Supply Risk at Dell: Burning Down the House

European Leaders recently picked up on a story that Dell was recently hit by a supply disruption due to a fire at one of its largest suppliers. According to the story, "The world's second-largest PC maker said that [a] fire at LG Chem -- South Korea's second largest battery maker -- earlier this month had led to a short of laptop batteries." In addition to facing shortages, Dell also noted that "pricing is being impacted by current availability." What's the lesson here for procurement and operations organizations in other industries? I'd argue that the most important take-away is the importance of developing alternative supply options in strategic categories. Perhaps Dell and other makers should have gotten together to create a new battery JV with the intent not just to create additional competition, but to create supply alternatives to reduce risk in various situations such as this. In addition, disruptions also showcase how those organizations with the best supplier relationships tend to get the most from other supply partners in times of crisis. If there's excess capacity at another facility, you can bet only the most strategic customers -- who a supplier favors over others -- will receive the benefit first.

- Jason Busch