Distribution Mgt Assignment

7/29/2019 Distribution Mgt Assignment

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ASSIGNMENT

ONDISTRIBUTION MANAGEMENT

ON

SUBMITTED TO : SUBMITTED BY :

PROF. AJAY BANSAL SWETA KUMARI

11PGDM114


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TABLE OF CONTENT

OBJECTIVE OF THE PROJECT.........................................................3

INTRODUCTION.................................................................................4

HISTORY OF DELL............................................................................4

ORGANISATION................................................................................5

STRATEGIC DIRECTION.................................................................6

DISTRIBUTION CHANNEL.............................................................8

SELLING THROUGH INTERNET...................................................9SUPPLIER..........................................................................................9

KANBAN PROCESS.......................................................................11

SUPPLY CHAIN MANAGEMENT................................................12

DELL SUPPLY CHAIN PROCEDURE..........................................12

E- COMMERCE USED BY DELL TO IMPROVE SUPPLY CHAIN...........13

PRICING STRATEGY.....................................................................................14

PRICING ISSUE...............................................................................................15

CHANNEL CONFLICT...................................................................................17

COMPETITIVE STRATEGY..........................................................................18

QUESTIONNAIRE..........................................................................................19

FINDING.........................................................................................................20

CONCLUSION................................................................................................21


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Objective of the Project

This project report is on the THE STUDY TO ASSESS THE EFFECTIVENESS OF

DISTRIBUTION CHANNEL OF DELL.

This report is made for DELL with their distribution points. Objective of the every

organization is to satisfy the needs and wants of their customer in which distribution channel

plays a vital role.

The study is conducted by collecting secondary data and primary data. Secondary data is

collected from books, journals, government websites, company documents whereas primary

data is collected by means of survey questionnaire distributed among channel partners and

the end customers. Participants of research would be intermediaries in the distribution

network and the end customer. In order to select the participants the study has made use of

stratified random sampling method in order to make sure that major demographic segments

are represented while selecting the samples.

This study helps us in the following way:

To know performance of existing distribution channel

To know if there are any flows in the channel

To know their retailers satisfaction level with respect to the existing channel


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INTRODUCTION

Dell Inc. (formerly Dell Computer) is an American multinational computer technology

corporation based in Round Rock, Texas, United States, that develops, sells, repairs and

supports computers and related products and services. Bearing the name of its

founder, Michael Dell, the company is one of the largest technological corporations in the

world, employing more than 103,300 people worldwide. Dell is listed at number 44 in

theFortune 500 list. It is the third largest PC vendorin the world afterHP and Lenovo.

Dell has grown by both increasing its customer base and through acquisitions since its

inception; notable mergers and acquisitions including Alien ware (2006) and Perot

Systems (2009). As of 2009, the company sold personal computers, servers, data storage

devices, network switches, software, and computerperipherals. Dell also sells HDTVs,

cameras, printers, MP3 players and other electronics built by other manufacturers. The

company is well known for its innovations in supply chain management and electronic

commerce, particularly its direct-sales model and its "configure to order" approach to

manufacturingdelivering individual PCs configured to customer specifications.

Dell is the sixth largest company in Texas by total revenue, according

toFortunemagazine. It is the second largest non-oil company in Texas behind AT&T

and the largest company in the Greater Austin area.

On February 5, 2013 Dell announced a leveraged buyoutby founderMichael Dell and Silver

Lake Partners with additional funding from Microsoft. However South eastern Asset

Management, the largest shareholder of Dell stock with about 8.5%, is opposed to the deal at

the per share price of $13.50 to $13.75 as they value the company at $23.72 a share. The

buyout would save Dell between $4 and $5 billion in taxes they would otherwise have to pay

on repatriated profits controlled by tax haven subsidiaries.

History of Dell

Michael Dell founded Dell in 1984 while he was a student at the University of Texas at

Austin. Michael Dell believed that consumers would value the ability to customize their

computers and purchase them directly from the manufacturer rather than through a retail

