Dell closing plant as part of 8,800 layoffs

Layoffs hit close to home Monday at Dell, which said it will close its Austin, Texas, desktop manufacturing facility as part of an effort to trim billions in costs.

The Austin facility, which replaced a smaller facility in Austin, is where Dell fine-tuned its "build-to-order" strategy that allowed it to vault ahead of Compaq for the top spot in PCs in the early part of the decade. By not building PCs until orders get placed, Dell minimizes the time it holds components in inventory, which in turn reduces costs. (Round Rock, Texas-based Dell, in fact, doesn't own components until the forklift carrying them crosses a white line on the floor. See our story from a visit to the center here.)

Although still considered a leader in logistics and low-cost manufacturing, Dell began to see its market share erode in 2005 because of complaints about poor customer service, among other factors. Dell is now number two behind Hewlett-Packard (which bought Compaq) in PCs.

Dell also reaffirmed its plans to reduce employee headcount by at least 8,800. So far, it has eliminated 3,200 positions. Overall, the company hopes to reduce expenses by $3 billion a year on average over the next three years.

Dell also has desktop manufacturing facilities in Tennessee and North Carolina.