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summary of dell activities around the world 2008
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Hanze University
International business School
Daniel Prieto
MBA 2008/09
Operation Management: Dell
1 Introduction Dell is a technological sales company which performs their business in the whole world as is possible to
see in the following diagram.
With a net revenue of $61,133,000,000 is the second largest computer manufacturer company in the
word and the number one in United States.
Dell focuses on Business to Business(B2B) and Business to Consumer(B2C) commerce to satisfy their
business and individual customers. Dell differentiates between classes of customers because the needs
of their business customers, who buy large quantities of computers, are different than the individuals
who want to configure a single unit.
The present document is oriented to analyze Dell just since the point of view of operations management
starting with a review of the company, after a look over Product design process, the internal process and
the technology associated, how Dell forecast the coming productions rates, how Dell manages their
inventory, which is the quality model followed by the company, which is the human resource strategy to
finalize with conclusions and reflections.
2 Dell Company
2.1 Vision “Fully integrate environmental stewardship into the business of providing quality products, best-in-class
services, and the best customer experience at the best value”
2.2 Mission “Create a company culture where environmental excellence is second nature”
2.3 Operations Strategy Identify the operations strategy of Dell is go almost in all the main activities of the company where
operations is relevant. Under this perspective, the list of strategies is related to some areas of
operations inside of the company:
Be the greenest technology company on the planet and the first computer company to achieve
carbon-neutral operations by the end of 2008
Continue leadership with the climate strategy and global recycling programs
Partner with customers in energy-efficiency and climate-protection initiatives
Broaden the Global Citizenship commitment
Recommit efforts to improve sustainability governance
3 Product design process For Dell, Globalization has impacted directly in the management of the product life cycle involving more
stakeholders during the process of product development; thereby the complexity of this process has
become more complex as well. The most important factor introduced in the product life cycle is the
environmental issue. For Dell, the design products have to be energy efficient, to avoid unnecessary
materials and to be easy to use, which is supported by rigorous business controls and supplier audits
that consider (Dell, 2008):
Energy Efficiency: Dell delivers optimized performance per watt, and help customers deploy
systems efficiently. In this way, IT is an important avenue to decreasing cost of ownership and
enhancing productivity while reducing a customer’s carbon footprint.
Precautionary Chemicals and Materials Use: Dell design to eliminate the use of unregulated
substances if we believe they possess hazard characteristics similar to other, regulated
substances. If alternatives are not yet viable, Dell works to develop reliable, environmentally
sound and commercially scalable solutions
Supply Chain Sustainability: We expect suppliers to uphold the same commitment to
environmental responsibility as we do, as a condition of doing business with them.
Dell design activities are compliant with this internationally recognized standard for environmental
management system criteria (ISO 14001 certification program)
Other main stream of definition of what Dell is doing in terms of product design rely on the participation
of their own customers. The website “Dell IdeaStorm” (http://www.ideastorm.com) where customers
participate directly in the conceptualization of products giving their own ideas of develop, voting for
another ideas already posted or simply criticizing products from the company. This website is a very
comprehensive platform to cover an appropriate SWOT analysis of products design due to the huge
variety of post and group discussion on it.
4 Processes and Technology
4.1 Production process The well known operation model of Dell called ‘Dell Direct’ base its value added in just work on demand
eliminating intermediaries in procurement, manufacturing and distribution processes. The technology
used by the company in the manufacturing process is the base of success and therefore play a very
important role in its operations.
Dell’s technology allow to the company to combine its resources, its relationship with suppliers and its
consumer communication capabilities, developing one big advantage over its competitors.
Dell is in “Mass Production” process category due to mainly the stable demand of products, the
assembly work as a main line of production and with a good level of efficiency. To consider Dell as a
manufacturing or assembly company is a constant discussion even for the employees of the company.
Due to the nature of the products (mainly computers) they build new products that do not exists in the
market, in this sense they are manufactures. But in another sense they just assemble component which
production is on suppliers, in this sense could be considerate that dell “buy to sell”. In this document
the company will be considered as a manufacturer company.
The generation of innovative ideas for the production line is pulled due to the necessity of new kind of
products defined basically due to the interaction with suppliers and customers.
The following diagram illustrates the main zones of manufacturing centers for dell around the world.
All the Dell manufacturing centers use the same processes enable by the same systems and are
measured in the same way. This insurance consistency award quality across the global network and also
allows identifying and implementing best practices.
