1. Industry Studies 1
Seminar:
Dell’s distribution departure
Topic Number: 4
2. Overview
In the 1990s Dell was one of the most successful computer
companies in the world, with an annual turnover of $30 billion. It
was a pioneer in its distribution capability and sold its products
directly to consumers. In addition, their supply chain drove
further efficiencies like none other in the industry.
However, Dell has seen a massive declines in recent years, so
much so, that Michael Dell has recently bought the company back
to try and regain their entrepreneurial spirit.
In this seminar, we will initially explore their direct distribution
model and what made them successful. Thereafter, we will look at
their supply chain and how they were able to meet customer
needs more effectively then competitors.
Thereafter, we will look at what has changed in the environment
that has caused their decline and determine the outlook for the
future of Dell.
3. 3
Learning outcomes of this seminar
• Be able to identify key aspects of the original Dell
distribution model that led to their tremendous success
• Critically evaluate and describe the Dell supply chain to
understand what was unique about it that gave them a
competitive advantage
• Determine and describe key environmental changes that
led to Dell’s decline
• Be able to articulate what the outlook is for the future
4. Agenda for this seminar
Describe Dell’s original distribution model
Critically evaluate Dell’s push-pull supply chain strategy
Evaluate and describe the environmental factors that led to Dell’s
decline
Determine what the outlook is for the future
5. Structure for the session
You will have
15 minutes to
discuss each
question
We will have a
de-brief at the
end of each 15
minutes to hear
your thoughts
on each area
Feel free to ask
questions but
please do not
have separate
conversations
‘we are all in
this together’!
6. The importance of operations
Our business is about
technology, yes. But it’s also
about operations and
customer relationships
Michael Dell
7. The background to Dell
Michael Dell started trading in the belief
that by selling personal computer
systems directly to customers, PC's
Limited could better understand
customers' needs and provide the most
effective computing solutions to meet
those needs. Michael Dell dropped out
of school in order to focus full-time on
his fledgling business, after getting
about $300,000 in expansion-capital
from his family.
10. A pioneer of direct distribution
Gain a competitive advantage for several reasons:
• First of all, direct distribution allows Dell to eliminate wholesalers.
• Second, Dell has eliminated retailers. This is effective because without
retailers, Dell does not have to receive customer orders through
thousands of different retailers.
11. Dell’s Value Chain
Direct Sales and Built to Order Model
Close
relationship
with customers
and suppliers
First hand
and pure
customer
feedback
High
volumes of
customer
information
Its big advantage was in its ability to capture customer data
Gather
customer
data
Make better
and faster
products and
services
Analyse
12. Customisation and Quick Response
Dell uses the internet to sell its products
Virtually unlimited variety of PC
configurations
Customers can customise based on their
individual needs
14. A Push-Pull Strategy
http://www.driveyoursuccess.com/2012/08/dell-push-pull-an-order-fulfillment-and-supply-
chain-strategy.html
15. Minimal Inventory Counts
One of the pivotal rules of Dell’s strategy is that it relies upon
maintaining minimal inventory counts of components and
consumables.
The company lowers its costs of inventory financing and receivable
financing by only taking in what it’s guaranteed to ship to
customers. This allows the company to reduce it costs of capital,
improve its cash flow and most importantly, reduce its financing. In
essence, Dell gets paid for its product through a direct sales model
well before the company has to pay its own vendors.
16. Custom made finished goods
The order fulfillment portion of the strategy allows Dell to provide a
custom-made finished good, one where customers decide upon
options that are controlled by the computer manufacturer itself.
There are several inherent advantages to providing custom-made
products directly to end-users.
1. The company eliminates the need
to sell through wholesalers and
retailers, thereby reducing their
markup and eliminating the
middlemen in the value chain.
2. Provides a custom-made
finished goods providing a value-added
3. Provides finished goods directly
to end-users allows the computer
manufacturer to employ a direct
sales model
product and service, one
that is matched to the customer’s
unique requirements
17. Strong end user customer service
Dell employs a strong direct end-user customer service support
system. Customers are able to deal directly with the company's
service technicians and customer support center.
The company gains invaluable insight into its customers’ preferences
and the multiple customer segments within its market. The costs to
manage such information are much less than if the company had to
define its market segments and customer preferences through
several layers of retailers.
18. Overview of Push-Pull Strategy
View video: https://www.youtube.com/watch?v=4ocldjqiiiE
25. Dell goes private; let Michael Dell explain
View video: http://www.cbsnews.com/videos/computer-pioneer-michael-dell-
looks-to-the-future/
26. 8 things to look out for
1. Dell can make
investments as a
private company that it
couldn't make as a
public company.
2. Dell sees no reason
to make a smartphone
but will continue to
make PCs
3. Dell will focus
on the hybrid cloud.
4. Dell wants to
enable IT to
manage BYOD
and fragmented
workplaces.
Source: Information Week
27. 8 things to look out for
5. Dell will invest in
next-gen data center
technologies and big-data
products.
6. Dell will increase its
international sales
coverage.
7. Dell will
continue to focus
on the middle
market.
8. Dell will execute
moves more quickly
than in the past.
Source: Information Week
