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Dell value chain strategy
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Dell’s Value Chain
Kelompok IIMuhamad Syafe’i P056121793.12EKFebi Adnesia Angraini P056121773.12EKIvo Oskiano Sinukaban P056121783.12EKPriyo Tri Nugroho P056121823.12EK
TOPICS
• Background and Overview• Business Strategy• Internet and E-commerce• Future Strategy for Growth
Topics
Background and Overview
Business Strategy
Internet and E-commerce
Future Strategy for Growth
Background and Overview
• Founded by Michael Dell – 1984• Youngest CEO in the World• Included in Forbes 500 list – 1992• Forbes 2010 Rank – 38, Revenue $53 Biliion, Profit $1,4
Billion • Number one PC seller in US – 1999 ( No. 2 in the world)• Adopted Internet selling model – 1996• Inventory turnover – 60 times a year• Competitors – Compaq, IBM, HP
© Dell Inc. - 2003
~80%Corporate & Institutional ~20%
Consumer
Customer Base (Revenues)
Revenue by Region
70%Americas
11%APAC
19%EMEA
Global Manufacturing Austin, Texas, USA
Nashville, Tennessee, USA
Eldorado do Sul, Brazil
Limerick, Ireland
Penang, Malaysia
Xiamen, China~41,800 employees worldwideRevenue $38.4B (last 4 qtrs.)
Dell Facts
Revenue by Product• Desktops = 51%• Enterprise = 21%• Notebooks = 28%
Background and Overview
Precision Workstations
PowerEdge Servers
PowerVault&
Dell|EMC Storage
OptiPlex Desktops
Latitude Notebooks
Software &Peripherals
PowerConnect Switches
Dell’s Product portfolio
Topics
Background and Overview
Business Strategy
Internet and E-commerce
Future Strategy for Growth
Business Strategy – Direct sales – Build to order
• No build up of expensive inventory• Build exactly the computer that its customers want.• Minimize the need for forecasting• New product can be introduced without waiting for old
inventory clearance• Customers can choose what components they want for
their computer, Dell then assemble the order and ships it.
• This strategy improves customer satisfaction and reduces costs and risks to the company.
© Dell Inc. - 2003
CompetitivePricing
CompetitivePricing
DrivesMarket Share
DrivesMarket Share
EfficientModel with Lowest
Cost Structure
EfficientModel with Lowest
Cost Structure
HelpDrive
SupplierBusiness
HelpDrive
SupplierBusiness
Pass cost savings on to customer
Pass cost savings on to customer
Competitive pricing ignites demand
Competitive pricing ignites demand
Lower cost drives Increased demandLower cost drives Increased demand
Industry's most efficient
procurement, manufacturing and distribution
process
Industry's most efficient
procurement, manufacturing and distribution
process
Dell’s Direct Model = Perpetual Success
Business Strategy – Direct Customer Relationship
• Detailed customer data(Name/Equipment/ duration of relationship)
• Information can be used for add-on Product and services – Replacement and product upgrade
• Customer calls Dell – PC Outsourcer – Full life cycle management
Dell’s Direct Model
• Direct relationship, most efficient path• Low cost and best value• Built to order• Customized systems• Superior, tailored service and support• Highest quality and most relevant technology
Monday, April 17, 2023 13
Benefits of direct sales method
• Direct sales in conjunction with build-to-order is a powerful model for both Dell and its customers.
• Customers get what they want, rather than be forced to choose among a fixed set of options.
• Dell wins because by developing and building only those systems that customers want, Dell eliminates the excess cost of buying too many components, having high storage and inventory costs, and having to sell the surplus at a loss.
• Dell can use savings in other areas such as web site improvement, marketing and distribution.
Business Strategy – Dell E-Commerce Company
• First web site – 1994 – ahead of competitors – selling online (dell.com)
• No channel conflict – reseller/ distributors• Build to order – Opportunity to customer to configure
products online• Internet to coordinate entire value network – Suppliers/
Logistics Providers/ Distributors of third party products, SI, Service providers
• Tight information linkage between Dell and its customers
• Need to hold inventory at each step in value chain .
• Have to pay suppliers first before getting paid from customers .
• Stuck with excess inventories of slow selling products .
Competitors’ Disadvantages vis-à-vis Dell
Dell’s Competitive Advantages
Dell is having one of the best SCM in the world.
• 90% supplies ordered online using integrated websites of supplier and Dell (B2B).
• 95% of suppliers situated very close to assembly plant hence coordination is easier..
• 15 suppliers provide almost 85% of all supplies.• Dell gets paid by customers and then pays to its suppliers.
