dell Intel machines). Indeed, the company is so confident in its processes that it routinely lets in visitors - customers or competitors. Even if they wanted to copy the set-up exactly, Dell argues it will have moved on sufficiently by the time others get going. The facilities seem to be in an almost constant state of upgrade. The PCs per hour at Austin have gone from 90, to 300, to 600 to more. There is some rivalry as to which facility is the most productive. It's currently a toss up between Austin and Limerick. And the warehouse? There isn't one. Supplies enter one door and leave as completed product 90 minutes later. Every two hours Dell completely reschedules its inventory, helped by equally sensitive supplier hubs nearby. Some analysts have doubted Dell's chances in networking, saying a lack of dominant suppliers means it might find it hard to apply its model. Cook's answer to that: "It's not at all different [to PCs]. That kind of talk doesn't keep me up at night." Still, what's apparent - as when Japanese manufacturers made such inroads in the West in the 1970s and 1980s - is that the company feels it is still learning. Every tiny improvement helps. Susan Sheskey, a Dell VP, says the influences throughout the business are clear: for tracking and logistics, FedEx; for repeat business, LL Bean; for personalistion, Amazon.com. And Dell eats its own dog food. As well as the PCs, the workstations, the high-end clustering (Linux or Microsoft), there is a web services push - "We are very .Net" - and an IT budget that, though just 1.5 per cent of revenue, is being driven down. Booming sales help that. Behind all these go-getters is, of course, Michael Dell. Recent US articles have talked about a physically leaner, meaner Dell - like his company, strong in tough times. But in person, he doesn't come across as ruthless or power-hungry. He may be the richest American under 40 but he also comes across as thoughtful, a leader who has only known one job, a job he has spent half his life doing. That's right, he'll only turn 38 in February. Sitting in a boardroom the size of a basketball court, you'd be forgiven for thinking this father of four cares about only two things - his family and his company. When I ask him about the frequent comparisons to Henry Ford, he answers: "It's certainly flattering but I don't think about it all that much." On Dell being like WalMart, the world's largest retailer: "There are big differences… but the similarity is the efficiency." On the subject of his tenure at the top, he is more expansive. Earlier he characterises his relationship with right-hand man, president and COO Rollins, as one where "we make better decisions when we put our heads together". Yet when I ask him if he can see a day when he won't be in charge - as eventually happens with the founders of so many high-tech successes - he doesn't seem to contemplate an ouster or giving it all up for golf one day, shooting back: "Well I'm sure in a couple of hundred years I'll be dead but I'm not too worried about that at the moment." Don't underestimate how much of Dell's 'secret sauce' is Mr Dell himself.