store. Consequently, Dell's initial marketing strategy was to convince individual and
http://en.wikipedia.org/wiki/Round_Rock,_Texashttp://en.wikipedia.org/wiki/Michael_Dellhttp://en.wikipedia.org/wiki/Fortune_500http://en.wikipedia.org/wiki/Fortune_500http://en.wikipedia.org/wiki/Market_share_of_leading_PC_vendorshttp://en.wikipedia.org/wiki/Hewlett-Packardhttp://en.wikipedia.org/wiki/Lenovohttp://en.wikipedia.org/wiki/Mergers_and_acquisitionshttp://en.wikipedia.org/wiki/Alienwarehttp://en.wikipedia.org/wiki/Perot_Systemshttp://en.wikipedia.org/wiki/Perot_Systemshttp://en.wikipedia.org/wiki/Server_(computing)http://en.wikipedia.org/wiki/Data_storage_devicehttp://en.wikipedia.org/wiki/Data_storage_devicehttp://en.wikipedia.org/wiki/Network_switchhttp://en.wikipedia.org/wiki/Computer_softwarehttp://en.wikipedia.org/wiki/Peripheralhttp://en.wikipedia.org/wiki/HDTVhttp://en.wikipedia.org/wiki/Supply_chain_managementhttp://en.wikipedia.org/wiki/Electronic_commercehttp://en.wikipedia.org/wiki/Electronic_commercehttp://en.wikipedia.org/wiki/Fortune_(magazine)http://en.wikipedia.org/wiki/Fortune_(magazine)http://en.wikipedia.org/wiki/Fortune_(magazine)http://en.wikipedia.org/wiki/AT%26T_Inc.http://en.wikipedia.org/wiki/Greater_Austinhttp://en.wikipedia.org/wiki/Leveraged_buyouthttp://en.wikipedia.org/wiki/Michael_Dellhttp://en.wikipedia.org/wiki/Silver_Lake_Partnershttp://en.wikipedia.org/wiki/Silver_Lake_Partnershttp://en.wikipedia.org/wiki/Microsofthttp://en.wikipedia.org/wiki/Tax_havenhttp://en.wikipedia.org/wiki/Tax_havenhttp://en.wikipedia.org/wiki/Microsofthttp://en.wikipedia.org/wiki/Silver_Lake_Partnershttp://en.wikipedia.org/wiki/Silver_Lake_Partnershttp://en.wikipedia.org/wiki/Michael_Dellhttp://en.wikipedia.org/wiki/Leveraged_buyouthttp://en.wikipedia.org/wiki/Greater_Austinhttp://en.wikipedia.org/wiki/AT%26T_Inc.http://en.wikipedia.org/wiki/Fortune_(magazine)http://en.wikipedia.org/wiki/Electronic_commercehttp://en.wikipedia.org/wiki/Electronic_commercehttp://en.wikipedia.org/wiki/Supply_chain_managementhttp://en.wikipedia.org/wiki/HDTVhttp://en.wikipedia.org/wiki/Peripheralhttp://en.wikipedia.org/wiki/Computer_softwarehttp://en.wikipedia.org/wiki/Network_switchhttp://en.wikipedia.org/wiki/Data_storage_devicehttp://en.wikipedia.org/wiki/Data_storage_devicehttp://en.wikipedia.org/wiki/Server_(computing)http://en.wikipedia.org/wiki/Perot_Systemshttp://en.wikipedia.org/wiki/Perot_Systemshttp://en.wikipedia.org/wiki/Alienwarehttp://en.wikipedia.org/wiki/Mergers_and_acquisitionshttp://en.wikipedia.org/wiki/Lenovohttp://en.wikipedia.org/wiki/Hewlett-Packardhttp://en.wikipedia.org/wiki/Market_share_of_leading_PC_vendorshttp://en.wikipedia.org/wiki/Fortune_500http://en.wikipedia.org/wiki/Michael_Dellhttp://en.wikipedia.org/wiki/Round_Rock,_Texas


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corporate computer purchasers to buy computers directly from Dell via the Internet. In its

early years, Dell targeted most of its marketing efforts at medium and large businesses that

needed to purchase numerous highly customized computers that would fit seamlessly with

their business processes. Dell began advertising at electronics trade shows, in trade

magazines and through other mediums targeted at corporate chief technology officers, who

were responsible for their companies' computer purchases. In marketing to these executives,

Dell highlighted the ease of customizability, the simplicity of placing orders through Dell's

website and Dell's rapid order fulfillment abilities. The company also promoted its "Premier

Pages" service, which provides corporate customers with 24-hour technical support services.

This marketing effort allowed Dell to become a dominant supplier of computers to medium

and large businesses in the 1990s and early 2000s.

ORGANIZATION

The board consists of nine directors. Michael Dell, the founder of the company, serves as

chairman of the board and chief executive officer. Other board members include Don

Carty, William Gray, Judy Lewent, Klaus Luft, Alex Mandl, Michael A. Miles, and Sam

Nunn. Shareholders elect the nine board members at meetings, and those board members whodo not get a majority of votes must submit a resignation to the board, which will subsequently

choose whether or not to accept the resignation. The board of directors usually sets up five

committees having oversight over specific matters. These committees include the Audit

Committee, which handles accounting issues, including auditing and reporting; the

Compensation Committee, which approves compensation for the CEO and other employees

of the company; the Finance Committee, which handles financial matters such as proposed

mergers and acquisitions; the Governance and Nominating Committee, which handles

various corporate matters (including nomination of the board); and the Antitrust Compliance

Committee, which attempts to prevent company practices from violating antitrust laws.