SWOT ANALYSIS:- B TO BSTRENGTHS OPPORTUNITIESCustomizationPriceCustomer FocusedTechnical KnowledgeMarket DiversificationStrong Brand/PositioningMedia SavvyDirect Marketing Model
Server MarketInternational strategyAdditional marketsProduct extensionsStrategic partnerships
Technology MarketInventory
Competition across marketsCommodity pricing(shrinking margins)Complexity of Mgmt.Growth exceeding productivity
WEAKNESSES THREATS
Dell’s Competitive Advantages
The Dell Value Chain
• Close relations with Customers & Suppliers• Elimination of bull Whip Effect & Early to Market• Collection of Payments and Negative Working
Capital• Assemble / made to Order & Faster Inventory turn-
over• Reduced Cost => Competitive Pricing• Solid Information management & internal aligment
Weeknest point of Dell value chain• The complicated of integrated resources• Low internet penetration in emerging
country• High shipment cost (JIT)• Need to accurate information
Topics
Background and Overview
Business Strategy
Internet and E-commerce
Future Strategy for Growth
LEVERAGING E-COMMERCE
Direct Business Model Internet Orders Phone Calls Mass catalog mailings
Value Proposition Easy Ordering process Customization & Flexibility Easy access after sales support
Embracing the Internet
In its Supply Chain:• Partners access to Order
information• Close co-ordination
between IT and Dell Online
• High Supply Chain Visibility allows Partners to plan based upon demand
Customer:• Improved Customer
Reach• Online Ordering & Self
Service Tools• Paper-less
transactions• IT Management Tool• E.g B2B premier
pages
LogisticsCompany System
integratorsCMs/OEMs
Components Supplier
Third Party HW and SW suppliers
Distributors
Repair and Support Services
Finance Procurement MIS Helpdesk
E-Com
I2 Intranets DOMs DPS Glovia Tech
Docs
EDI
Extranet
I2 msgs
EDI
EDI
EDIextranet
Dell
Internet
EDI
EDI
Dell IT and Ecommerce Applications
Dell’s Value Web Model
Topics
Background and Overview
Business Strategy
Organization of Business Activities
Internet and E-commerce
Future Strategy for Growth
Always listen to
Customers
Never Sell Indirect
Disdain inventory
• The Three Golden Dell Rules
Suppliers Customers
Direct Model
• Continuity of Supply• E-business
Collaboration• Technology Leaders• Low-cost
Manufacturers
• Best Customer Experience• Low Cost Efficiency &
Highest Quality• Partnering/Virtual
Integration
• Product Quality• Price for
Performance• Customization• Reliability, Service
and Support• Latest Technology
The Power of Virtual Integration
• Dell acts as the single point of accountability while focusing on our core competency – custom-configured computing solutions.
• Seamless integration with best-in-class partners leverages their core competencies for the benefit of Dell’s customers.
Software E-Business
ServicesTechnologyBLUECURRENT
EMC²
SOLUTIONCustomer
© Dell Inc. - 20031991
0
50
100
Day
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ales
Inve
nto
ry
1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 Q103
10
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60
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15 X
Inventory Management Experience
© Dell Inc. - 2003
Velocity = Direct Demand Feedback
1) Dell facilities act as Manufacturing Centers, not Warehouses – only inventory needed for next 2 hours of orders is on site
2) Provides direct signal of Dell customer demand for suppliers3) Dell’s performance to customer orders is directly linked to our suppliers’
level of support4) Absolute synchronization between manufacturing and sales keeps the
process balanced.
SLCDell
Manufacturing
Buy-to-Plan Build-to-OrderS
up
pli
ers
Material requested to build customer orders
All material is tied to a customer order – nothing is built without an order.
“push” “pull”
Cu
sto
mer
s
1. "PunchOut" - authenticated access to the customer's catalog at Dell from the customer's Internet browser to facilitate shopping
2. Order Requisition - shopping cart data pulled back into the customer's ERP system and workflow processing
3. Electronic Purchase Order - sent back to Dell for automated order processing
4. PO Acknowledgement - response returned to customer
Customer places an Order(By phone or through the Internet on www.dell.com)
Dell processes the order
Financial evaluation
(credit checking)
Configuration evaluations
(checking the feasibility of a specific technical configuration)
Sends the order to assembly
plant (any one in Austin, or any other)
Plants build, test &
package the product
(about eight hours)
Dell typically ship all orders
(no later than five days after receipt)
DELL’S Supply Chain
2-3 days
through
General rule for production is first in, first out
SUPPLIERS REVOLVERS
CUSTOMERS
Customer
Local Suppliers
Dell Factory
Lean Inventory Model……
Revolvers(SLCs)
Suppliers
3 days of inventory - Inventory turns of 122 per year
Delivery
Supplier Owned Dell Owned
www.a2zmba.com
RFID applications
Future Strategy for Growth• Increased Usege of E-Commerce in developing Countries
– Education Session to Institutional/ corporate Customers– Schemes/ Discounts on onlines booking
• Value added services – Usage of Business Analytics– Study the nature of purchase from Existing database– Design the value offerings based on spending pattern
• Better Usage of Knowledge Sharing tools– Sharing of the best practices and Support
Solutions– Driving Innovation for offering to new market
• Partner network for Geographical Expansion– Better delivery and distribution in new markets– Onsite Support
• Region specific Customizations– Opening of stores for touch and feel experience– Presence of local sales, cutomer service and
support teams
Future Strategy for Growth..(contd)
Summary of MIS and its Effect in Dell
