Dell's Scary Efficiency

I recently read an interesting article in The New York Times reminding me that few things are really impossible -- at least in the business world.

In the past, looking at many of Wal-Mart's (NYSE: WMT) numbers taught me the same lesson. For example, it's conventional wisdom that as a company becomes bigger and bigger, it's harder and harder for it to keep growing rapidly. Mathematically, I know that that's pretty much true. Still... there are few companies larger than Wal-Mart, yet between 2000 and 2001 it increased its revenues by 7.6%, and then by 12.5% between 2001 and 2002 and by 11.7% between 2002 and 2003. For fiscal year 2004, it's closing in on $300 billion in revenues.

But back to this recent article, which was about Dell (Nasdaq: DELL), computer manufacturer extraordinaire. If you know anything about the firm, you probably know, like I did, that it makes and sells a heck of a lot of computers (and other related products) each year. And that much of its performance is due to its build-to-order, direct-selling business model. (In other words, it doesn't have to support lots of stores or build computers that it thinks its customers want.) I hadn't looked closely at any Dell numbers in a while, though (perhaps because I'm a former shareholder and didn't want to be reminded that I shouldn't have sold). Take a look at these stats: Dell's fiscal 2004 results are closing in on $50 billion in revenues, and these revenues have increased 13.6% between 2001 and 2002 and a whopping 17.1% between 2002 and 2003. Impressive, eh?

Here are some other amazing facts from the article:

• Dell churned out a total of 49,269 personal computers in the last three months of 1991, but today, one plant manager notes, "On a good day, during peak demand, we'll exceed that number by lunchtime."
  
  
• "An order that hits the factory floor at 9 a.m. is typically stacked in the back of a truck motoring down an interstate highway by 1 p.m."
  
  
• "No other major computer maker produces computers in the United States. Long ago, Dell's top rival, Hewlett-Packard (NYSE: HPQ), outsourced assembly of its PC's to third parties, primarily based in Asia, as did IBM (NYSE: IBM), the world's third-largest PC maker." (IBM is selling its PC division to a Chinese company.)
  
  
• Managers think big. Chief executive Kevin Rollins said, "I set irrational goals, Michael [Dell] and I together, to encourage our team so they don't think of conventional solutions.… If we asked for a 10% or 15% increase in productivity, we'd get conventional solutions. But if we ask them to double their productivity, then they have to rethink everything." Don't think this works? A goal for the past year was a 30% increase in machines manufactured, and the company is on track to meet that goal. Wow.
  
  
• The labor to make a Dell PC costs only about $10, or 2% of the average PC's total cost. "Five years ago, it took two workers 14 minutes to build a PC; it now takes a single worker roughly five minutes to do the same."
  
  
• Dell entered the printer business less than two years ago but already has a 13% market share.
  
  
• Whereas 12 years ago, Dell kept 30 days' worth of components in inventory, it now has its suppliers keep eight to 10 days' worth of its inventory no more than 90 minutes away.
  
  
• The world is watching and learning from Dell. Hundreds of representatives (and bigwigs) from firms such as General Motors (NYSE: GM) have traveled to Texas to see what they could learn.

These things all suggest that a firm can never be too big or too successful to keep aiming high -- and hitting its mark. Great leaps in performance and efficiency are often possible.

As you evaluate various companies as possible investments for your portfolio, ask yourself how driven they are to keep improving. Look for bold goals and big results. 

And if you're looking for some impressive organizations, give some of our stock idea newsletters a whirl, via painless free samples. We've got newsletters focused on compelling values, on rule-breaking fast growers, and more.

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Longtime Fool contributor Selena Maranjian owns shares of Wal-Mart -- and a Dell computer.