DELLS SUPPLY CHAIN MANAGEMENT

Presented by: Group 3, FMG 19 B Ashima Mathur (191080) Manas Tripathi (191095) Neeraj Sharma (191098) Nishat Parveen (191099) Parul Garg (191103) Yukti Mittal (191122)

COMPANY PROFILE
An American multinational information technology corporation based in US Founded by - Michael Dell The 3rd largest PC maker in the world Listed at #38 on the Fortune 500 (2010) Listed as the #5 most admired company in its industry by Fortune

DELL IS IN THE BUSINESS OF

PCs

S/W

Servers

DELL
Peripherals

Storage devices

Switches

DELL IN INDIA
Dell has a PAN India presence

Incorporated as Dell Computer India Private Ltd. in Bangalore in 1996

Dell manufacturing facility- inaugurated in Sriperumbudur, near Chennai-2007

In 2010-Dell India became #1 PC brand in Indiamarket share of more than 15 percent

PRODUCTS- FOR CORPORATES

Office Desktops OptiPlex Vostro

Notebooks
Vostro N Series Latitude Precision

Servers, NAS, SAN

Power Edge Power Vault Equal Logic

Network Switches

Power Connect

PRODUCTS- FOR HOMES

Desktop
Inspiron Studio XPS

Notebook
Inspiron Studio XPS

Gaming Systems
Alienware

Luxury Laptops
Adamo

MAJOR COMPETITORS
Apple, Hewlett-Packard, Acer, Toshiba, Gateway, Sony, Asus, Lenovo, IBM, Samsung, and Sun Microsystems Dell and its subsidiary, Alienware, compete in the market against AVADirect, Falcon Northwest, VoodooPC (a subsidiary of HP), and other manufacturers.

SUPPLY CHAIN MANAGEMENT

Importance of an efficient SCM for Dell: Material Costs account for 74% ($21 billion) of the annual costs for Dell Improving SCM by 0.1% has a greater impact than improving manufacturing process by 10% in the PC business Changing technology makes the materials value obsolete by almost 1% per week Technology breakthroughs result in very short product life cycles in this business

COMPONENTS OF DELLS SCM

Customers

Suppliers Suppliers

Website

SCM

Suppliers

Manufac. & Assembly

DELLS VALUE WEB

OEMs
Logistics Companies System Integrators

Component Suppliers

DELL

Customer

Third Party HW and SW suppliers

Distributors

Repairs and Support Companies

Physical flows, including products and services Information flows

COMPETITIVE ADVANTAGE OF DELLS SCM

90% supplies are ordered online using integrated websites of suppliers and Dell (B2B) 95% of Dells suppliers situated very close to assembly plants (within 15 minutes) hence coordination is easier Dells factories have only 7 hours worth of inventory for most items while the industry wide it is around 10 days 15 suppliers provide almost 80% of the supplies

MANUFACTURING
Configure to Order" approachcustomization

JIT manufac. approach- minimum inventory

Manufacturing process Assembly Software installation Functional testing Quality Control

DELL COMPUTER EXAMPLE STRUCTURE & INFRASTRUCTURE

They focus on customer service, cost, and speed ERP system developed to allow customers to order directly from Dell Product design and assembly line allow make to order strategy lowers costs, increases turns Suppliers ship components to a warehouse within 15 minutes of the assembly plant - VMI Dell set up a shipping arrangement with UPS

SUPPLY CHAIN MODELS

1.

2.

Direct sales model, usually referred as direct model Build-to-order strategy

DISTRIBUTION CHANNEL OF DELL VS. A

TRADITIONAL COMPANY
Indirect Distribution Channel of the PC Industry:
PC Makers Distributors Retailers/ Resellers/ Integrators Final Customer

Suppliers

Dells Direct Distribution Channel:

PC Makers Final Customer

Suppliers

DIRECT SALES MODEL

Receiving orders directly from customers Manufacturing to the customers requirements Delivering it within days Implemented just-in-time (JIT) inventory-management Pull based SCM Advantages Price for performance Customization Latest Technology Service & Support

CUSTOMER SEGMENTS

Wide customer mix 1. Large organizations (large companies or government institutions) - account for 70% revenue 2. Small and medium businesses 3. Personal consumers Better forecast demand Facilities that bring Dell and its customers closer: 1. Premier Pages (Premier.Dell.com) Customized IT procurement and support sites for big clients 2. Platinum Councils regional meetings 3. Dells Customer Experience Initiative, Dell Forums, the Direct2Dell blog and the IdeaStorm