Day-to-day operations of the company are run by the Global Executive Management

Committee, which sets strategic direction. Dell has regional senior vice-presidents for

countries other than the United States, including David Marmonti forEMEA and Stephen J.

Felice for Asia/Japan. As of 2007, other officers included Martin Garvin (senior vice

president for worldwide procurement) and Susan Sheskey (vice president and Chief

Information Officer).
http://en.wikipedia.org/wiki/Michael_Dellhttp://en.wikipedia.org/wiki/Donald_J._Cartyhttp://en.wikipedia.org/wiki/Donald_J._Cartyhttp://en.wikipedia.org/wiki/William_H._Gray_(congressman)http://en.wikipedia.org/wiki/Judy_Lewenthttp://en.wikipedia.org/wiki/Klaus_Lufthttp://en.wikipedia.org/wiki/Alex_J._Mandlhttp://en.wikipedia.org/wiki/Michael_A._Mileshttp://en.wikipedia.org/wiki/Sam_Nunnhttp://en.wikipedia.org/wiki/Sam_Nunnhttp://en.wikipedia.org/wiki/Shareholderhttp://en.wikipedia.org/wiki/Meetinghttp://en.wikipedia.org/wiki/Antitrusthttp://en.wikipedia.org/wiki/Strategic_managementhttp://en.wikipedia.org/wiki/Europe,_the_Middle_East_and_Africahttp://en.wikipedia.org/wiki/Susan_Sheskeyhttp://en.wikipedia.org/wiki/Chief_Information_Officerhttp://en.wikipedia.org/wiki/Chief_Information_Officerhttp://en.wikipedia.org/wiki/Chief_Information_Officerhttp://en.wikipedia.org/wiki/Chief_Information_Officerhttp://en.wikipedia.org/wiki/Susan_Sheskeyhttp://en.wikipedia.org/wiki/Europe,_the_Middle_East_and_Africahttp://en.wikipedia.org/wiki/Strategic_managementhttp://en.wikipedia.org/wiki/Antitrusthttp://en.wikipedia.org/wiki/Meetinghttp://en.wikipedia.org/wiki/Shareholderhttp://en.wikipedia.org/wiki/Sam_Nunnhttp://en.wikipedia.org/wiki/Sam_Nunnhttp://en.wikipedia.org/wiki/Michael_A._Mileshttp://en.wikipedia.org/wiki/Alex_J._Mandlhttp://en.wikipedia.org/wiki/Klaus_Lufthttp://en.wikipedia.org/wiki/Judy_Lewenthttp://en.wikipedia.org/wiki/William_H._Gray_(congressman)http://en.wikipedia.org/wiki/Donald_J._Cartyhttp://en.wikipedia.org/wiki/Donald_J._Cartyhttp://en.wikipedia.org/wiki/Michael_Dell


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Strategic Direction

Dell is a completely customer centric organization and its business has been built for a direct

sale of the products to the customers. They follow the concept of build-to-order strategy formanufacturing and selling PCs. Dell originally sold PCs to individual PC users, by the end of

1980s; it made its way into the corporate market. Dell's direct approach didn't need the

various services provided from resellers. Dell concentrated on its efforts on working closely

with those departments to simplify their lives and lower the price of PCs to the end customer.

Dell developed a sales force to deal directly with the top executives of companies, and it

penetrated into the corporate accounts that had long been dominated by vendors such as IBM,

HP and DEC.

Dell has glued to its inherent model of build-to- order business model to increase their profit

margins. A main advantage of this build-to-order production is that quite expensive inventory

does not pile up and lose its value before it can be sold. The inventory turnover rate of Dell is

60 times per year compared to that of indirect vendors which is 12-15 times more.

Customers often pay for the product before the sale as it is built to order and Dell pays its

suppliers for the parts that go into the PC after the customer pays them, which shows that

Dell operates on negative conversion cycle.

One of the most important benefits that Dell gain are the customer relationship which is the

key area for many businesses. Unlike many manufacturers who do not know who is their end

customer is Dell knows its end customer and how much he is spending with the company and

feedback the customer gives after the usage of the product.

