PRESENTED BY:DEEPAK KHANDELWAL

SUPPLY CHAIN

INTEGRATION OF DELL

INTRODUCTION Founded by Michael Dell in 1984. Based on a simple business model. Dell became number 1 in 2001. Dell started three major manufacturing facilities. Selling directly to the customers has become Dell’s key strategy &

strength. Its manufacturing cost was kept lower than that of its competitors.

Saves money by selling directly to customers,Raw material inventory is low,Time was reduced from ‘customer’s order to receipt of system.

New concept of ‘Contract Manufacturing’ came up. To take advantage of labor cost differences, many original equipment

manufacturers (OEMs) initiated business engagements with Contract Manufacturers (CMs), as

they lacked in:- Capability,- Manufacturing Competitiveness,- Technology.

Introduction of first PC- non-mainframe computers (LINC, PDP-8) in 1960s.

- Expensive and Bulky.

First microcomputers hit the market in 1970s.- Emergence of single-chip microprocessor lowered the PC

prices.- Apple II- first successfully sold desktop in 1977.

In 1980s, computers became increasingly cheaper & gained popularity among home & business users.

Introduction of first commercially available portable computer – Osborne in 1981.

In 1990s the PC became more powerful & capable of handling more complex tasks.

Introduction of multi-user PCs in 1990s.- Increased usage by studios, universities, governments,

etc.

HISTORY OF PC INDUSTRY

COMPONENTS OF A DESKTOP PC & MAJOR

COMPONENT MANUFACTURERS

4

ChipsetAMDIntel

MotherboardASUS

FoxconnIntel

MiTAC

Desktop ChassisASUS

FlextronicsFoxconnMiTACLite-On

Desktop PCAcerAppleDell

Fujitsu SiemensGateway

HPLenovo/IBMLAN Chip

BroadcomIntel

Printed Circuit Board

BTI ElectronicsCompeq

GCEPlato Electronic

LEVELS 1-5 OF DESKTOP PC ASSEMBLY

LEVELS 6-10 OF DESKTOP PC ASSEMBLY

L6 vs. L5

L5

MB

Chassis

5 Weeks

1 WeekDell

Manufacturing Custom

er

Supplier Logistics Center

3rd Party Integrator (managed by equipment Manufacturers)

L6

MB

Chassis

5 WeeksChina

Integration

Dell

Manufacturing

Customer

Supplier Logistics Center

: L5 additional cost

L6 vs. L5: Value Comparison

8

L5• Integrated inside a Dell

facility• Chassis shipped on

water• Motherboards shipped

by air+ Increased supply chain

flexibility– Increased motherboard

air-freighting costs– 3rd-party integration

cost in US – Separate logistical costs

for chassis and motherboards

L6• Integrated offshore &

outside a Dell facility• Integrated motherboard-

inside chassis shipped on water

+ Labor savings+ MB air-freighting costs are

eliminated+ Reduced motherboard

packaging costs– Reduced supply chain

flexibility– More motherboards need to

be re-worked in the event of an MB ECN

L5 Driving Increasing Operational Cost

9

Q3FY05 Act Q4FY05 Act Q1FY06 Act Q2FY06 Act Q3FY06 Act Q4FY06 FCST

MB

-Airf

reig

htin

g &

3PI

Inte

grat

ion

Cos

ts

Americas EMF APJ MDS Total

Costs of air-freighting MBs and 3PI integration have been increasing.

AMF includes 3PI integration cost. EMF and APJ don’t as integration is done in Dell factory.

L6 vs. L5 Shipments: %Comparison

10

Dell Worldwide L5 vs. L6 Shipments Received from a Typical Contract Manufacturer

89% 93% 94% 95% 96%86% 91% 94% 96%

90% 85%73%

11% 7% 6% 5% 4%14% 9% 6% 4%

10% 15%27%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

Jul-04 Aug-04 Sep-04 Oct-04 Nov-04 Dec-04 Jan-05 Feb-05 Mar-05 Apr-05 May-05 Jun-05

L5%L6%

L5 shipped % has been increasing

since March 2005.

