Dell – The OM Blog by Heizer, Render, & Munson

OM in the News: The Memory-Chip Shortage

Memory is one of the tech world’s most ubiquitous and essential components that come in 2 major types. DRAM handles more fleeting, immediate tasks like using apps. The other kind, called NAND flash memory, provides long-term storage for photos, videos and other data. And there has been a 7-fold increase in contract prices for DRAM and NAND flash in the past year.

Facing soaring memory-chip prices, the world’s biggest electronics companies are staring at a list of unpalatable responses:(1) charging consumers more, (2) eating the costs or (3) rejiggering product specs. Such is the supply-chain disruption wrought by the global drive into AI, which requires fleets of data centers with servers needing gargantuan amounts of memory, reports The Wall Street Journal (Feb. 13, 2026).

The memory crunch comes at an inopportune time for companies like Nintendo.

That has caused supply to dry up for the makers of smartphones, PCs, gaming consoles and various other electronic gadgets, and triggered a historic price uptick since early last year that is higher than any increase seen before.

Dell has raised prices for some commercial laptops by as much as 30%, while budget PCs from rival Acer now carry several gigabytes less of multitasking memory. Chinese smartphone maker Xiaomi recently discontinued the lower-memory variant of its new midtier device and raised prices. To summarize: A tough year for smartphones, PCs and game consoles is getting worse. Projected shipment declines are now stumbling deeper. PCs, with memory representing as much as 30% of their total costs, are particularly vulnerable.

With investments into AI infrastructure remaining hot, the prospects of memory prices falling soon don’t appear high. Supply is expected to remain tight through 2028.

Classroom discussion questions:

What is the underlying issue?
What can manufacturers of PCs, smartphones, and game consoles do to protect themselves?

OM in the News: The Challenges of Mass Customization in Manufacturing

Today’s consumers are not content with standard products but are looking for differentiated and personalized goods or services. Thanks to the new information technologies and innovative manufacturing processes, mass customization (see our discussion in Chapter 7) has become widely available. This combination of mass production and customization aims to provide unique products or services on a large scale and at a relatively low cost. It can improve profitability, just as it can help boost customer satisfaction and win brand loyalty.

One in five consumers are willing to pay a 20% premium for customization service, reports New Equipment Digest (Sept. 15, 2021). For instance, in the fashion industry, more people are now looking for personalized clothes, handbags, and shoes.

Although customers might be willing to pay more for a customized product, there might be neither time nor budget for full product inspection. Therefore, manufacturers must work with suppliers who can deliver high-quality materials on time to minimize production costs and shorten lead times.

The supply chain also needs to be adaptable, with every node able to communicate effectively to others so that they are all aware of any changes in demand. Supply chain visibility software can help manufacturers be aware of what’s happening across an extended supply chain so that they can react quickly when unexpected circumstances affect the delivery of goods.

Customer involvement in product configuration is inherent in the process, meaning that sales, marketing, distribution, and manufacturing all need to have great understandings of customer requirements. Customers who visit Dell’s website, for example, can directly talk to the staff about their personal requirements. After choosing suitable products, customers can order them with a simple click. From inventory and manufacturing to marketing and logistics, all the departments can process the transaction at the same time..

Since manufacturers are producing goods based on customers’ unique requirements, a highly flexible manufacturing process is important. Companies that are able to organize their modular product design properly tend to have a more agile manufacturing system. For instance, Boeing classifies a huge number of parts for its planes into 3 types: standardized, configured to a fixed set of options, or customized. This modular product design streamlines the process of ordering, engineering, and manufacturing, leading to a more cost-effective and time-saving customization process.

Classroom discussion questions:

What are the advantages and disadvantages of mass customization?
Provide examples of products/services (beside Dell and shoes) that you have ordered that have been mass customized.

OM in the News: Manufacturing’s Circular Economy

With a raging pandemic, disrupted supply chains, and a growing scarcity of raw materials, 2021 will present serious challenges to the global manufacturing industry. American Machinist (Jan. 6, 2021) sees a renewed resolve among manufacturers to focus on sustainability and join the circular economy – the strategic effort to eliminate waste and the maintain a continual use of resources. Manufacturers are approaching the circular economy model by rethinking how they design and produce their products with as little waste as possible, how they ship them, and how they approach the growing after-market repair and recycling market.

The circular economy is putting pressure on companies to reexamine their business processes; not only to improve quality and profitability, but because an efficient supply chain consumes less energy, uses fewer resources, and produces less waste. In short, gearing production toward sustainability is good business.

One example is DyeCoo, a textile company that has partnerships with Nike and IKEA, has developed a water-free process for dyeing. Using highly pressurized, recyclable carbon dioxide instead of water, the company can produce its product in half the time, using a fraction of the energy of traditional methods. Another example is Cambrian Innovation. This U.S. company treats wastewater contaminated by industrial processes, not only turning it into clean water, but even producing biogas that can be used to generate clean energy.

Manufacturers also will need to reengineer, and in some cases reimagine, their products. This means building for longevity in a sustainable business plan. If you are a lighting fixture manufacturer selling light as a service to an airport, you will want to produce lightbulbs to last long as possible, to maximize ‘uptime’ and revenue.

Manufacturers are also taking serviceability into account in the design phase. Consider Dell and its Latitude laptop computers, which have been designed with recycling in mind. Using removable batteries, standardized fasteners, and by eliminating mercury and adhesives, Dell is able to produce laptops that are 97% recyclable.

Classroom discussion questions:

How does Supp. 5 in your Heizer/Render/Munson OM text define “circular economy?”
Provide examples of how product design teams can use alternative materials to improve sustainability.

OM in the News: Will Chip Makers Locate in India?

Dell sells in India, but does not make components there

India, home to many of the world’s leading software companies, wants to replicate that success by creating a homegrown industry for computer hardware. But unlike software, which requires little infrastructure, building electronics is a far more demanding business, writes The New York Times (April 16, 2013). Chip makers need vast quantities of clean water and reliable electricity. Computer and tablet assemblers also depend on economies of scale and easy access to cheap parts. When you are discussing multinational location decisions in Chapter 8, this article will highlight many of the factors that are considered in Figure 8.1.

“Nobody disputes India’s need to build up manufacturing. But the government needs to not mandate this, but create an ecosystem,” says the head of the U.S.-India Business Council. Another executive doubted that India could provide a new chip-making facility with the basic infrastructure it needed to even keep the lights on. Dot-matrix printers, outdated in most of the world, are one of the few electronic products that India manufactures. India’s import bill for semiconductors alone was $8.2 billion in 2012, and demand is growing at around 20% a year.

The big fish the government would like to land is a factory to produce microprocessors for computers. A computer processor typically accounts for 25% to 35% of the total cost of a PC or laptop. India hopes that such a plant, which could cost as much as $5 billion to build, would help spur a bigger high-tech manufacturing industry. Spurred by a new “Buy India” government requirement, Dell, the largest PC retailer in India, explored the possibility of setting up manufacturing facilities there. “They flew in their suppliers from China and Taiwan to see if they could set up facilities. They said no,” said an industry official. “Logistically it is a nightmare.”

Discussion questions:

1. Why do manufacturers hesitate to manufacture computers in India?

2. What are the key operations concerns?