...Dell’s Supply Chain Management Strategy Build-to-order model, Dell, Direct model, PC Manufacturing, SCM, Supply Chain Case Study Abstract The focus of this case study is the supply chain management practices of Dell. Dell has been following its unique ‘direct build-to-order’ sales model for more than 20 years. Customers can plan their own configuration and place orders directly with the company via the phone or its Web site. Over the years, Dell’s supply chain efficiencies and direct sales gave it a competitive advantage. Can Dell regain its market leader position from HP? In 2006 however, Dell faced several problems. Many customers complained about long delays in supplies. Recall of Sony battery cells in its laptops brought undesirable media hype to the company. Increasing discontent of customers led to a slowdown in sales. Consequently, Dell lost its market leadership to Hewlett-Packard Co. (HP). Industry analysts felt that, with Dell’s competitors also improving their supply chains and matching Dell’s direct model, the company had been losing its competitive edge. Dell will have to bear additional costs with its foray into retail distribution thereby minimizing its cost advantage. Besides, profit margins of Dell will drop further since it will have to offer incentives to compete with HP in retail stores. Though Dell spruced up its product design and range but Apple is clearly far ahead of it. Many experts feel that such new initiatives will only distract Dell from its...
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...In recent times logistics and supply chain management have become the most vital issue for Organizations; Dell has realized this from initial and so by putting more emphasis on its logistics, supply chain management and direct sales strategies it has become one of the most successful PC companies in the world. A little bit of history, Dell was founded on November 4, 1984 in Austin Texas, by Mr. Michael Dell when he was a student at university of Texas in Austin. In the beginning only Dell adopted its key supply chain strategy of direct sales, initially they use to take orders on phone according to customers condition. Then later they do tried to use retail channel from 1990 to 1994, but after that it returned to its direct model and grew quickly and in 1999 it became the number one PC company in United States and two among all pc companies in the world. Michael Dell the unique supply chain strategies and his successful way of putting them in to practice played considerable role in Dell success. Computer maker Dell Inc. became the poster child for supply chain efficiency largely thanks to its "direct model," which shifted a make-to-stock philosophy to make-to-order. That transition helped Dell reduce its cycle times to levels that had been unthinkable for the high-tech industry, allowing the company to carry inventory for just a few days rather than for three to four weeks. And other industries, particularly the consumer-packaged-goods field, were quick to notice Dell's success...
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...Dell’s Supply Chain Management The term supply chain management (SCM) was initially used in wholesaling and retailing to denote the integration of logistics and physical distribution functions with the goal of reducing delivery lead times. Manufacturers and service providers have used the same term to describe integration and partnership efforts with first- and second- tier suppliers to reduce cost and improve quality and delivery timing. Terms such as integrated purchasing strategy, integrated logistics, supplier integration, value chain management, supply base management, strategic supplier alliances, lean production, Just-In-Time (JIT) logistics, and supply chain synchronization have been used in the literature to address certain elements or stages of this new management philosophy (1998; 1994). Conceptually, SCM includes all value-adding activities from the extraction of raw materials through the transformation processes and through delivery to the end user. SCM spans organizational boundaries and treats the organizations within the value chain as a unified virtual business entity (1991; 1995). (1995) further expanded SCM to include recycling or reuse activities. In general, SCM seeks improved performance through elimination of waste and better use of internal and external supplier capabilities and technologies (1996). The retailing industry has focused on different aspects of SCM, namely, location, transportation, and logistics...
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... Understanding the Supply Chain Logistics * Logistics is the management of the flow of goods, information, and other resources between the point of origin and the point of consumption in order to meet the requirements of customers. * Logistics involves the integration of information, transportation, inventory, warehousing, material handling, and packaging. * Logistics is a channel of the supply chain which adds the value of time and place utility. * Today the complexity of production logistics can be modeled, analyzed, visualized and optimized by plant simulation software. Traditional View: Logistics in the US Economy (2006, 2007) * Freight Transportation $809, $856 Billion * Inventory Expense $446, $487 Billion * Administrative Expense $50, $54 Billion * Total Logistics Costs $1.31, $1.4 Trillion * Logistics Related Activity 10%, 10.1% of GNP Source: 18th and 19th Annual State of Logistics Report – Logistics Magazine Traditional View: Logistics in the Manufacturing Firm * Profit 4% * Logistics Cost 21% * Marketing Cost 27% * Manufacturing Cost 48% Profit * Logistics * Cost * Marketing * Cost * Manufacturing * Cost Supply Chain Management: The Magnitude in the Traditional View * Estimated that the grocery industry could save $30 billion (10% of operating cost) by using effective logistics and supply chain strategies * A typical box of cereal spends 104 days...
