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engineers and a team of Taiwanese notebook designers. "The customer's needs, required

technologies, and Dell's design innovations were all determined by Dell through our

direct relationship with customers," he explained. "The basic design of the

motherboard and case-the basic functionality of your machine-was designed to those

specifications by an ODM [original design manufacturer] in Taiwan. We put our

engineers in their facilities and they come to Austin and we actually codesign these

systems. This global teamwork

brings an added benefit-a globally distributed virtually twenty-four-hour-per-day

development cycle. Our partners do the basic electronics and we help them design

customer and reliability features that we know our customers want. We know the

customers better than our suppliers and our competition, because we are dealing

directly with them every day." Dell notebooks are completely redesigned roughly every

twelve months, but new features are constantly added during the year-through the

supply chain-as the hardware and software components advance.

It happened that when my notebook order hit the Dell factory in Penang, one part was

not available-the wireless card-due to a quality control issue, so the assembly of

the notebook was delayed for a few days. Then the truck full of good wireless cards

arrived. On April 13, at 10:15 a.m., a Dell Malaysia worker pulled the order slip

that automatically popped up once all my parts had arrived from the SLCs to the Penang

factory. Another Dell Malaysia employee then took out a "traveler"-a special carrying

tote designed to hold and protect parts-and started plucking all the parts that went

into my notebook.

Where did those parts come from? Dell uses multiple suppliers for most of the thirty

key components that go into its notebooks. That way if one supplier breaks down or

cannot meet a surge in demand, Dell is not left in the lurch. So here are the key

suppliers for my Inspiron 600m notebook: The Intel microprocessor came from an Intel

factory either in the Philippines, Costa Rica, Malaysia, or China. The memory came

from a Korean-owned factory in Korea (Samsung), a Taiwanese-owned factory in Taiwan

(Nanya), a German-owned factory in Germany (Infineon), or a Japanese-owned factory

in Japan (Elpida). My graphics card was shipped from either a Taiwanese-owned factory

in China (MSI) or a Chinese-run factory in China (Foxconn). The cooling fan came from

a Taiwanese-owned factory in Taiwan (CCI or Auras). The motherboard came from either

a Korean-owned factory in Shanghai (Samsung), a Taiwanese-owned factory in Shanghai

(Quanta), or a Taiwanese-owned factory in Taiwan (Compal or Wistron). The keyboard

came from either a Japanese-owned company in Tianjin, China (Alps), a Taiwanese-owned

factory in Shenzen, China (Sunrex), or a Taiwanese417

owned factory in Suzhou, China (Darfon). The LCD display was made in either South

Korea (Samsung or LG.Philips LCD), Japan (Toshiba or Sharp), or Taiwan (Chi Mei

Optoelectronics, Hannstar Display, or AU Optronics). The wireless card came from

either an American-owned factory in China (Agere) or Malaysia (Arrow), or a

Taiwanese-owned factory in Taiwan (Askey or Gemtek) or China (USI). The modem was

made by either a Taiwanese-owned company in China (Asustek or Liteon) or a Chinese-run

company in China (Foxconn). The battery came from an American-owned factory in

Malaysia (Motorola), a Japanese-owned factory in Mexico or Malaysia or China (Sanyo),

or a South Korean or Taiwanese factory in either of those two countries (SDI or Simplo).

The hard disk drive was made by an American-owned factory in Singapore (Seagate),

a Japanese-owned company in Thailand (Hitachi or Fujitsu), or a Japanese-owned

factory in the Philippines (Toshiba). The CD/DVD drive came from a South Korean-owned

company with factories in Indonesia and the Philippines (Samsung); a Japanese-owned

factory in China or Malaysia (NEC); a Japanese-owned factory in Indonesia, China,

or Malaysia(Teac); or a Japanese-owned factoryin China (Sony). The notebook carrying

bag was made by either an Irish-owned company in China (Tenba) or an American-owned

company in China (Targus, Samsonite, or Pacific Design). The power adapter was made

by either a Thai-owned factory in Thailand (Delta) or a Taiwanese, Korean, or

American-owned factory in China (Liteon, Samsung, or Mobility). The power cord was

made by a British-owned company with factories in China, Malaysia, and India (Volex).

