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Dell computer corporation . new

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  • Supply Chain Management briefly described: Our planning processes “push” components into a supplier logistics center (SLC) awaiting a “pull” signal generated by the replenishment processes in our manufacturing plants. The SLCs are managed by a third party logistics provider. Inventory in the SLC’s is owned by our suppliers - there is an average of 8 or 9 days worth of inventory in the SLC. Local suppliers provide support through Vendor Managed Inventory programs. The results of this simple yet effective supply chain model is inventory turns of 91.25 (or over 90 times a year). In addition we incur an error and omission expense of only 5 hundredths of one percent, and we have experienced 8X productivity improvements over the last three years. The benefits to you of this case studied model is high quality, fast to market with new features, we build-to-order and don’t have two or three months of inventory in the channel which we’re trying to pawn off when new features are introduced into the market by our suppliers, and lower cost operations means lower priced products.

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  • 1. www.a2zmba.com
  • 2. www.a2zmba.com DELL COMPUTER CORPORATION .
    • 1984 by: Michael S. Dell : (19) 1000$ : todaY,Chairman and CEO of a NOW worth $58.2 BN Co.
    • Vice Chairman and CFO Donald J. Carty Jr.
    • Company headquartered in Round Rock, Texas U.S.A
    • Fastest growing - By 1999, Dell had become the No.1
    • PC seller in the U.S & number two worldwide.
    • 2001, became the No. 1 computer systems company in the world.
  • 3.
    • Major competitors in the PC market are Compaq, IBM and Hewlett-Packard.
    • AWARDS AND ACCOLADES.
    • Largest direct seller - bypassing retailers , thereby avoiding the delays and costs of an additional stage in the supply chain
    • Speciality – customer’s specification.
    • Eg: customers could choose a color Mitsubishi monitor, an extra powerful Intel microprocessor and a host of other options according to their choice
    www.a2zmba.com Best of 2003 Service and Support Site. (Computer Shopper Magazine, February 2004)
  • 4.
    • Customer segments :
    • Relationship
    • (large corporate)
    • Home and small business
    • (sometimes called transaction customers)
    • Public sector customers
    • (government and educational)
    • The Co. receives 1 order every 5 seconds (approx.)
    www.a2zmba.com 2006 Sales (mil.) $55,908.0 1-Year Sales Growth 13.6% 2006 Net Income (mil.) $3,572.0 1-Year Net Income Growth 17.4% 2006 Employees 66,100
  • 5.
    • Dell’s product line
    • Desktop computers
    • Notebook computers
    • Network servers
    • Workstations
    • Storage products
    • Swicthes
    • Software Peripherals
    • Dell offers a total of 1.6 million different possible product configurations for all its product lines.
    • MAJOR SUPPLIERS
    • MICROSOFT
    • -for windows,
    • windows NT
    • operating system
    • INTEL-for micro processors
    • SONY- for monitors
    www.a2zmba.com
    • DESIGN CENTRES: ONLY 5
    • _ _ _ _ _ _ _ _
    • Austin--- the largest
    • Shanghai
    • Singapore
    • Taiwan
  • 6. DELL -- BANGALORE www.a2zmba.com
    • DELL CAME TO INDIA IN THE YEAR 1996.
    • FIRST CITY – BANGALORE.
    • 5 DESIGN CENTRE AT BANGALORE.
    • RETAIL OUTLET
    • first INDIAN CUSTOMER CONTACT CENTRE. ( out of 50 in the world) followed by a similar centre in Hyderabad 2003. Mohali 2005 and Gurgaon.
    • 13,500 employees in India
    • 3000 employees at the bangalore and hyderabad facilities.
    • The Company intents to open new offices at Pune, Kolkata and Mumbai.
    • NO ASSEMBLE LINES IN INDIA,SYSTEMS ARE SHIPPED FROM MALAYSIA.
    • Takes the Co. 10-15 working days to deliver the products to Indian customers.
    • ROI MALHOTRA, Dell India’s head of operations
    • DINESH PAI - GM
  • 7. KEY TO SUCCESS……MINIMUM INVENTORY!
    • BUILD-TO-ORDER MODEL
    • DIRECT TO SELL
    • INVENTORY MANAGEMENT .
    • i) Just-in –time inventory management
    • - 3 days.