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...Supply chain management is the vital business function that coordinates all of the network links. Supply-chain management is the management of the activities that procure raw materials, transform them into intermediate goods and final products, and deliver the products to customers through a distribution system these activities are the components of a supply chain. The supply chain function’s role is to help identify the products and services that can best be obtained externally to improve performances to develop, evaluate, and determine the best supplier, price, and delivery for them. The wholesaling and the retailing industries incorporate a logistic focus within their strategic decisions; this is because it will enable them to control the movement of goods from the supplier to end customers without waste. This helps to obtain efficiency of operations through the integration of all material acquisition, movement, and storage activities in the firm which is the objective of logistics. One of Dell’s supply chain management is by using technology to decrease storage and increase efficiency. Meaning, Dell uses their company supply and shipping networks that exemplifies the latest trend in logistics, which is, visibility. Dell makes sure that their inventories can be trace and tracked throughout their entire logistical operations. With solid visibility made possible by technology, the company could query all of its shipments by bill of lading number to figure out which shipments...
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...Dell Inc. Don’t bother asking computer giant Dell Inc. about the prolonged slump in the high-tech market — the company just posted a 16% increase in sales for its most recent quarter, the sixth straight quarter Dell has enjoyed a double-digit revenue gain. Even more impressively, the hike in sales was accompanied by a 21% increase in profit. All told, Dell expects to reach $40 billion for the year, a substantial improvement on the $32 billion in sales it had last year. The secret to Dell’s success is really no secret at all — the company has said all along that its direct model works because of a single-minded adherence to supply chain excellence. The company manufactures more than 50,000 computers every day, but carries only three to four days’ worth of inventory, when many of its competitors carry between 20-30 days of inventory. However, Dell isn’t exactly sitting on its laurels. “We’re on the tip of the iceberg,” says Dick Hunter, vice president, Americas Manufacturing Operation. “Most people think that Dell has reached the ultimate goal in supply chain management — an inventory of three days. We disagree; every day we work to bring that number down. Our current goal is to get down to two days. Long term, I think we can get even lower.” The key to that will be transition management. “We sell what we have and we don’t sell what we don’t have,” explains Hunter. “We don’t tolerate excess inventory. We do whatever it takes to move inventory, even if it means creating demand...
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...CASE STUDY ANALYSIS REPORT ON SUPPLY CHAIN MANAGEMENT OF DELL COMPUTER CORPORATION Submitted By: Asmita Baz ACKNOWLEDGEMENT On the successful completion of the project, first and foremost I thank God, the Almighty without whose blessings the project would not have been a success. I take this opportunity to express my sincere gratitude towards Mr. Subrata Kar (faculty of SCM,Globsyn Business School) under whose guidance I completed this project report. I wholeheartedly thank him for giving his valuable time & attention & for providing me a systematic way for completing our project report in time. THANK YOU. CONTENTS Index | Page No. | Introduction | 4 | Supply Chain | 8 | Channel Strategy | 10 | Market Perspective | 11 | Cycle of Order | 12 | Information | 13 | Conclusion | 14 | INTRODUCTION DELL Computers, a leading PC supplier to corporate and government customers, today is now among the first companies to provide its customers with the next level of industry-standard Pentium processor power, while many vendors are still struggling to broaden their processor-based product lines. Dell's unique ability to take a market strategy position during important technology transitions because of its build-to-order manufacturing process. This build-to-order approach allows the company to maintain low inventory levels and integrate emerging technologies into systems. Today's customers are reducing their supplier bases, providing the opportunity...
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...market and has been in production for six months. This new capability has caused notice from Midland Motors and they placed an urgent, substantial order for ECU's and RFID's; an amount that exceeds Kuiper's current daily production capacity. To complete this order to Midland's specifications and time frame, Kuiper needs to determine the best way to undertake this order while meeting the production needs of orders already in the pipeline as their current capacity is insufficient to meet the additional demands. To further complicate the situation, Kuiper's production planning, inventory tracking, and supply chain management systems are inadequate to meet the demands of increased production. Benchmarking strategies are excellent resources to appraise the decision that Kuiper Leda can make when having alternative solutions based on benchmarking companies such as Dell, Eastman Kodak, ETC name all companies. Eastman Kodak Issue Kodak is the world’s foremost imaging innovator. George Eastman put the first simple camera into the hands of a world of consumers in 1888. In so doing, he made a cumbersome and complicated process easy to use and accessible to nearly everyone. Since that time, the Eastman Kodak Company has led the way with an abundance of new products and processes to make photography simpler, more useful and more enjoyable. With sales of $13.3 billion in 2006, the company is...