The removable memory stick was made by either an Israeli-owned company in Israel

(M-System) or an American-owned company with a factory in Malaysia (Smart Modular).

This supply chain symphony-from my order over the phone to production to delivery

to my house-is one of the wonders of the flat world.

"We have to do a lot of collaborating," said Hunter. "Michael [Dell] personally knows

the CEOs of these companies, and we are constantly working with them on process

improvements and real-time demand/supply balancing." Demand shaping goes on

constantly, said Hunter. What is "demand shaping"? It works like this: At 10 a.m.

Austin time, Dell discovers that so many customers have ordered notebooks with

40-gigabyte

418

hard drives since the morning that its supply chain will run short in two hours. That

signal is automatically relayed to Dell's marketing department and to Dell.com and

to all the Dell phone operators taking orders. If you happen to call to place your

Dell order at 10:30 a.m., the Dell representative will say to you, "Tom, it's your

lucky day! For the next hour we are offering 60-gigabyte hard drives with the notebook

you want-for only $10 more than the 40-gig drive. And if you act now, Dell will throw

in a carrying case along with your purchase, because we so value you as a customer."

In an hour or two, using such promotions, Dell can reshape the demand for any part

of any notebook or desktop to correspond with the projected supply in its global supply

chain. Today memory might be on sale, tomorrow it might be CD-ROMs.

Picking up the story of my notebook, on April 13, at 11:29 a.m., all the parts had

been plucked from the just-in-time inventory bins in Penang, and the computer was

assembled there by A. Sathini, a team member "who manually screwed together all of

the parts from kitting as well as the labels needed for Tom's system," said Dell in

their production report to me. "The system was then sent down the conveyor to go to

burn, where Tom's specified software was downloaded." Dell has huge server banks

stocked with the latest in Microsoft, Norton Utilities, and other popular software

applications, which are downloaded into each new computer according to the specific

tastes of the customer.

"By 2:45 p.m., Tom's software had been successfully downloaded, and [was] manually

moved to the boxing line. By 4:05 p.m., Tom's system [was] placed in protective foam

and a shuttle box, with alabel, which contains his order number, tracking code, system

type, and shipping code. By 6:04 p.m., Tom's system had been loaded on a pallet with

a specified manifest, which gives the Merge facility visibility to when the system

will arrive, whatpallet it will be on (out of 75+pallets with152 systems per pallet),

and to what address Tom's system will ship. By 6:26 p.m., Tom's system left [the Dell

factory] to head to the Penang, Malaysia, airport."

Six days a week Dell charters a China Airlines 747 out of Taiwan and flies it from

Penang to Nashville via Taipei. Each 747 leaves with twenty-five thousand Dell

notebooks that weigh altogether 110,000 kilograms,

or 50,000 pounds. It is the only 747 that ever lands in Nashville, except Air Force

One, when the president visits. "By April 15, 2004, at 7:41 a.m., Tom's system arrived

at [Nashville] with other Dell systems from Penang and Limerick. By 11:58 a.m., Tom's

system [was] inserted into a larger box, which went down the boxing line to the

specific external parts that Tom had ordered."

That was thirteen days after I'd ordered it. Had there not been a parts delay in

Malaysia when my order first arrived, the time between when I phoned in my purchase,

when the notebook was assembled in Penang, and its arrival in Nashville would have

been only four days. Hunter said the total supply chain for my computer, including

suppliers of suppliers, involved about four hundred companies in North America,

Europe, and primarily Asia, but with thirty key players. Somehow, though, it all came

together. As Dell reported: On April 15, 2004, at 12:59 p.m., "Tom's system had been

shipped from [Nashville] and was tenured by UPS shipping LTL (3-5-day ground,

specified by Tom), with UPS tracking number 1Z13WA374253514697. By April 19, 2004,

at 6:41 p.m., Tom's system arrived in Bethesda, MD, and was signed for."