Dell uses the feedback of the customer to offer add-on and keep-on products and services.

Dell provides system maintenance and customer support services to the customer to help the

customer plan PC replacement and to upgrade themselves with the latest technologies.

Dell calls itself a PC outsourcer as it takes the responsibility for managing customer's PC

inventory, from purchase to disposal. Its manufacturing operations and systems are set up to

support their business model which is building PCs to a customer's requirements whichincludes pre-loading software and making a hard drive image of it in the factory, and


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providing an asset tag that can be scanned to compare to that of the PC throughout its

lifecycle.

The build-to-order process is being practiced for years, and involves the entire production

process and supply chain. A Dell PC is designed to minimize manual activities in production.

Suppliers are selected with an assurance of high quality material, suppliers are also integrated

into production process and system, and the entire production is managed by the combination

of all information systems which are internal as well as external.


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DISTRIBUTION CHANNELS

Dell has prepared an enormous trade of developing an innovative and formal channel big

business representation and this formal model is a vital to its organizational success. I would

be giving the impression of being at Dell's inventive distribution channel management which

has literally revolutionaries the importance of Direct Marketing in the customer electronics

space in the world.

Direct marketing is still the most important distribution channel methodology within Dell. I

would be documenting the development of this concept within Dell accurate from its

modified sales administration during Personal Computer's narrow to the compound and

complicated systems that it employs at present situation. I would be presenting an illustration

of the complete distribution arrangement that it situates in the present day environment. It has

countless of the rudiments concentrated, while developing a new formal model.

Dell's true channel success could be determined in how it can extent its channel volume and

transactions and this will be a great deal influenced by the steps it acquires to enhance

product accessibility and moderate possibility for its partners. Dell is incorporated with

mainly direct marketing approach but new technology of internet marketing changes that

strategy, means now Dell is operating their marketing operation both with direct channel and

internet marketing channel.


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Selling through Internet

With the growing use of Internet and e-commerce in 1994, Dell started its online shopping as

it withdrew from the retail market in the US. It believed that electronic selling will provide anew opportunity for their growth in sales and it would help them to restore their growth.

In the year 1995, after the Internet the buying and selling through the internet had started,

Dell has created its own website www.dell.com to provide information and assistance to its

customers in technical support and product related information. The web site also contained

the company's information such its annual reports, stock price, and other statistical data.

Suppliers

The suppliers for hard drives for Dell are those which are same for the others in the same

group such as Intel, Seagate, Quantum, Maxtor, Philips, Nokia, Samsung, Acer etc.

The notebook range of systems of Dell of the lower end models are manufactured completely

by mainly Quanta and Arima which are suppliers from Taiwan. The base units of higher-end

notebooks are manufactured by Dell.

Dell completely relies on Intel for microprocessors which is a smart decision and which willmake the task of product development easy for them.

More than 70% of procurement is done from the Asia pacific region though the

manufacturing is concentrated completely in the US.

Dell has redesigned its computers so that same components can be utilized for different

models, which in turn helps in the reduction of number of parts in inventory, its cost,

economies of scale, and the process of managing their procurement.

From the years 1992 to 1997, the suppliers for dell were reduced by more than 75%. The

suppliers who produced more than 85% of their material were also reduced.

Dell has a multiyear planning negotiating and supplying with its suppliers by reducing the

complexity of procurement and inventory management.

External Relationships: From Value Chain to Value Web

Dell's core part of the business is based on the value chain. Like other PC manufacturers it

does not focus on designing and selling the models and by relying on others to provide

components software and parts for its models.

Dell sells its products directly to the end users by cutting out the distributor and reseller.


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A big part of its components are manufactured by other manufacturers and suppliers and are

shipped directly to the customers. In terms of designing manufacturing and delivering PCs

Dell works in a different way than the others.

Because of its unique way of operating and selling PCs, it has changed the general value

chain with a new model which can be called as a value web or a virtual corporation.

Indirect value chain

Co-ordination and control of the value network is completely in control of the company,

which creates a direct relationship with the end user.

Customer feedback can be taken easily.

The necessary information can be passed on to suppliers who actually manufacture the

components.

The value web model illustrates how Dell's distribution model can respond immediately to

customer feedback. As all the traditional mediators are removed from the system the

gestation period of customer order to receiving the product is reduced substantially.


