Supply Chain of DELL

Assignment 1
3/7/2013 Thushan Dharmawardana 101414G

Supply Chain of DELL

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 todays 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.

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Supply Chain of DELL

Supply Chain of DELL

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 softwares 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.

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Supply Chain of DELL

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.

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Supply Chain of DELL

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 .

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Supply Chain of DELL

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 DELLs 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 DELLs direct selling distribution channel. All these elements in their supply chain make them the best in the business.

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Supply Chain of DELL

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
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Supply Chain of DELL

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.

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Supply Chain of DELL

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.

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Supply Chain of DELL

The value chain of DELL

According to this value chain plays a vital role in their demand analysis which cant be considered as true as always since there are visible occasions when their share prices go down drastically in the recent past.

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Supply Chain of DELL

Recommendations
Even though it is said to be that their relationship is DEEP with customers in the Sri Lankan context its 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 its 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 )

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