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...18-year-old Michael Dell left college to work full-time for the company he founded as a freshman, providing hard-drive upgrades to corporate customers. In a year’s time, Dell’s venture had $6 million in annual sales. In 1985, Dell changed his strategy to begin offering built-to-order computers. That year, the company generated $70 million in sales. Five years later, revenues had climbed to $500 million, and by the end of 2000, Dell’s revenues had topped an astounding $25 billion. The meteoric rise of Dell Computers was largely due to innovations in supply chain and manufacturing, but also due to the implementation of a novel distribution strategy. By carefully analyzing and making strategic changes in the personal computer value chain, and by seizing on emerging market trends, Dell Inc. grew to dominate the PC market in less time than it takes many companies to launch their first product I. Statement of the Problem Dell has been following its unique ‘direct build-to-order’ sales model for more than 20 years. Customers can plan their own configuration and place orders directly with the company via the phone or its Web site. Over the years, Dell’s supply chain efficiencies and direct sales gave it a competitive advantage. II. Statement of Objectives * Examine and analyze Dell’s Direct model, its basic working, success and future challenges * Typical Working of Dell’s Supply Chain and future supply chain challenges * Highlights Dell’s evolving Supply Chain practices...
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...challenges. Dell’s Direct Model Dell has been following it’s unique direct build-to-order sales model for more than 20 years. Customers can plan their own configuration and place orders directly with company via the phone or a web site. Over the years Dell supply chain efficiencies and direct sales gave it a competitive advantage. Dell has also leveraged JIT principle to make its manufacturing process success. Dell’s approach to JIT is different in that they leverage their suppliers to achieve the JIT goal. They are also unique in that Dell is able to provide exceptionally short lead times to their customers by forcing their suppliers to carry inventory instead of carrying it themselves and then demanding (and receiving) short lead time on components so that products can be simply assembled by Dell quickly and then shipped to the customers. Characteristics of direct model * Eliminate costs and risks of carrying large finished goods inventories * High velocity * Low-cost distribution * Direct customer relationship * Build-to-order * Just-in-time manufacturing * Products and Services aimed at specific market segments * Reduced channel costs: from 13.5%-15.5% to 2% of product revenue * Latest Technology was introduced faster than indirect channels * Dell can use IT to directly control its value chain, set quality measures and monitor in real time how material is flowing throughout the chain * Managing Information to ...
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...Flexibility of the Desktop PC ISCOM 476 April 9, 2012 Professor Gary Kowalkowski Flexibility of the Desktop PC Dell Computer Company founded in 1984 uses the business model of eliminating retailers from the sales channel and selling directly to customers. Dell used this model to deliver customized systems to customers with lower than market average prices. To assist Dell in accomplishing this achievement, Dell used contract manufacturers to build and supply various components of its computer equipment. However, Dell has identified issues arising from its L5 and L6 manufacturing processes regarding motherboard availability and the resulting increased cost of manufacturing and logistics. This paper will review and evaluate the L5 and L6 manufacturing and logistics cost, the manufacturing solution to best minimize the issues, and address the chipset supply concerns In addition, the business process improvement methodology will be reviewed, supply changes recommended, and the application to other industries and work environments. The L5 manufacturing and logistics process includes the assembly of the desktop PC chassis, floppy disc drive, fan, and depending on chassis configuration, the power supply. On the other hand, the L6 process includes all the processes in L5 plus the installation of the motherboard in the chassis. Currently, Dell suffers from the inability to provide contract manufacturers sufficient motherboards in a timely fashion. Several factors contribute to Dell’s...