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Kanban Process

Kanban Process is defined as a technique for work and inventory release, is a major

component of Just in Time and Lean Manufacturing philosophy (Fujitsu, 2002). The concept

was originally developed at Toyota in 1950; it is an efficient factory production system. The

Kanban process also demands huge amount of trust between the company and its supplier

The company works closely with its suppliers and customers. The company makes use of

Internet to integrate its customers and suppliers to its manufacturing and logistic function

which is based on Just in time management model. The company relies on its robust

organization to get the supplies and components when and where required. Any alternative

components are acquired through the time of the production process by making use of the

Kanban' System. The suppliers of Dell deliver parts when they receive the request or anempty transportation giving request for refill. Apart from the company also makes use of

integrated Kanban' process to be more efficient, the integrated Kanban process is divided

into two parts. The first part is the transport Kanban and the other is the production Kanban

and the key difference between both of them is the schedule, the transport Kanban works on

every day basis where components are manufactured by the suppliers based on the specific

order for that particular day. Because of made to order system at times it can be challenging

for Dell to identify or forecast the components which would be required which justify the use

of Kanban process. The production Kanban gives details about the completion of the

production by a specific unit or workstation, depending on which the suppliers are able to

find out the time when the assembly line would need their product. The process is based on

the production schedules that are fixed and autonomous in nature which helps in successful

and effective logistic process. The company makes use of information technology in the best

possible manner to encourage trust and cultivate health relationship (Internal Reports).


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SUPPLY CHAIN MANAGEMENT

Dell has implemented an outstanding supply chain system that has made their business even

better. They use supply chain software by i2, which gives them the ability to get materials

from suppliers over the web in real time, and get those supplies to the factories every two

hours to meet customer needs. The key to the success of this method is that Dell has suppliers

within close proximity to all of their factories. Basically, Dell never runs out of an item, and

if they need something, they can get it so quickly that they can take an order for a custom

computer and have it in the mail and on the way to the customer in a couple days or less. By

maximizing their supply chain capabilities and developing excellent customer service, Dell

computers has established themselves as one of the front-runners in the computer business.

Their ability to provide customers with custom-built computers in a matter of days at an

affordable price is unheard of in their market, and their business has thrived as a result.

DELL SUPPLY CHAIN PROCEDURE

Due to efficient supply chain management, Dell is capable of shipping a PC within 24 hours

of receiving an order. The introduction of the internet and e-commerce has helped Dell

improve this efficiency and profitability.

First we need to understand what is involved in a supply chain. A simple supply chain covers

the whole process of the production of the goods for sale. Once the goods are produced, they

lie in the stock at the outlet until an order is made. When an order is processed, the specific

goods are delivered to the buyer and payment is received by the seller.

A computer manufacture depends on suppliers for parts when designing and manufacturing a

PC for the mass market. The complete product will then be sold to a distributor, who in turn

will sell it to a retailer who will eventually sell it to end customer.

When a customer walks into the retailers shop and decides to purchase a PC, the PC has

been manufactured well in advance at this stage. When customer pays for his order, the PC is

taken from the stock and handed over to him.

At Dell, the traditional supply chain has two fundamental differences: disintermediation and

real time production. Dell sells directly to its customer, cutting out the middle man, the


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distributor and the retailer. When a layer that exists between two other layers is removed like

this, it is known as disintermediation.

As Dell manufactures the products and then sells them directly to the customer, Dell creates

disintermediation

the outside retailer is cut out of the process. This reduces time and costs

in the process and also ensures Dell is better positioned to understand its customers needs

directly.

Crucially, Dells supply chain costs are reduced on the storage side too by its efficient

relationship between orders and production. Each individual PC that is ordered is only

manufactured after the order is received and only using the freshest raw materials, which are

delivered to the factory several times a day. This is known as just-in-time production or real-

time production. There is no warehouse for either raw components or finished goods. Each

computer has been paid for and has been built for a specific customer before it is shipped.

Real time production ensures no costs are incurred from rising inventory stocks. Outputs is

always driven by actual customer demand. Each individual product is created with the latest

technology and each product is custom-made to exactly what the customer wants.

Dells direct selling started off using the customer channels of mail order and ordering using

toll- free phone numbers and this has grown to embrace online sales channels too.

E- COMMERCE USED BY DELL TO IMPROVE SUPPLY CHAIN

When internet technology arrived, Dell was quick to set up the e-commerce processes that

would enable it to also sell directly online to customers. Selling online allows the whole

process to be automated and more efficient.

Since 1996 when dell opened its website www.dell.comfor e-commerce, the company has

had huge sales success. By 1997, the company recorded $1 million in online sales. By 2000,

the companys internet sales had reached $50 million a day.

