Supply Chain ManagementPractices
Who is Dell ?
What is its current position ?
What practices made them to be in that position ?
Docket
• Started by Michael Dell (19 at that time) in his dorm room at the University of Texas in 1984 with $1000.
• Company headquartered in Round Rock, Texas, U.S.A.
• Its revenue is around US$ 63.07 billion in 2012.
• In 2001, became the No. 1 computer systems company in the world.
• At present (2013), it is the third largest PC vendor in the world after HP and Lenovo.
Inception
Dell has grown by both increasing its customer base and through acquisitions since its inception; notable mergers and acquisitions including Alienware (2006) and Perot Systems (2009).
NOTABLE ACQUISITIONS
2006 – Alienware 2009 - Perot Systems2010 - KACE Networks2010 - SaaS2012 - Sonic Wall2012 - Wyse
Acquisitions
Product Lines
Dell offers a total of 1.6 million different possible product configurations for all its product lines
Desktop computersNotebook computers
Network serversWorkstations
Storage products
Curr
ent P
ositi
on
#3
What practices made them to be
successful and exemplary ?
ComponentManuf.
PCManufactu
rer
Distributor /Reseller
Order
Product Product
Forecast
Component
Components
MicroAge,CompuCom
Corporate customer
Build to Stock
Traditional Model
Component manufacturer
DELL CompCorp
Distributor
Final customer
Components
Order
Product
Direct Model
CustomerOrder>>
<<Product
Dell Supplier
It OUTSOURCED all components but performed assembly.
It ELIMINATED RETAILERS and shipped directly from its factories to end customers.
It took CUSTOMIZED ORDERS for hardware and software over the phone or via the Internet.
It designed an INTEGRATED SUPPLY CHAIN linking Dell’s suppliers very closely to its assembly factories and order-intake system
No intermediaries - No warehousing - No physical store
Direct Model
What it means for customers(users)
• PROSPerceived customizationConvenienceNo sales pressureNo price comparisons/objections
• CONSNo immediate deliveryNo touch and feel
• What it means for (corporate) customers
• PROSPremier pages: approved configurations onlyReduces procurement costReduced over shipment costsE-support
• CONSNo immediate delivery
Direct Model
What it means for DellPROS
Lower inventory and little product obsolescenceNew technology to market fasterQuick feedback on problemsAbility to manage product shortage and demand by advertising and pricing
Dell gets paid earlyLower component cost than indirect competitorsCreates real switching barriers for large customersCustomer database>>customer information, lowers cost of follow up services and support
CONSmay not appeal to all segments
INVENTORY MODEL
DIRECT MODEL
BUILD-TO-ORDER MODEL
INVENTORY MANAGEMENT is primarily about specifying the size and placement of stocked goods.
1. Just-in time inventory management - 3 days.2. Focus on speed of inventory delivery process.
“8 days of inventory competitors 40 days, if Intel comes out with a new chip, I am going to get that to the market 32 days sooner”
- MICHAEL DELL
KEY TO SUCESSES
In contrast to others who produce –to stock, dell first
receives the order and the money and only then starts to
build, using that money to purchase from supplier
Therefore there is customization of products for each and every customer.
While other companies had to guess, DELL knew exactly what its customers wanted before manufacturing the product
Others had to maintain inventory as there existed middlemen, so to support reseller and retail channels.
Build to Order
SupplierManufacturing
(SLC)Warehouse
Factory / Merge Center
Material Transfer
Supplier Logistics Centers
To compensate for long lead times & buffer against demand variability, Dell requires its suppliers to keep inventory on hand in the revolvers.
Supplier Logistics Centres (SLCs) are small warehouses located within a few miles of Dell’s assembly plants.
Each of the SLC is shared by several suppliers who pay rents for using their revolver.
Dell doesn't own the inventory in its revolvers; this inventory is owned by suppliers & charged to Dell indirectly through component pricing.
Dell has a special Vendor-Managed-Inventory (VMI) arrangement with its suppliers
Suppliers decide how much inventory to order & when to order while Dell sets target inventory levels & records suppliers’ deviations from the targets.
Dell withdraws inventory from the SLC’s as needed -- on average every two hours.
It uses a quarterly supplier scorecard to evaluate how well each supplier does in maintaining this target inventory in the SLC.
Supplier Logistics Centers
Customer
Local Suppliers
Dell Factory(SLCs)
Suppliers
Delivery
Supplier Owned Dell Owned
Supplier Logistics Centers
Value Chain is intended to extend Dell’s successful direct-sales approach back into the supply chain
The goal of it is increasing the speed and quality of the information flow between Dell and its supply base
The portal, valuechain.dell.com acts a secure extranet for Dell suppliers to collaborate in managing the supply chain
Dell envisions using this site to exchange with suppliers current data, forecasted data, new product ideas, and other dynamic information
ValueChain.dell.com
“The direct model has been a revolution,but it’s not a religion.”
Michael Dell in April, 2007
Direct sell
Retail stores
Hybrid business
model
Wal-MartGomez Electrical, ChinaDell extended its international retail strategy - Russia
PUSH or PULL
?
70% - 80% 20% - 30%PUSH PULL
Fixed B.O.MPre Manufacturing
Semi Fixed B.O.MCustomer Dictates
8 Weeks1 Week
Push-Pull
Thank you