The core of Dell Computer Corporation's direct selling model is based on a simple premise: sell custom-built computer systems directly to the end-customer, eliminating the middle rungs of the distribution system. A traditional distribution structure, in contrast, involves several layers: the regional warehouse, local warehouse and dealer/distributor before it reaches the end customer.

Another unique feature: the Dell model promises to build the PC according to individual specifications of customers and to deliver it directly to the customer, without any intermediaries. The benefit: reduced delivery time from the usual 60-90 days to 5-7 days and effecting a cost saving of at least 5-6 per cent.

A visit to Dell's Penang facility showed just how the system works. The build-to-order cycle can take just a day to be completed if all the parts required are available. At the end of the cycle the PC is ready for delivery within 7 working days. In the case of India, company officials are reluctant to put a time frame on the delivery period, keeping in mind customs delays.

``Delivery usually takes 5-7 days by air, and 15 days by road. However, in India, we need to keep an allowance of a few more days, making delivery time 7-10 days, after factoring in customs and other issues,'' said Mr Ron Goh, vice-president, Asia. The process of manufacturing begins only after the Penang factory receives an order which is placed through one of three methods: online, on the phone or face to face, through salespersons.

What is crucial to the success of the direct model is efficient logistics handling. The Asia Pacific Customer Centre in Penang (APCC), for example, (which looks after the supply and servicing needs of the Asia Pacific region, excluding China) has most of its major suppliers located close by, saving on transportation costs: the Intel integrated logistics centre is just five minutes away, while other suppliers like ASE, Iomega, Bax and Samsung are also located nearby.

With its suppliers wired into Dell's IT system, even a 2-hour supply becomes possible. Dell has a total of 200-250 suppliers, with the top 38 suppliers making up 90 per cent of the material costs. The Dell value chain lays emphasis on time to volume, service, continuity of supplies and quality.

``We rate our suppliers every quarter and are constantly raising the bar, '' said Mr Simon Wong, managing director, APCC.

End-to-end integration of the supply chain is also crucial. At Penang, for example, Dell outsources its material stocks from a `bonded' warehouse located just minutes away. ``The advantage,'' says Mr Wong, ``is that Dell has a buffer stock and does not own any inventory.''

``The key to our success is information and speed of execution,'' he adds. ``In 95 per cent cases we are able to meet our deadlines, if all the parts are available. In case a part demanded by the customer is not available, we suggest a change to a higher level.''

The business model thus rests on: time to volume, building to order, eliminating reseller margins, sales & supplies and low inventories.

Needless to add, such a system needs a strong front-end: the company has a strong, trained sales and technical support staff, to provide after-sales services through a toll-free hotline. At the company's call centre, 85 per cent of complaints and queries are resolved by the staff and don't need to go any further, claim company sources. These centres are multi-lingual, to cater to customers from different regions. The APCC centre in Penang has a 100-strong sales and technical support staff.

The company site www.dell.com receives 40 million visits per quarter at 78 country-specific sites. Customers can evaluate multiple configurations, obtain instant price quotes, access technical support, place orders online and track the status of orders. Its site for Asia Pacific, www.dell.com/ap supports 16 country specific sites for the region. The true secret of direct selling? Be in direct touch with the consumer at all times.

The travel for this story was sponsored by Dell Corp.