The product range is online with detailed information to help the customers to help them

make their decisions. They simply have to follow the easy automated instructions that come

up on screen. These allow the customers to customise the computer they want with the

features they need. They can increase, say, their hard disk space and see the difference that
http://www.dell.com/http://www.dell.com/http://www.dell.com/


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increase makes to the overall price. Then they are given varieties of options on how to pay,

either directly online or, via a customer service operator. There is even an automated leasing

option available through a financing arrangement that Dell has here with Permanent TSB.

The customers order is then passed automatically through to the production department at

dells factory where it will be manufactured to his specification, tested and shipped out to

him. All of the systems relating to the sales are done through e-commerce order placement,

order tracking, payment processing, inspection, testing and delivery.

Similarly, internally at Dell, the whole purchase and procurement of materials is automated

between Dell and its suppliers. Atwww.valuechain.dell.com, dell shares information with its

suppliers on a range of topics, including product quality and inventory.

The crucial benefit is the automation of the whole process, which not only makes it faster and

more efficient, but also much more cost effective, especially given the volume of business

involved. Dells global website receives more than 1 billion page request per quarter at 80

country sites in 28 languages and 26 currencies.

Dells approach to e-commerce simulates the benefits of face-to-face contact between the

buyer and the seller. This ensures that staff can be focused on delivering a quality product

and providing excellent customer service and support.
http://www.valuechain.dell.com/http://www.valuechain.dell.com/http://www.valuechain.dell.com/http://www.valuechain.dell.com/


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PRICING STRATEGY OF DELL

Direct Business Model

Dell's direct business model is behind the firm's continued success. Competitively, it:eliminates the need to support an extensive network of wholesale and retail dealers, in turn

eliminating dealer mark-ups,

avoids higher inventory costs associated with "best estimates" of product demand;

avoids large inventories of obsolescent finished products due to the rapidly changing

technological market;and

gives the firm the ability to maintain, monitor, and update a customer database that can be

used to shape future product offerings and post-sales service and supportThe bottom line and of course thats where the direct business model must truly be

weighed is that Dell Computer Corporation is able to bringthe latest technology to its

customers faster andmore competitively priced than many of its competitors.

Most recently Dell has taken the idea of directly selling to customers on the Web, and

sales atDell's Web site now make up 30 percent of corporate business.

Mass Customization

From the start up of Dell Computer, the entire company - from research and development to

manufacture to sales has been listening to the customer, responding to the customer, and

delivering what the customer asked for, in line with the direct model.

o High performance products: The standard, then, was set by IBM, and that was what

customers wanted - and what Delloffered.

o Direct relationship with customers: Dell had an ongoing dialogue with customers.

The information gave the company a competitive advantage in tailoring its products

and communications to customer thinking. Direct marketing also communications to

customer thinking. Direct marketing also avoided dealer mark ups.This remains true

today - even with the prices of PCs declining, such rates may still be as high as a

quarter of purchase price.

o Efficient and Flexible Manufacturing: The fledgling firm didn't have much capital

and the issue of inventory was a serious one. Although the firm now garners most of

the market share, it continues to monitor inventory levels, practicing JIT to remain

continues to monitor inventory levels, practicing JIT to remain flexible to buildmachines to customers' orders.


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PRICING ISSUES

Since the computer manufacturer re-entered the channel nearly 18 months ago, its dodged

issues of conflict for what it offers registered partners for prices on products and what

customers can find by shopping direct on Dells Web site.

NowDell is engaging the channel through distribution. In a deal signed with Ingram

Micro and Tech Data, Dell offered 14 desktop and notebook units from its business-class

Vostro line through distribution giants Ingram Micro and Tech Data. Dell says solution

providers can buy direct from Dell or through distribution. The benefit of buying through a

distributor is having one source for comparative brand pricing, a broad line of products for

building holistic solutions and credit. Distribution, in theory, often offers better pricing than

what manufacturers charge end users, but slightly more than what solution providers can

get direct from suppliers.

Dells pricing conflicts with the channel are nothing new. Dells 2002 attempt at a white

box program proved disastrous. The company offered solution providers "unbadged" Dell

PCs for resale, but there were a lot of problems with the model. First, the white box

versions were often more expensive than Dell-branded systems. Second, the removal of the

Dell label made the systems less desirable to customers. And third, Dell only offered alimited selection of low-end PCs to its partners.

Channel Insider checked out the prices of the new Vostro systems sold through distribution

against the prices of comparable systems available direct from Dell and from Dell

competitors.

Dells foray into the distribution model consists of the companys Vostro product line, with

approximately 14 desktops and notebooks available. The Vostro product line is aimed at

business users and sport mid-level features and performance. Vostro should have particular

appeal to the small business user due to affordable pricing and competitive software

bundles.