I am telling you the story of my notebook to tell a larger story of geopolitics in

the flat world. To all the forces mentioned in the previous chapter that are still

holding back the flattening of the world, or could actually reverse the process, one

has to add a more traditional threat, and that is an outbreak of a good, old-fashioned,

world-shaking, economy-destroying war. It could be China deciding once and for all

to eliminate Taiwan as an independent state; or North Korea, out of fear or insanity,

using one of its nuclear weapons against South Korea or Japan; or Israel and a

soon-to-be-nuclear Iran going at each other; or India and Pakistan finally nuking

it out. These and other classic geopolitical conflicts could erupt at any time and

either slow the flattening of the world or seriously unflatten it.

The real subject of this chapter is how these classic geopolitical threats might be

moderated or influenced by the new forms of collaboration fostered and demanded by

the flat world-particularly supply420

chaining. The flattening of the world is too young for us to draw any definitive

conclusions. What is certain, though, is that as the world flattens, one of the most

interesting dramas to watch in international relations will be the interplay between

the traditional global threats and the newly emergent global supply chains. The

interaction between old-time threats (like China versus Taiwan) and just-in-time

supply chains (like China plus Taiwan) will be a rich source of study for the field

of international relations in the early twenty-first century.

In The Lexus and the Olive Tree I argued that to the extent that countries tied their

economies and futures to global integration and trade, it would act as a restraint

on going to war with their neighbors. I first started thinking about this in the late

1990s, when, during my travels, I noticed that no two countries that both had

McDonald's had ever fought a war against each other since each got its McDonald's.

(Border skirmishes and civil wars don't count, because McDonald's usually served both

sides.) After confirming this with McDonald's, I offered what I called the Golden

Arches Theory of Conflict Prevention. The Golden Arches Theory stipulated that when

a country reached the level of economic development where it had a middle class big

enough to support a network of McDonald's, it became a McDonald's country. And people

in McDonald's countries didn't like to fight wars anymore. They preferred to wait

in line for burgers. While this was offered slightly tongue in cheek, the serious

point I was trying to make was that as countries got woven into the fabric of global

trade and rising living standards, which having a network of McDonald's franchises

had come to symbolize, the cost of war for victor and vanquished became prohibitively

high.

This McDonald's theory has held up pretty well, but now that almost every country

has acquired a McDonald's, except the worst rogues like North Korea, Iran, and Iraq

under Saddam Hussein, it seemed to me that this theory needed updating for the flat

world. In that spirit, and again with tongue slightly in cheek, I offer the Dell Theory

of Conflict Prevention, the essence of which is that the advent and spread of

just-in-time global supply chains in the flat world are an even greater restraint

on geopolitical adventurism than the more general rising standard of living that

McDonald's symbolized.

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The Dell Theory stipulates: No two countries that are both part of a major global

supply chain, like Dell's, will ever fight a war against each other as long as they

are both part of the same global supply chain. Because people embedded in major global

supply chains don't want to fight old-time wars anymore. They want to make

just-in-time deliveries of goods

and services -and enjoy the rising standards of living that come with that. One of

the people with the best feel for the logic behind this theory is Michael Dell, the

founder and chairman of Dell.

"These countries understand the risk premium that they have," said Dell of the

countries in his Asian supply chain. "They are pretty careful to protect the equity

that they have built up or tell us why we should not worry [about their doing anything

adventurous]. My belief after visiting China is that the change that has occurred

there is in the best interest of the world and China. Once people get a taste for

whatever you want to call it-economic independence, a better lifestyle, and a better

life for their child or children-they grab on to that and don't want to give it up."

Any sort of war or prolonged political upheaval in East Asia or China "would have

a massive chilling effect on the investment there and on all the progress that has

been made there," said Dell, who added that he believes the governments in that part

of the world understand this very clearly. "We certainly make clear to them that

stability is important to us. [Right now] it is not a day-to-day worry for us ...