BUILD-TO-ORDER AND INTEGRATION

WITH SUPPLIERS A computer is built only after a customer has placed an order; then lean manufacturing and just-in-time production take place This means that once an order is placed, configuration details are sent to the manufacturing floor and the assembly begins; once the computer is built and the requested software is downloaded, it is shipped by a 3PL to the customer

ADVANTAGES OF BUILD-TO-ORDER

Small level of inventories, low inventory costs and faster response to demand changes

For instance, when a new microprocessor comes out in the market, Dell can immediately order it from its suppliers, as there is no excess inventory to get rid of first For instance, it is common that customers pay for an order before Dell pays its suppliers for the products components, thus letting Dell operate on a negative cash conversion cycle. This way, the customized products are offered, and instead of guessing, that is Dell knows exactly what its customers want before producing it

Pull based system

DISTRIBUTION NETWORK

Use of

Manufacture Storage Direct Shipping Distribution Method

Advantages
Centralized inventories created at the manufacturer Holding of common equipments Postponing product customization Reduces fixed cost of storage facilities

USE OF RFID

Read at every stage of assembly and during distribution Benefits:

Production stops have reduced dramatically Returns due to wrong shipping of products have been minimized

INVENTORY MANAGMENT

High speed inventory

For instance, ask for 6.795 units to be delivered at the door A3 of warehouse, instead of 5000 every two weeks

Average inventory holding time is less than 6 days of inventory, while that of competitors 6 weeks. The main suppliers are required to maintain inventory near or in Dells plants

Either produce close or keep inventories in revolvers or supplier logistics centers

DELLS SUPPLIERS
To support direct sales strategy, Dell requires its suppliers to keep inventories within 15 minutes of the manufacturing locations Every two hours, the factory planning system sends out a computerized message to suppliers detailing what parts the plant needs. Benefits

Almost no inventory of parts or products in the factory Gives working capital advantages Dell can sell computers that are about two months newer than the competition

SELECTION OF SUPPLIERS
While selecting its suppliers, Dell makes sure that they conform to the same social and environmental responsibility (SER) standards that Dell observes The primary SER principles required to be followed by these suppliers are in the following areas:

Ethics Labor Environment Health and safety Management systems

HEADQUARTER LOCATIONS OF KEY DELL SUPPLIERS

MAJOR SUPLIERS

Some Major Suppliers for Financial Year 2010 included:

Microsoft Corporation Texas Instruments Intel Corporation Hitachi IBM STMicroelectonics Inc. LG Philips LCD Co. Ltd. Samsung Electronics

USE OF INTERNET FOR SCM

Dell shares demand and production forecasts with its suppliers, so they can themselves decide on production levels, avoiding the bullwhip effect Website ValueChain.Dell.com For information sharing Operates as an extranet between Dell and its suppliers Suppliers can get informed about Level of inventory in the supply chain Supply and demand data Component quality metrics New part transitions

IMPLEMENTATION
JIT inventory system Use of e-commerce: customers order on website

Direct sales-cutting distribution channels entirely

Exceptional customer service- use of CRM

Implements i2 SCM

Strategic alliances- Palm Inc., Xerox

ORDER FULFILMENT

REPAIR SERVICE HANDLING

INTEGRATING PEOPLE AND PROCESSES

COMPETITIVE ADVANTAGE
Dell competes on all four priorities

Cost

Time

Quality

Flexibility

FOUR PROCESSES THAT MADE COMPETITIVE

DELL INC.

Postponement

Modularity

Competitive Advantage Vendor Managed Inventory Supply Chain Partners

RECOMMENDATIONS
Consider selectively adding other vendors to SCM system

Invest more in R&D

Can offer online data back-up capabilities

Reduce errors in Dells direct Internet ordering

Create a Clearance area on its website

Enhance customer support services

REFERENCES
http://en.wikipedia.org/wiki/Dell http://content.dell.com/in/en/corp/d/corpcomm/about-dell-india-country.aspx http://www.upsscs.com/solutions/white_papers/wp_supply_chai n.pdf http://www.icmrindia.org/casestudies/catalogue/ Operations/Dell%20Supply%20Chain%20Manag ement%20Practices.htm

THANK YOU