While on the surface, it looks like Dell is taking the right approach in regards to pricing for

the channel, but one needs to consider Dells frequent specials and offers. For example,

Dell.com is currently offering a "Desktop Deal" Vostro 220s equipped much the same as

the distribution system, with 2 GBs RAM and a 19-inch LCD monitor included for $559.
http://www.channelinsider.com/c/a/Dell/Dell-to-Distribute-PCs-through-Ingram-Micro-Tech-Data-558334/http://www.channelinsider.com/c/a/Dell/Dell-to-Distribute-PCs-through-Ingram-Micro-Tech-Data-558334/http://www.channelinsider.com/c/a/Dell/Dell-to-Distribute-PCs-through-Ingram-Micro-Tech-Data-558334/http://www.channelinsider.com/c/a/Dell/Dell-to-Distribute-PCs-through-Ingram-Micro-Tech-Data-558334/


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Solution providers buying through distribution are going to find it difficult, if not

impossible, to compete with that offering.

Those looking to compete with Dells pricing may turn to Lenovo or Hewlett -Packard for

similarly equipped systems. Lenovos ThinkCentre A57 9702, when equipped similarly to

the Vostro, costs about $470; an HP Compaq Business Desktop dx2400 costs about $540.

This shows that on the bottom end, Dell can beat most other vendors when it comes to

basic pricing.

On the other hand, system builders may be able to under-sell Dell by carefully choosing

components. For example, a system builder should be able to build a comparable system

for about $435 using an Intel E7300 CPU, Intel DG31 Motherboard, Antec case/PSU,

Maxtor 160 GB hard drive, Corsair RAM, Lite-on Optical drive, generic keyboard, mouse

and Windows Vista Business Edition.

At this time, Dell did not have any "Dell Deals" on the Vostro 1510, meaning that until a

special offer develops, the best place for a solution provider to buy the Vostro 1510 is

through distribution.

Of course, Dell is not the only notebook manufacturer. Toshiba offers a similarly equipped

Satellite Pro S300 for $799 and Lenovo offers an SL500, with a P7370 Intel CPU (2.0 Ghz)

for about $680a bit cheaper than Dell, albeit with a slightly slower processor.

In our tests, Dells pricing against both distribution and competitors either doesnt conflict

or is within a reasonable variance. Even so, solution providers will have to pay careful

attention to Dells "specials" when pricing systems. Those not looking to sell Dell products

may have some work cut out for them, where it may be difficult to beat Dells prices

feature by feature.


18/22

Channel Conflict

As revealed by Micro Scope in September, Dell trialled an initiative with one internal team

and a bunch of resellers to create channel advocates among its direct sales force and foster a

new culture of partnering.

Direct sales teams have been given sales targets that will be difficult to achieve without

leaning on resellers, said outgoing EMEA channel boss Josh Claman, who is moving to lead

the public sector division in the region.

"We will be assigning quotas that will be hard or almost impossible to achieve without using

the channel, we'll tell them that there are partners working on their patch and to hit targets

they will have to use the channel," he said.

In January, Dell merged its channel account and direct sales team into four global customer

segments including Public Sector, SME, Large Enterprise and Consumer.

This structural change together with the overhaul of internal reward mechanisms are designed

to minimise channel conflict which according to UK partners continues to dog the vendor a

year after it launched the Partner Direct scheme.

"I think that is why we called for a pretty dramatic change in how we structure the channel. I

can't imagine anything more that we could do to train channel advocates in our direct sales

teams," said Claman.

The recent departure of Andy Dow, UK channel director at Dell, has unsettled partners and

caused some to question if Dell was committed to them for the long term.

The company has also recruited two new heads to run Europe as revealed last month.

Emmanuel Mouquet has been appointed as EMEA channel sales director and Kathy

Schneider as EMEA channel programme manager.

Mouquet said: "There are lots of things that partners can do which we can't. Will our internal

[direct sales] culture change overnight? No, but it is changing day by day."In two to three years Dell will become the preferred vendor of choice for partners, said Greg

Davis, vice president of global commercial channels.

"We listen to our partners and we make adjustments to our programmes, it is going to take

some time but I am confident that the structural changes we are making will lead to greater

opportunities to collaborate with partners," he said.

The instances of conflict may have reduced in the last year but Dell is banking on partners

having a little patience while it plays catch up with rivals that have been operating in the

channel for the last 25 years.


