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Supply chain of DELL


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Supply chain of DELL

  1. 1. Supply Chain of DELLAssignment 13/7/2013Thushan Dharmawardana101414G
  2. 2. Supply Chain of DELLIntroductionSupply Chain Management is a business practice that hasbeen employed in order to give an effective service tocustomers and to make the business sustainable byconsidering all the aspects from the suppliers to theconsumers.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 fulfillcustomer 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 intoconsideration which is known to be one of the best in the world. DELL s supply chain will beheavily analyzed in the areas of supply chain integration strategies and demand managementaspects.TL 2050: Supply Chain Management Page 2
  3. 3. Supply Chain of DELLSupply Chain of DELLDELL has a different business model than its competitors, which can be identified as “directmodel”. 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 havesegmented into groups to make it easier to approach. Mainly there are three customer segmentswhich can be illustrated as large organizations, small and medium businesses, and personalconsumers.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 sentto the manufacturing floor and then the assembly of the PC begins. Once the computer is builtand 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 severalreasons. The level of inventory costs is really low since the case of faster responses to demandchanges. It is also visible that customer pays for an order before DELL pays its suppliers for theproducts components.Thus the most interesting part of DELL and its supply chain is relationship they maintainbetween the customers which of course lays foundation for the existence of the business.TL 2050: Supply Chain Management Page 3
  4. 4. Supply Chain of DELLSupply Chain Activities Involved in Managerial LevelsFor the supply chain to be strategically effective it has to be implemented in all the levels in theorganization. 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 thatthe company should manufacture and offer to their customers. Especially the customer segmentsare identified targeting company marketing and advertising. It is the same when it comes tomanufacturing of products strategically decisions are taken to verify the capacity of existingfacilities and other logistics related things. DELL is using 3PL providers and it applies the theoryof manufacturing overseas.It is needed to analyze and predict the capacity in supply chain therefore measures can be takento expand the facilities accordingly. The middle level management team has the responsibility ofthis. There is more significance when it comes to the operational level. All the supply chainactivities in DELL are done thoroughly by this cluster.TL 2050: Supply Chain Management Page 4
  5. 5. Supply Chain of DELLThe Role of Supply Chain in Maximizing Profit in DELLDELL is able to sustain a competitive advantage over competitors in the computer industrybecause of an extremely efficient supply chain/distribution system. Also DELL has been able toacquire 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 ofinventory. 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 DELLsinventory is only a 6 day cycle, they have been able to cut down costs on warehousing, hiringpeople to track and maintain inventory , and thus avoid using out dated technology .TL 2050: Supply Chain Management Page 5
  6. 6. Supply Chain of DELLAs depicted in the diagrams the technique is surprisingly simple but it is best competitive tool inincreasing profit.One other thing which makes this supply chain really competitive is the fact that DELL’scustomers can only order computers through DELL itself which results in a profoundly bondwith 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 onDELL’s direct selling distribution channel.All these elements in their supply chain make them the best in the business.TL 2050: Supply Chain Management Page 6
  7. 7. Supply Chain of DELLSupply Chain Integration StrategiesBetter integration of planning and execution has become one of the dominant themes in supplychain. DELL has given a special place for the supply chain integration as described previously.The heart of Dells success is its integrated supply chain, which has enabled rapid product design,fabrication, and assembly, as well as direct shipment to customers. Inventories have beendramatically reduced through extensive sharing of information, a prudent choice given the risk oftechnological obsolescence and reductions in the cost of materials that can exceed 50 percent.Even with reduced inventories, Dells strategic use of information has made possible a dramaticreduction in the elapsed time from order to delivery, giving Dell a significant competitiveadvantage.Accordingly those integration strategies described previously are there in DELL. As a whole inthe 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 orderTL 2050: Supply Chain Management Page 7
  8. 8. Supply Chain of DELLDELL has benefitted immensely by using a highly integrated supply chain which results inhaving advantages of vertical integration while simultaneously benefiting from the investments,innovation, efficiencies, and specialization of highly focused suppliers.Demand ManagementDELL 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 modelStrategy & Planning : Establish ground rules for the collaborative relationship. Determineproduct mix and placement and develop events plan for the future.Demand & Supply Management : Project consumer demand and as well as order and shipmentrequirement.TL 2050: Supply Chain Management Page 8
  9. 9. Supply Chain of DELLExecution: Place orders, prepare and deliver shipments, receive and stock products on retailshelves, record sales transactions and paymentsAnalysis: Monitor planning and execution activities for exception conditions. Aggregate resultsand calculate key performance metrics, share insights and adjust plans for continuous improvedresultsApart 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 trendsTherefore their demand analyses are mostly accurate which results in them getting the edge inthe business.TL 2050: Supply Chain Management Page 9
  10. 10. Supply Chain of DELLThe value chain of DELLAccording to this value chain plays a vital role in their demand analysis which can’t beconsidered as true as always since there are visible occasions when their share prices go downdrastically in the recent past.TL 2050: Supply Chain Management Page 10
  11. 11. Supply Chain of DELLRecommendationsEven though it is said to be that their relationship is “DEEP” with customers in the Sri Lankancontext it’s quite visible that the service is not the greatest among all. In fact DELL is losing itsmarket share with the rising of other PC producers which is quite evident in recent share pricesof DELL.Having a direct relationship with the customer is a good strategy but considering big customerswho are going to be retailers in that context can be a threat to this supply chain. Since somehowit’s representing DELL and the customer service that is done by them can have an adverseimpact on them. Therefore rather than going for short term profits consideration of these aspectswould make them thrive in the industry.ReferencesThesis – University of Supply Chain Integration: Strategies for Small Manufactures ( 2000 )TL 2050: Supply Chain Management Page 11