The standardized process of manufacturing is divided as is illustrated in the following diagram.
These processes are described as follow:
Customer order pull: receive the electronics orders closer to the ship destination. In this point
the order is transferred from Dell order management systems to the Manufacturing scheduling
system. The servers of the facility keep the track of order process associating serialized parts
with unique codes.
Customer Order Pull
Kitting Build
Software Installation and Testing
Final Test and labeling
Boxing
Order accumulation
area
Kitting: the build to order process of Dell generate request for materials which is delivered to
the factory. Since there are no warehouses the inventory system is very important and every
part is serialized and labeled since this is received from suppliers (which are basically important
for Dell quality system). The scanning of these tags associated to the order indicates to the
personnel which components should be part of a specific order, and at the end of the kidding
line, all the parts of a single unique order are ready for the next step.
Build: the scan of the code associated to the single order gives to the personnel specific
instructions to builders based in the customer requirements. In this step, Dell associates every
single component using bar codes to the order allowing a better quality control for the
company.
Software Installation and Testing: Directed by the main brain, the central gives specific
instruction to ensure all the components are presents and operating properly before to install
any software in machines.
Boxing: This process ensures all the components required by the user are properly stored and
ready for the ship. Once finished the boxing, the order goes straight for shipping or the order
accumulation area.
Order accumulation area: When the client creates and order, all the required products start at
the same time but not all of them finish at the same time due to process variability. Once all of
them are finished the shipping process starts.
Depending form the order, there is an external synchronization with others manufactures as monitors or
printers manufacturers for example, which allow to Dell to reduce inventory with extern products to the
production line (Dell, 2007).
4.2 E-business E-business is central to Dell's entire operations and Dell uses e-business extensively across its entire
value chain to deliver high levels of service to its customers and suppliers. Dell basically does trades with
two of the four main kind of e-business (B2B, B2C, C2B and C2C) and both of them based in the internet
architecture
B2C: the main stream is represented by direct communication between Dell and their
customers. Internet allows this direct communication avoiding intermediaries. This guarantee a
good quality service for the customers, efficient processes, decision makers in real time, higher
customer expectations and globalization.
B2B: this stream of communication connects Dell with their suppliers allowing and efficient
process of communication with the same benefits described in B2C. Also, the when big
corporations and governments are clients, the definition of relation is established in a very
particular way treating them as a special customers that need a special attention.
4.3 Technology In terms of technology, Dell in all its experience in all the manufacturing centers, has implemented a
large number of solutions in order to accomplish a constant improvement in the value chain. Basically,
the main source of constant improvement has been Internet, helping Dell to establish good relations
with both their suppliers and their customers. The high level of integration that this technology has
allowed is on simple evidence through the corporate website (www.dell.com) where for example
suppliers are allowed to follow their material as it used throughout Dell’s operations. They can log-on,
drop off invoices, check engineering change orders, review negotiated and forecasted cost reports, and
track their overall performances and progress.
The “Dell i2 Supply Chain Management (i2SCM)” is the name of the solution implemented to cover
communications necessities with suppliers. This implementation enabled to Dell to reduce costs
providing component suppliers and Dell planners with global views of product demand and material
requirements.
In partnership with IBM, both have managed to maintain high employee productivity. The join in
between companies to design the productions lines provide near unlimited availability to their IT
infrastructure. Another outcome of this partnership is the use of electronic catalog with appropriate
search functionality.
As an example time ago, Altiris Recovery Solution was selected by Dell for integrated delivery of backup
and disaster recovery. Altiris along with Dell Open Manage Client Administrator (OMCA) will provide
“Direct integration of Altiris backup and recovery technology with Dell OMCA which helps ensure
business continuity and helps provide additional cost savings for Dell customers through proactive IT
management”. These factors implemented into a concrete disaster recovery plan provide Dell and IBM
with the confidence to scale and complex IT network.
4.4 Production Layout Dell is by definition an assembly manufacturer company, where basically the process is only one and the
assembly line as well. Dell does not build any part or piece of the computers, lodging basically in their
own suppliers which have the necessary expertise and commitment with dell’s production line. If we
consider Dell and their suppliers as a unique company it will be represented as typical “Process Layout”,
and Dell will be of course in this exercise the assembly department.