19/22

Competitive Strategy

Dells competitive strategy is the key to the companys success and its their distribution

model and its lean cost structure. Both of these strategies have given the company a

competitive advantage over others in the industry. The companys business strategy is based

on the direct business model. With this model, they can deliver the best customer experience

through direct, comprehensive customer relationships, cooperative research and development

with technology partners, computer systems built to customer specifications, and service and

support systems geared towards customer needs.

Dells direct model gives the company several competitive advantages over others in the

industry. First of all, it eliminates the need to support a network of wholesalers and retail 11

dealers. This avoids dealer mark-ups. Second of all, this model reduces inventory costs,

which are associated with the wholesale/retail distribution channels. Inventory is big in the

technology industry. Dell uses JIT (just-in-time) inventory practice, which means that they

keep very minimal inventory of components on hand. Not only does this reduce expenses on

the financial statements but it also keeps technological components from being outdated.

Other companies in the industry have had a hard time reducing their inventories. By the time

they go to use the component it had become outdated so it increases their costs. Dell keeps

their inventory costs at a minimum. Dells inventory turnover rate is about 4 days while the

industrys is around 15. This model also helps to avoid competition for shelf space in the

retail markets.

Dells direct distribution strategy can be credited for the companys lean cost structure. The

company is heavily exposed to the slow growing PC market however, Dells market share

continues to accelerate compared to the rest of the industry. As the industry continues tomove towards standardized technology, cost structure will become a key issue and Dell

already has an advantage over the rest in this area.


20/22

Questionnaire

1. The number of years the channel partner has been working with Dell

I. less than 5 years

II. between 5-10

III. between 10-20

IV. more than 20

2. Rate the service of Dell in terms of orders and pickups

I. Best

II. Good

III. Not sure

IV. Average

V. Worst

3. Have you had any issues with Dell ?

I. Yes

II. No

4. Do you Trust Dell?

I. Yes

II. No

5.

Rate the quality of the communication systems at Dell.I. Best

II. Good

III. Not sure

IV. Average

V. worst

6. Rate the technological systems used by Dell to assist the channel Partners.

I. BestII. Good

III. Not sure

IV. Average

V. worst


21/22

FINDINGS

The key themes or findings of the questionnaire response are summarized as below:

* Almost 90% of the participants have had encounter with a Dell machine at one point of

time which shows the popularity of the system among students and employees

* In response to the questions to rate the service of Dell, 75% participant considered it to be

good , however there is still gap of 25% on which the company can focus to improve its

customer service. In case of UK it is recommended to have physical contact with the

customer rather than outsourcing the customer service to some other country.

* Most of the consumers were happy with the delivery schedule of the company which shows

the timeliness and quality of its distribution channel. There is still room for improvement

however.

* 72% of the respondent considered the quality of the Dell system to be good whereas around

28% were either not sure or did not considered it to be good. The company here can focus on

the quality that is being supplied by its channel partners.

* 73% customers were happy to recommend Dell to their family and friends whereas 27%

were not. This showed that there is still some gap the company can capitalize on when it

comes to bringing about customer satisfaction.

* Cost, quality and service were the key criteria when it came to making decision of buying a

new computer system (laptop and PC). Brand image, looks and after sales services were rated

average in terms of importance. Provision of Finance was least important when the customer

considered making a purchase of computer system

* Maximum channel partners have worked between 10-20 years with Dell. This shows the

commitment and long terms partnership Dell establishes with its channel partners. This is

only possible if there is professional and trustworthy relationship between the channel

partners and Dell.

* 95% of the channel partners were happy with the service of Dell in terms of deliver and

order pickup.

* Around 30% of the channel partners said they have had issues in the past with Dell.

* All the channel partners replied that they trust Dell

* 85% channel partners agreed that the communication systems at Dell were Good whereas

15% did not believe it to be good.


22/22

Conclusion

The discussion above has presented a comprehensive explanation of the channel of

distribution of Dell. The deliberations established out that the point of accomplishment

presently enjoyed by the companionship is for the most part influenced by these different

areas. In particular, the revise even pushed it additional by maintaining that these

fundamentals are surrounded by the issues that make a payment to the aggressive

improvement of the organization greater than the rest of the competitors in the marketplace.

Considering the circumstances concerned in the exterior surroundings of Dell the utilization

of such method authorizes effectiveness for the reason that it is understandable who their

consumers are along with the piece of information that an enormous demand for their various

products is observable from these consumers.

It must also be distinguished that such an organization would not be possible as it is if a

successful level of control is reachable to the company. Based on the deliberations above, the

company is well responsive on how to supervise their marketplace as well as the method on

which it could further obtain a superior market share throughout their channels of

distribution.

Documents

Distribution Mgt Assignment