Dell Inc. was No. 1 on Fortune magazine’s annual list of the nation’s most admired companies, displacing Wal-Mart, which has held the top spot for the past two years and fell to No. 4. Rounding out the Top 5 are General Electric, Starbucks, and Southwest. To compile the list, Fortune asked executives and securities analysts to rate companies on innovation, employee talent, financial soundness, management, use of corporate assets, social responsibility, long-term investment and product quality.
Dell won the accolade in large part due to its reputation for customer satisfaction, shareholder return, and community citizenship. The shareholder return component is no surprise to those of us in the Lean Manufacturing world, where the company has always been held up as a positive example of the potential of Lean.
The demand-driven culture and systems within Dell are remarkable. The company topped CFO Magazine’s list of the top 25 supply chains with a sales/inventory ratio of 126… five times better than Nokia in the #2 position. Along the same lines the entire company has a bonus system based on "deliver to target"… basically how fast the company delivers products to customers, which along the way minimizes work in process inventory.
Another CFO article points out the effect Dell’s demand-driven culture has on other financial metrics, such as net working capital. The company does such a good job of bringing in receivables and monitoring inventory so that payables are due after the received funds that it’s net working capital is a negative 30 days! Total days inventory outstanding (DIO) is at three days… a number so low that their chief accounting officer now monitors pure dollars instead of converting to days.
Dell teaches us that a focus on cash velocity can have an incredible effect on business performance.