The main advantages of the “Product layout” (or assembly line production layout) are:
The amount of time for a product to be ready is faster in general if it is compared with other
kind of process layout
The set up cost of the product layout is low due to the facilities does not vary in position and
functionality.
Due to the tasks of every stage are very specific, the efficiency of this kind of distribution
(production layout) is higher than others types of layouts. This very related with the high
continuity of the assembly line.
The necessary planning in order to be concern about matters like synchronization is very low if it
is compared with other layouts, this because is just one continue line.
The required level of expertise is not so important as well considering that the main task is to
assemble. There is no much hard production processes to take care about.
For Dell the level of inventory is very low, maybe too much low considering the average industry
in “Products Layout” companies. This is because the technological advantage of Dell using
Internet.
As negative point in Dell layout oriented to product, it is possible to say that the required infrastructure
is more expensive than other layouts because the high degree of cohesion that should exist in the
assembly line which it demands a high technology and dedicated machinery.
5 Supply Chain Dell supply chain is illustrated in the following image
As is possible to appreciate, Dell Company is in the middle of all the operations since suppliers till the
final customer. The simplicity of this model put on evidence the absence of intermediaries in the supply
chain, which is synonymous of low cost, fast answer to client’s orders.
The communication between Dell and suppliers is by Internet, and in real time which it means that the
suppliers are constantly monitoring the status of components in order to prepare new orders and
negotiate the prices on demand. Usually suppliers have warehouse building nearby Dell’s
Manufacturing Centers in order to reduce the risk of lack of components in the main assembly line of
Dell and assuming at the same time the inventory costs that Dell is avoiding.
Supplier A
Supplier B
Supplier C Supplier D
: Internet
Final user
The suppliers usually feed the starting point of the Dell’s assembly line, but as the illustration show, it is
possible to have some suppliers after the production line of Dell (even out of Dell facilities). Partnership
with screen or printer manufacturers, allow to the final user to order for products that are absolutely
out of Dell’s production lines, and it is just necessary to complete the order in their warehouses to finally
ship the order to the client.
Is important to recognize that the use of Internet is the blood of this system, without this technology
would be impossible to coordinate such value system.
In order to make the service easier for customers within this supply chain, Dell has divided their home
page into a number of major customer groups:
Home & Home Office,
Small Business
Medium and Large Business and
Government, Education & Healthcare
6 Forecasting, Planning and Scheduling
6.1 Forecasting As a forecasting method Dell, as many other big companies, base their analysis on the records stored on
the internal Customer Relationship Manager system (CRM). This system stores every registry made by
customers in order to analyze the tendency of the actual behavior and predict demand for certain
products in the future.
Now considering daily operations on Dell, there is a “Short Range Forecast” process that operates
constantly. Dell uses state of the art production planning programs that forecast the quantities of
components needed to build the computers. After those forecasts are made, supply chain systems pass
those forecasts to suppliers, who respond with cost estimates and plan their production as a result.
As the CRM, the mentioned i2SCM (technology section) is another provider of forecast information as
well, providing real-time factory scheduling and inventory management.
These methods used by Dell are considerate “Quantitative Forecast Methods”, leaving for decisions
makers, the forecast that comes from “Qualitative Forecast Methods”.
6.2 Scheduling Dell bases its scheduling process in the system i2SCM system output. One of the basic tasks of i2SCM is
to streamlines the supply chain in order to keep a constant flow of component in the starting point of
the assembly line, and considering this, as a consequence is in charge of provide a manufacturing
schedule the whole plant. This scheduling process is refreshed every 2 hours.
7 Inventory Management Dell has implemented “Just-In-Time Inventory System” which operates on only 6 days of inventory. This
simple number implies a huge benefit for Dell because this enable to the company to reduce the
warehousing costs, also is not necessary to hire people to put in charge and maintain the inventories
and though technology become obsolete very quickly, for Dell this is not a problem because they don’t
hold obsolete technology in its small inventory.
The way how Dell controls, in terms of basic definition¸its inventory and the costs that this means is
being a “Demand Pull Company” (used as well as a Lean system method), whereas one of its top
competitors (Compaq HP for example) is strictly a supply-push company and operates in a more
traditional manner.
8 Quality model Since several years, Dell has been operating their manufacturer plants using the production standards
ISO 9001, ISO 14001 and OHSAS 18001 (Dell).