    • ii) Focus on speed of inventory delivery process
    • MICHAEL DELL – “8 days of inventory – competitors 40 days, if intel comes out with a new 700 mega hertz chip,iam going to get that new chip to the market 32 days sooner”
    • “ if the cost of material goes down ,u have got a big cost disadvantage”
    www.a2zmba.com
  • 8. INVENTORY MANAGEMENT www.a2zmba.com
  • 9. 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) www.a2zmba.com 2-3 days through General rule for production is first in, first out SUPPLIERS REVOLVERS CUSTOMERS
  • 10. www.a2zmba.com Build-To-Order Model Value Chain Program Revolver or SLCs (Supplier Logistics Centers)
  • 11. Build to order
    • In contrast to others who produce –to stock, dell first receives the order and the money and only then starts to build, using that money to purchase from supplier
    • Therefore there is customization of products for each and every customer.
    • While other companies had to guess, DELL knew exactly what its customers wanted before manufacturing the product
    • Others had to maintain inventory as there existed middlemen, so to support reseller and retail channels.
    www.a2zmba.com Dell’s Inventory Management……
  • 12. Revolvers (for “revolving” inventory)
    • To compensate for long lead times & buffer against demand variability, Dell requires its suppliers to keep inventory on hand in the revolvers.
    • Revolvers or supplier logistics centers (SLCs) are small warehouses located within a few miles of Dell’s assembly plants.
    • Each of the revolvers is shared by several suppliers who pay rents for using their revolver.
    • Dell does not own the inventory in its revolvers; this inventory is owned by suppliers & charged to Dell indirectly through component pricing.
    www.a2zmba.com Supplier Manufacturing (SLC) Warehouse Factory / Merge Center Material Transfer
  • 13. 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
  • 14. DELL’S Inventory Model………..
    • The inventory in the revolvers is called revolver inventory
    • The revolver inventory plus any inventory ordered but not yet delivered is called system inventory
    • The average requirements during replenishment lead time is called pipeline inventory
    • Safety stock protects against variability of demand during lead time
    • To help suppliers make good ordering decisions, Dell shares its forecasts with them once per month
    www.a2zmba.com
  • 15. DELL’S Inventory Model………..
    • Dell has a special vendor-managed-inventory (VMI) arrangement with its suppliers
    • Suppliers decide how much inventory to order & when to order while Dell sets target inventory levels & records suppliers’ deviations from the targets.
    • Suppliers decide when to send their goods to their revolvers. In practice, most suppliers deliver to their revolvers on an average 3 times a week.
    • Dell withdraws inventory from the revolvers as needed-- on average every two hours.
    • It uses a quarterly supplier scorecard to evaluate how well each supplier does in maintaining this target inventory in the revolver.
    www.a2zmba.com
  • 16. I2 TECHNOLOGIES
    • i2 technologies software enables Dell to monitor the supply position of every part
    www.a2zmba.com On a high level, the supply chain process is comprised of two steps: 1. Planning – which involves getting the needed materials positioned at SLC’s near the appropriate Dell factories. 2. Execution – which involves having the right materials on and at the factory to build each customer’s order.
  • 17. Value Chain Program
    • Value Chain is intended to extend Dell’s successful direct-sales approach back into the supply chain
    • The goal of it is increasing the speed and quality of the information flow between Dell and its supply base
    • The portal, valuechain.dell.com acts a secure extranet for Dell suppliers to collaborate in managing the supply chain
    • Dell envisions using this site to exchange with suppliers current data, forecasted data, new product ideas, and other dynamic information
    • It also provides suppliers a customized view of their materials at Dell.
    www.a2zmba.com DELL’S Inventory Model………..
  • 18. SUPPLIERS SELECTION AND EVALUATION
    • SELECTION
        • Quality
        • Price
        • Delivery
        • Response to feedback.
    • EVALUATION -to measure performance –uses suppliers score
        • Cost
        • Delivery
        • Availability of technology
        • Velocity of inventory
        • Ways in which they did business with dell over the internet.
    www.a2zmba.com
  • 19. ADVANTAGES
    • This process frees Dell from having to manage inventories and the costs associated with them.
    • The component inventory reduced from seventy days to thirty to forty days, then to twenty days, then to nearly zero.
    • Returns grew disproportionately as the carrying costs and obsolete stock is avoided.
    • Saves enormous amounts of money on purchasing components because the component prices drop by 3 percent per month.
    • Reduces handling cost. Common factors that drive up holding costs include opportunity costs, increased rent required for the space of the inventory, higher premiums to insure the inventory, and cost of obsolete goods.
    www.a2zmba.com