Dell’s Secret Weapon Dell Computer Corporation is a leading direct computer systems company founded in1984. Dell sells its computer systems directly to end customers, bypassing distributors andretailers (resellers). Dells supply chain consists of only three stages— the suppliers, themanufacturer (Dell), and end users. The company’s direct contact with customers allows them toproperly identify target markets, analyze the requirements and profitability of each assignmentand develop more accurate demand forecasts. Dell matches supply and demand because its customers order computer configurationsover the phone or online. These computer configurations are built from components that areavailable. Dell’s strategy is to provide customized, low cost, and quality computers that aredelivered on time. Dell implemented this strategy through its efficient manufacturing operations,better supply chain management and direct sales model. Dell reduces the cost of intermediariesthat would otherwise add up to the total cost of PC for the customer by taking orders directlyfrom the customers. This saves time on processing orders that other companies normally incur intheir sales and distribution system. Moreover, by directly dealing with the customer Dell gets aclearer indication of market trends. This helps Dell to plan for the future besides better managingits supply chain. Another advantage Dell gets by directly dealing with the customer is that it isable to get the customers requirements regarding the software to be loaded. By eliminating theneed of a PC support engineer to load software, the customers gain both in time and cost (2008).Benefits of Supply Chain Management Supply chain management is an important subject for global businesses and smallbusinesses alike. It is vital for companies to achieve benefits of adopting a successful strategy foran efficient supply chain in any economic climate. Despite the emphasis in all of the supplychain literature about how critical maximizing customer satisfaction is, most decisions inwardlyconsider the impact on the supplier’s stand. Will it create or destroy shareholder wealth?Investors have been expressing concerns that traditional methods to evaluate companies and tocompensate managers are not adequately linked to changes in the economic value and wealthcreation of the company. A better alignment of company performance and valuation measureshas been recently addressed by increasing attention on value based management (VBM). VBM demonstrates that beyond after-tax profit is the bedrock called economic profit –the most meaningful measure to investors. Companies practicing VBM began linking theireconomic profit metrics to their ABC/M and balanced scorecard tools to link the data at theboardroom level to the daily work of the frontline employees. ABC/M traces the paths for howall resources are consumed through work caused by outputs, products, services, channels,customers, and senior management. The true cost of outputs and segmented profit contributionmargins is made widely visible. ABC/M places a reflecting mirror for an organization to see howand where it is burning through its resources. Moreover, companies expect the basic benefits ofusing supply chain management to acquire increase demand accuracy and order fulfillmentsatisfaction levels, reduce inventory levels and increase inventory turns across the network,increase the profitability and productivity and integrate sales and operations and planningprocess (Larson & Halldorsson, 2004).
The Importance of Environmental InvolvementA growing number of companies realized that to achieve their environmental goals and satisfystakeholders expectations, they need to look beyond their own facilities and to involve theirsuppliers in environmental initiatives. Examples of this in supply chain management includescreening suppliers for environmental performance, working collaboratively with them on greendesign initiatives and providing training and information to build suppliers environmentalmanagement capacity. Working with suppliers on environmental issues not only generatessignificant environmental benefits, but also opportunities for cost containment, improved riskmanagement and enhanced quality and brand image. Leading companies understand thatcustomers do not always differentiate between a company and its suppliers and hold companiesaccountable for suppliers environmental and labor practices (Harland, 2000). In addition, manycompanies are working to streamline their supply base and develop more co-operative, long-termrelationships with key suppliers, a practice that has fostered greater opportunities to worktogether on environmental issues.ABC Analysis ABC analysis is a business term defined as an inventory categorization technique oftenused in materials management. It provides a mechanism for identifying items which will have asignificant impact on overall inventory cost whilst also providing a mechanism for identifyingdifferent categories of stock that will require different management and controls . When carryingout an ABC analysis, inventory items are valued (item cost multiplied by quantityissued/consumed in period) with the results then ranked. The results are then grouped typicallyinto three bands. These bands are called ABC codes (2008). The ―A class‖ inventory typicallycontain items that account for 80% of the total value, or 20% of the total items. ―B class‖ havearound the 15% of the total value, or 30% of total items. In the ―C class‖, inventory will accountfor the remaining 5%, or 50% of the total items. For example, if a company wanted to make sure that the quantity on hand is accurate, andbe able to identify and research problems quickly but dont have the time and resources needed todo a physical count every month, the best solution is to use the ABC analysis report to identifythe items that generate the most sales. The average company generates the most sales with only20% of their Inventory Items (A Items). Find the companys "A Items" and dedicate theresources you have to managing these important items. Another example of a problem is if thereis an item that makes up 30% of the inventory sales and issues, the solution would be using thedefault definition of "A Items" : top 20% usage, "B Items" - 21% to 50%, and "C Items" - 51%to 80%. However, these defaults can be set to the percentages that make the most sense to thecompany.ReferencesLarson, P.D. & Halldorsson, A. (2004). Logistics versus supply chain management: aninternational survey. International Journal of Logistics: Research & Application, 7 (1), 17-31.Harland, F et al (2000). Bridging organization theory and supply chain management: The case ofbest value supply chains. Journal of Operations Management, 25(2) 573-580.
Simchi-Levi, D. K. (2007), Designing and Managing the Supply Chain. New York: Putnam.Internet. (2008). Dell Online. Retrieved January 13, 2009 from http://www.dell.com.Internet. (2008). ABC Analysis. Retrieved January 13, 2009 fromhttp://en.wikipedia.org/wiki/ABC_analysis.Read more: http://ivythesis.typepad.com/term_paper_topics/2010/12/supply-chain-management-scm-of-.html#ixzz1sf6iPJsI