Dell operations in China have been distinguished by Ministry of Information Industry (MII) and China
Quality Management Association for Electronics Industry (CQAE) receiving wards such as "Excellent
Quality Management Corporation", "Excellent Quality Management Team's and "Excellent Quality
Management Individual". It demonstrates Dell's commitment to providing high-quality products and
superior customer experience (Dell).
The main support behind this award is the constant focus in the customer-centric strategy, and the will
for a constant improving in the quality management system.
In Dell, the quality control process starts from engineering design and the early testing stages during
which design for reliability is the priority. Been conscious of quality standards in early analysis of failure
mode, the product design is based on typical customer profile and operation requirement. It is
important to consider that reliability test and improvement are also keys factors to ensuring the best
quality.
In addition, Dell has extended the “quality chain” putting great emphasis on suppliers' quality
management, as the company always regards the quality of the components as crucial factors for
product quality. According to this, Dell has established a set of scientific and complete management
process, which ensures final product quality through rigid selection and process control of industry-
leading suppliers.
Considering the whole process, the Quality Management during manufacturing process is the strongest
guarantee of Dell products' quality. Engineering pilot and employee training are conducted before any
new product launch. Through Statistic Process Control Quality Analysis, Dell is able to detect and
improve incoming material and process issues, which guarantee the best manufacturing quality.
9 Human Resources Strategy Dell’s direct business model influenced an organizational structure that fosters direct communication
and open-minded listening. As an strategy to accomplish this objective is to listen employees, and this is
done through “Tell Dell” program, a voluntary and confidential employee opinion survey. This program
is developed to encourage employees to speak frankly and privately about Dell’s principles, values,
strategies, policies, managerial effectiveness and employee engagement. In this way the HRM
department, after taken the measurement, is able to act in direct response to surveys. Some responses
to these kind surveys were for example in the past:
• Implementation of an employee purchase program
• Greater work-life flexibility
• Streamlined decision-making processes
• Increased focus on employee development
• Improved customer solutions
Less formal but equally important strategy to get employees feedback is Employee Storm. A tool that
enables every Dell employee to bring experiences and creative solutions to Dell and our customers.
With the objective to reduce mistakes and its consequences, Dell has implemented a strategy related to
ethic tools. This strategy define for example policies of communication in order to allow employees
approach the company when they feel is necessary according to the defined Dell Code of Conduct. This
policies are:
Open door policy
Global Ethics and Compliance Team
Ethic helpline
Since Dell is committed to inclusion and diversity, their mission is to succeed in the marketplace by
fostering a winning culture in which Dell employees are highly talented, committed, reflective of our
global customers, and recognized as our greatest strength. For Dell “diversity” is the core of their values
and winning culture. For this Dell has implemented the following activities:
Employees networking groups. A program that connect employees that share the same
nationality, gender, ethnicity, etc. ̀
Diversity Education and Training. Providing quality professional development opportunities to
all employees.
Work/Life Effectiveness. Committed to balance the employees contribution to the company
with their personal lives.
Other areas of strategy where Dell has been working on are:
Global talent management
Employee health and wellness
Employee sustainability engagement
10 Conclusions It is very interesting to remark that Dell, a multinational company with a big size, is successfully capable
to repeat basically the same formula of manufacturing process in every manufacturing center that the
company has. Dell has been able to repeat the best practices across the borders around the world
which by definition represent a big challenge for any company. Never the conditions will going to be the
same: restricted markets, cultural shocks for employees, different cost structure are some of the factor
that usually affect multinational companies with operations in many countries around the world.
Dell strategy found its success in basically the correct and optimums use of technology; Internet is
practically the blood of Dell system, or the base of Dell success. Dell’s business model bases its success
basically in Information technology. There is not a revolutionary change in the way how to do business,
is just a perfect example of how to take advantage of technology to become the most efficient
competitor in the computer sales industry.
Even though Dell business model is very well know, has been a model very difficult to imitate basically
because the huge investment that companies should do together with their suppliers. The supply chain
structure in this case is the key of success. Is not a matter of investment coming just from Dell to have
success, is a sacrifice coming from Dell, suppliers and partners that in some way are trusting in Dell way
of doing business. Trust in the value chain, is definitely a very big competitive advantage for Dell.
The product mix from Dell is not as broad as directs competitors are doing it, which in one way has
allowed to Dell specialization, focus and expertise in the field. But is a risk at the same time because
depending basically on a very limited amount of product and services it does not open many alternatives
to explore new markets or develop innovative solutions amount the products and services.
