Supply chain of DELL

Supply Chain of DELL Assignment 1 3/7/2013 Thushan Dharmawardana 101414G

Supply Chain of DELL

TL 2050: Supply Chain Management Page 2

Introduction

Supply Chain Management is a business practice that has

been employed in order to give an effective service to

customers and to make the business sustainable by

considering all the aspects from the suppliers to the

consumers.

Supply Chain integrates all these features such as manufacturer, supplier, transport, wholesalers,

retailers, customers and all other elements which link the above. Its main objective is to fulfill

customer demands by adding value to the products and services.

DELL is a computer technology corporation that

develops sells, repairs and supports, computers and

computer related products. DELL has realized that

supply chain is becoming more and more important for

the success of today’s business world and they work

accordingly to keep a competitive advantage in the

market.

Here in this study, the supply chain processes that are utilized by DELL will be taken into

consideration which is known to be one of the best in the world. DELL s supply chain will be

heavily analyzed in the areas of supply chain integration strategies and demand management

aspects.




DELL has a different business model than its competitors, which can be identified as “direct

model”. In this model DELL sells its PC s directly to customers without using a retail channel.

Therefore it creates a direct relationship with each individual customer which they have

segmented into groups to make it easier to approach. Mainly there are three customer segments

which can be illustrated as large organizations, small and medium businesses, and personal

consumers.

The other aspect that makes DELLs supply chain unique is the Build-to-order strategy.

According to this once the order is placed by the customer, all the configuration details are sent

to the manufacturing floor and then the assembly of the PC begins. Once the computer is built

and all the software’s are downloaded it will be shipped to the customer by using 3PL.

Because of these aspects DELL has the competitive advantage over others because of several

reasons. The level of inventory costs is really low since the case of faster responses to demand

changes. It is also visible that customer pays for an order before DELL pays its suppliers for the

products components.

Thus the most interesting part of DELL and its supply chain is relationship they maintain

between the customers which of course lays foundation for the existence of the business.



Supply Chain Activities Involved in Managerial Levels

For the supply chain to be strategically effective it has to be implemented in all the levels in the

organization. Therefore in all the three levels of DELL; strategic, tactical and operational, supply

chain practices are being made use of.

In the strategic level decisions will be

made regarding the whole organization

considering the supply chain. These

decisions are critical since it reflects the

overall corporate strategy of the

company. In the case of DELL the

unconventional idea of using direct

sales method has to be come from the

strategic level.

Senior management of DELL is giving the strategic direction when considering the product that

the company should manufacture and offer to their customers. Especially the customer segments

are identified targeting company marketing and advertising. It is the same when it comes to

manufacturing of products strategically decisions are taken to verify the capacity of existing

facilities and other logistics related things. DELL is using 3PL providers and it applies the theory

of manufacturing overseas.

It is needed to analyze and predict the capacity in supply chain therefore measures can be taken

to expand the facilities accordingly. The middle level management team has the responsibility of

this. There is more significance when it comes to the operational level. All the supply chain

activities in DELL are done thoroughly by this cluster.



The Role of Supply Chain in Maximizing Profit in DELL

DELL is able to sustain a competitive advantage over competitors in the computer industry

because of an extremely efficient supply chain/distribution system. Also DELL has been able to

acquire superior profits in the industry since they are a knowledgeable in areas of information,

communication, e-commerce, e-business, and internet and web technologies.

DELL implements a Just-In-Time (JIT) inventory system which operates on only six days of

inventory. Because of this inventory system Dell has been able to obtain higher profit margins.

Inventory and labor are the highest liabilities that are there in a business firm. Since DELLs

inventory is only a 6 day cycle, they have been able to cut down costs on warehousing, hiring

people to track and maintain inventory , and thus avoid using out dated technology .



As depicted in the diagrams the technique is surprisingly simple but it is best competitive tool in

increasing profit.

One other thing which makes this supply chain really competitive is the fact that DELL’s

customers can only order computers through DELL itself which results in a profoundly bond

with the customers . This makes them retain their market share in the business.

DELL is also having strategic alliances with other companies to have their products sold on

DELL’s direct selling distribution channel.

All these elements in their supply chain make them the best in the business.



Supply Chain Integration Strategies

Better integration of planning and execution has become one of the dominant themes in supply

chain. DELL has given a special place for the supply chain integration as described previously.

The heart of Dell's success is its integrated supply chain, which has enabled rapid product design,

fabrication, and assembly, as well as direct shipment to customers. Inventories have been

dramatically reduced through extensive sharing of information, a prudent choice given the risk of

technological obsolescence and reductions in the cost of materials that can exceed 50 percent.

Even with reduced inventories, Dell's strategic use of information has made possible a dramatic

reduction in the elapsed time from order to delivery, giving Dell a significant competitive

advantage.

Accordingly those integration strategies described previously are there in DELL. As a whole in

the virtual integration strategy of them these characteristics are involved in.

Use of rapid seamless communication

A clear definition of what DELL does best

Selection of partners who are best in their respective fields

Use of a minimum number of suppliers

Using internet as a strategy to eliminate boundaries between companies and promote

effective integration

Less emphasis on guarding intellectual assets and more emphasis on using assets rapidly

before they become out of order



DELL has benefitted immensely by using a highly integrated supply chain which results in

having advantages of vertical integration while simultaneously benefiting from the investments,

innovation, efficiencies, and specialization of highly focused suppliers.

Demand Management

DELL has a special set of analysts who forecasts the demand in every single level of production.

At all these levels accuracy of the forecasts are very important.

DELL is using a

collaborative business

strategy and a process

model as shown in the

diagram.

There are 4 key task areas

according to this model

Strategy & Planning : Establish ground rules for the collaborative relationship. Determine

product mix and placement and develop events plan for the future.

Demand & Supply Management : Project consumer demand and as well as order and shipment

requirement.



Execution: Place orders, prepare and deliver shipments, receive and stock products on retail

shelves, record sales transactions and payments

Analysis: Monitor planning and execution activities for exception conditions. Aggregate results

and calculate key performance metrics, share insights and adjust plans for continuous improved

results

Apart from this there is this “Demand Sensing Initiative “by DELL.

In this initiative these key factors are

considered

Historical Sales

List price

Promotions

Competitor promotions

Inventory position

Market trends

Therefore their demand analyses are mostly accurate which results in them getting the edge in

the business.



The value chain of DELL

According to this value chain plays a vital role in their demand analysis which can’t be

considered as true as always since there are visible occasions when their share prices go down

drastically in the recent past.



Recommendations

Even though it is said to be that their relationship is “DEEP” with customers in the Sri Lankan

context it’s quite visible that the service is not the greatest among all. In fact DELL is losing its

market share with the rising of other PC producers which is quite evident in recent share prices

of DELL.

Having a direct relationship with the customer is a good strategy but considering big customers

who are going to be retailers in that context can be a threat to this supply chain. Since somehow

it’s representing DELL and the customer service that is done by them can have an adverse

impact on them. Therefore rather than going for short term profits consideration of these aspects

would make them thrive in the industry.

References

Thesis – University of Edinburg

www.dell.com

Surviving Supply Chain Integration: Strategies for Small Manufactures ( 2000 )

http://www.dell.com/

Documents

Supply chain of DELL