ROOT CAUSES OF INCREASING L5 MANUFACTURING

L5 manufacturing has higher overall manufacturing and logistic cost than L6.

Dell rising manufacturing cause by an increase in the utilization L5 manufacturing.

Most of the root causes of the rise of L5 manufacturing have to do with Dell inability to provide motherboards in a timely fashion to contract manufacturing

CAUSES

Chipset Supplier decommit supply

issueQuality/

Engineering issues

New product introduction

Dell forecast accuracy

CAUSES

Chipset supplier decommit or supply issue When a chipset supplier is unable to deliver

the previously agreed quantity of chipsets, its create disruption in pc supply chain.

63% Quality/ Engineering issues

This issue lead to dysfunctional or problematic motherboard that need to be repair or replaced by a new supply.

Which can subsequently create on additional unexpected demand of motherboard.

Dell forecast accuracyWhen the actual demand surpasses the

forecast, Dell needs to source extra chipsets or risk the possibility of not meeting customer demand.

The lead time of manufacturing, assembling, testing delivering a chipsets is on average 13 week.

Long lead time make it difficult for the chipset supplier to provide the additional chipsets in order

8.3% New product introduction NPI

Actual demand of a newly released PC product can be specially volatile, the forecast uncertainty can create air fright extra.

Mother boards normally not require when the product is in a mature stage with sable level of demand and a constant level of L6 manufacturing turning.

Mother board chassis assembly in the united state in order to reduce time to market for a newly launched product.

3.8%

Root Causes Analysis

15

63.5%

24.5%

8.3%3.8%

Chipset supplier decommitor supply issues

Quality/Eng Issues

Dell Forecast Accuracy

NPI

Majority of expedites are caused by chipset supply shortage.

AMF Expedite $ by Root Cause (January to June ’05)

COMPLEXITY MANAGEMENT

A task force, Business Process Improvement (BPI) team was formed.

The team identified six manufacturing options viz.-

- Keeping of safety stock,- Dell America Operations (DAO) cellular

integration to perform L5 to L10 manufacturing works.

- Offline integration at Supplier Logistics Centre (SLC).

- Offline integration at Dell-leased building.- 3rd Party Integrator (3PI) managed directly

by Dell.- L6 from equipment manufacturers’ Mexico

plants.

COMPLEXITY ANALYSIS

17

Legend: The “Cost per Box” data has been modified to respect Dell’s data confidentiality.

Option 1: CM-managed 3PI Option 2: Integration at DAO work cells

Option 3A: Integration at SLC/hub Option 3B: Integration at Dell-leased bldgOption 4: Dell-managed 3PI Option 5: Integrated chassis from

Mexico

Option 1Option 2(original)

Option 2(revised) Option 3A Option 3B Option 4 Option 5

Worldwide Procurement 10 1 1 1 1 5 10Regional Procurement 8 5 5 5 5 5 10Master Scheduler 5 5 5 5 5 5 5Production Control 5 10 10 7 7 7 5Operations 1 10 10 5 5 1 1DAO Quality 5 10 10 5 5 1 1Processing Engineering 1 10 10 5 5 1 1Supplier Quality Eng(Regional) 10 1 1 1 1 5 7Supplier Quality Eng(Global) 1 1 1 1 1 1 10Cost Accounting 5 1 1 10 10 10 1Inventory Control 1 5 5 5 7 10 1Logistics 5 1 1 5 5 5 10

Total: 57 60 60 55 57 56 62Cost per Box $10.07 $7.00 $7.90 $7.54 $7.70 $7.61 $7.00

CONCLUSION

Adopted the best marketing strategy to reduce the price.

Very effective approach of addressing the problem.

Managing the safety stock for motherboard was the best means of smooth running of inventory.

THANKUOY

04/08/202319