Even though Dell is considered a very successful business model, the company has been having
problems. These problems are reflected in financial reports which indicate that Dell is not reaching the
rate of growing that they were expecting. Although Internet is the base of its success, it has been a big
problem for Dell as well, since the point of view that important bloggers has been complaining in the net
about the pour quality of services and this has spread quickly between users a non god image of the
company. Dell is working on this blog phenomenon taking care of every comment done in the net about
their products and services. Another problem faced by Dell is that Dell is becoming victim of its size
because they are trying to keep the rate of growing in a market where the value of their products fall
significantly every year , this means that to keep the rate of growing is necessary to have a higher rate of
sales. As a final weak point in the way how Dell is approaching businesses, Dell is relaying increasingly
on new markets which it means that Dell is just applying best practices and knowledge in the field rather
than go deep with a study of the new entrance. This could be a risk considering the diversity and
cultural matters in between their customers (Gross, 2005).
10.1 Recommendations As a first recommendation, diversification in the product mix is the key. Different markets for new
products or services could be a good opportunity and the strength of the brand is supporting in some
way the possible adventure for this company.
As a second recommendation, the Research and Development strategy is still focused in innovation but
still not so far from the market. Some joint ventures could help Dell going directly to new markets
where the actual model of business (where they are experts) could be applied.
As a third recommendation, approach the African market with design centers and business centers is an
opportunity without exploration for Dell. The huge market in some countries of Africa represent a very
attractive market to approach.
The last recommendation but not less important than the others, is that Dell should approach a passive
big market formed by users without experience in technology, those kind of clients that need specialized
attention and that the fact of buy a computer by internet is not possible (usually they do not trust in
transaction on internet). Direct sellers behaving like advisor not just will help to sale a new product,
because this kind of clients are able to become loyal to the brand since the very first sale.
11 Reflections In the country if the author of this small research, Dell is not a big seller of technology, other companies
like HP, Acer or Toshiba are the big dealers of the market. This means for the author a interpretation of
a brand that in some parts of the world almost does not make any advertisement.
Is interesting to appreciate how the theory content learned at the school is applied directly in this
research document, and be able to compare if the approach followed by the company was the best or
according to the theory could have been even better.
Is impossible to cover in this document all the details that an appropriate analysis of operations should
be, but is a good approach to have at least an idea of which are all the sights that this concept has.
Even though the research is small, is not possible to access to all the information that is required to
perform a complete document like this mainly because most of this kind of information is classified and
not shareable as is information very useful for competitors.
12 References Adriano O. Solis, P. (2001, 05). The University of Texas at El Paso. Retrieved 06 01, 2009, from
http://utminers.utep.edu/solis/NAPM%20-
%20El%20Paso/Criterion%20Articles/Academic%20Advisor%27s%20Corner%20may%202001.doc
Dell. (n.d.). Dell and the Environtment. Retrieved 06 01, 2009, from Dell and the Environtment:
http://www.dell.com/content/topics/global.aspx/corp/environment/en/prod_design_main?c=us&l=en
&s=corp
Dell. (n.d.). Dell at a Glance. Retrieved 06 01, 2009, from Dell at a Glance:
http://www1.ap.dell.com/content/topics/topic.aspx/ap/corporate/en/factsheet/index?c=au&l=en&s=c
orp&~section=000
Dell. (2008). Dell Corporate Responsibility Report.
Dell (Director). (2007). DELL FactoryTour (http://www.youtube.com/watch?v=EEhNkzdKyrw) [Motion
Picture].
Dell. (n.d.). DELL WINS TOP AWARDS IN QUALITY MANAGEMENT OF CHINA ELECTRONICS INDUSTRY .
Retrieved 06 01, 2009, from DELL WINS TOP AWARDS IN QUALITY MANAGEMENT OF CHINA
ELECTRONICS INDUSTRY :
http://www1.ap.dell.com/content/topics/topic.aspx/ap/corporate/en/pressoffice/2005/cn/2005_08_11
_cn_000?c=cn&l=en&s=corp
Gross, D. (2005, 08 30). Slate. Retrieved 06 01, 2009, from Is Dell Dying?:
http://www.slate.com/id/2125297/
Sovereing Publications. (n.d.). Sovereing Publications. Retrieved 06 1, 2009, from Sovereing Publications:
http://www.sovereign-publications.com/dell.htm