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...In 2001 Dell became the number one provider of consumer personal computers in the world. The company became a global leader through a combination of inventory management and customer service. While competitors used a build-to-stock design, Dell utilized an assemble-to-order design. This meant that Dell only began building the PC until the order is received, using the order money to purchase the components. Dell kept no in-house stock of finished goods inventories. Dell’s supply chain design allowed for mass customization. While other companies in the industry had to guess at consumer preferences, Dell knew exactly what its customers wanted before manufacturing the product. This lean system would not have been possible without Dell’s supplier integration. The company outsourced all components of personal computers, only performing the assembly. To buffer against demand variability and minimize long lead times, Dell required its supplier to keep inventory in supplier logistics centers, which were small warehouses located within a few miles of Dell’s assembly plants. Each center was shared by several suppliers that paid rent to Dell. Dell owned none of the inventory in the logistics centers, keeping overhead low. Dell withdrew inventory from the logistics centers as needed, which averaged once every two hours. The just-in-time philosophy resulted in inventory turns of 122 per year. In order to maintain such lean manufacturing, Dell had vendor-managed-inventory arrangement with...
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...1. McDonald’s McDonald's had one of the best logistics models in India. To maintain consistency and quality of its products, McDonald's shipped all the raw materials — lettuce, patties et al to a cold storage close to the main market. Based on a daily demand schedule that was prepared a day in advance, the required amount of raw material was transported to individual outlets. 2. Subhiksha Inventory management Subhiksha has a centralized purchasing system. This eliminates multiplicity of billings, which would occur if the stores were to make independent purchases. Subhiksha has 3 separate godowns for stocking Pharmacy products, unbranded groceries and branded FMCGs. It has a fleet of 10 tempos, which supplies its stores once a day. As the discount format requires holding costs to be at a minimum all the stores are connected in an intranet to facilitate inventory planning. Also spot payments made, helped to get cash discounts to the company. 3. Field Fresh Distribution Strategy It follows a strategy of minimum suppliers to take advantage of economies of scale (in purchasing and supply logistics), reduced overheads and control requirements, and easier vendor development. Food World works on the hub-and-spoke model. A hub is typically of 50,000-60,000 sq ft in area and serves about 30-40 stores in a radius of 30 km .Creation of Regional Hubs facilitates over 90% central distribution .The remaining 10% (mostly perishable items like fruits and vegetables, bakery etc)...
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...Zing PC Company Introduction In April 200X, Zippy Computer, Inc., merged with Binger International, Ltd. The new entity was named Zinger Electronics, Inc. and began trading on the NASDAQ. Zinger Electronics, Inc., produces a variety of high-tech goods and services—computers and servers, Internet services, Web hosting, and business-to-business e-commerce applications. Their award-winning computers are sold under the ZingPC brand to business, government, education, and consumer markets. The ZingPC division designs and manufactures a broad range of computer products that ranks among the industry leaders in technology, innovation, price, and computing performance. These award-winning products are marketed under the following lines: Zinger Millennia desktop computers, Zinger TransPort notebook computers, Zinger ClientPro corporate computers, and HP NetServer servers. These product lines are manufactured exclusively at the company’s facilities in Cheyenne, Wyoming. ZingPC products can be purchased directly from the company’s Web site http://www.ZingPC. com, by calling a toll-free 800 telephone number, through company field sales representatives, and through leading national retailers. Early Successes and Challenges As a new organization, ZingPC adopted a product-focused strategy. Its goal was to provide the fastest and most powerful PC on the market. ZingPC built a 216,000- square-foot facility in Laramie, Wyoming (more than doubling its original capacity), and dedicated...
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...Executive Summary Designing and manufacturing vehicles is a very complex business that the Ford Motor Company has excelled in since 1903. Ford can never be virtually integrated like Dell but the Ford Company can adopt some of Dell’s concepts of virtual integration to strive for excellence in supply chain management. As Director of Supply Chain Systems, I am convinced that Ford can implement portions of Dell’s Virtual Integration strategy even though the Ford Company differs in many respects from Dell. A modification of the virtual integration system that Dell uses should be applied to Ford’s supplier base, distribution system, dealerships, and divisions. Issue Identification Ford must find ways to improve their supply chain management to compete in a global market and continue to retain its market share in an increasingly competitive, saturated and over capacitated US market. Ford must act now or risk losing market share. The main issue Ford must deal with is decreasing the volume and complexity of its supplier base as it is plagued with costly inefficiencies. Secondly, Ford must get closer to its customers to better understand their needs and wants and to create better forecasting of demand. Teri Takai must decide within a week if Ford should model its supply chain strategy close to Dell’s Virtual Integration. Environment and Root Cause Analysis The Ford Motor Company is the 2nd largest industrial corporation in the world with revenues of $144 billion. Ford employs over...
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