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Dells Response To Global Supply Chain Management

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Any opinions, findings, conclusions or recommendations expressed in this material are those of the authors and do not necessarily reflect the views of UK Essays.

Published: Mon, 5 Dec 2016

Dell was originated since 1984 with its founder, Michael Dell, with its limited PCs. He started with selling personal computer systems directly to customers. Later on, Dell Computer Corporation began growing internationally around June 1988 into the market of Ireland. This is the point of time that the logistic planning and supply chain process becomes complexity. At the same time, Dell became one of the lists of the world’s Fortune 500 companies.

In 1996, Dell started using their channel via through websites. Then Dell also expanded its product lines as well to include products such as television, handhelds, digital audio players, and printers. These even increase the complexity of its supply chain process. However, Dell turned out to be somewhat reputable with all the hard efforts that they have put in.

Dell’s headquarters are located in Round Rock, Texas in which it previously moved from Austin, Texas. It also expands its offices and corporate headquarters to other locations such as Las Cimas, Texas. Dell seems to be somehow concerned in environmental friendliness since approximately 60% of its total powers is generated from TXU Energy and 40% from gas.

We agreed on that since Dell has a wide global coverage of markets, they should be greatly concerned on its logistic. The logistic is directly interrelated with lead time, delivery cost, and risk of Dell. They should compare with using centralization or decentralization for the distribution system in each of the market respectively.

Dell’sLogistic Process

One major reason of Dell’s success is the management of its supply chain. Since the foundation of the company in 1984, Dell applied the strategy of direct sales in order to get more information about its customers’ needs and to react on these needs in order to increase customer’s satisfaction.

Dell has developed a strong supply chain and always tries to maintain an excellence relationship with all the other chain members. The company sees the advantage and opportunity it will have if it uses a strong supply chain in order to compete with the other competitors in the computer system industry. In order to prevent errors during the manufacturing process and to avoid the occurrence of too many defects, Dell requires certain standards of its suppliers. These standards include the ISO 14001 certification, which requires the suppliers to apply environmental management systems and also OHSAS 18001 certification which requires the suppliers to provide a safe workplace and to have a safety management.In order to save costs, Dell Inc. seeks for suppliers producing the components needed to assemble the Computer system from all continents. For example, Dell imports hardware components such as the Ram chips and disc drive from Taiwan and the soundcards from France. Other suppliers are located in China, Malaysia, Singapore, Japan and Mexico.

Dell Inc. uses a so called Dell Global Supply Base located in Taiwan. By using this base and a supply chain network with nine 3PL providers, four ocean networks and four air networks, the company can easily ship the product from one part of the world to another and can efficiently manage its supply chain.

After Dell has sent the orders to the suppliers, all components are then shipped to the Dell Manufacturing Plant in Austin, Texas. After the assembling process is finished, the assembled computers will be shipped on demand directly to the customers. In order to increase sales and to increase market share, the company decided to apply a restructuring program. Since Michael Dell was restructured in 2007, the company does not use direct sale as the only way of marketing the product anymore. The firm decided to choose retailer stores to market the Dell computers. These retailers were carefully selected in order to ensure a high level of customers’ satisfaction.

Another reason for its success lies in the decision to use a mixed pull-push strategy. By using this strategy, the company is always aware of the demand and can forward these information directly to the suppliers. By using high sophisticated software applications, Dell can maintain a perfect synchronization between manufacturing and sales.

Dell applies some kind of a just-in-time policy which gives the company the opportunity to make warehouses abundant because the majority of components is only stored for a couple of hours.

Strategy or Market of Logistic Planning of Dell

Dell, a well-known company selling computers and electronic devices, has a high reputation on innovative supply chain management. As nowadays, products and services themselves are not enough to compete with the same level of competitors in the market. Lower down the price to get market share is not the sustainable solution for the industries. Lastly, the one who can practice lowest total cost is the winner standing above others. Beside of operational costs, ordering and inventory holding cost is the primary factor we have to concern about.Dell is well-known for its innovations in supply chain management which consist of intelligent strategies.

Push-Pull boundary

In a push/pull strategy, the manufacturer will build to order. This implies that component inventory is managed based on forecast, but the final assembly is made in response to a specific customer request. So, the push part is part of the manufacturer’s supply chain prior to assembly, while the pull part is the part of the supply chain that starts with assembly and is based on actual customer demand. With this strategy, Dell has the lowest level of inventory to avoid computer depreciation in stock.

“Push” “Pull”

Buy-to-Plan Build-to-Order

Every Week Every 2 hours in each mfg center

Material requested to build

customer ordersCustomers

All material is tied to a

customer order – nothing gets

built without an order.

1) Dell facilities act as Manufacturing Centers, not Warehouses – only inventory needed for few hours of orders is on site.

2) Provides direct signal of Dell customer demand for suppliers.

3) Dell’s performance to customer orders is directly linked to their suppliers’ level of support.

4) Absolute synchronization between manufacturing and sales keeps the process balanced.

2. Indirect Channel

From its early beginnings, Dell operated as a pioneer in the “configure to order” approach to manufacturing – delivering individual PCs configured to customer specifications. In contrast, most PC manufacturers in those times delivered large orders to intermediaries on a quarterly basis.

To minimize the delay between purchase and delivery, Dell has a general policy of manufacturing its products close to its customers. This also allows for implementing a just-in-time (JIT) manufacturing approach, which minimizes inventory costs. Low inventory is another signature of the Dell business model – a critical consideration in an industry where components depreciate very rapidly.

You should have quoted the source from Wikipedia.org

At the first beginning of Dell supply chain management, Dell used to focuses on direct channel selling products from manufacturer to firms (business to business) without intermediaries. Dell’s business model proved so successful that the company then began marketing direct to the home PC market using retailers such as their IT city or their own retail stores.

Cost leadership

Lower cost drives increased demand

Competitive pricing ignites demand

Pass cost savings on to customer

Industry’s most efficient procurement, manufacturing and distribution process

Using build to order and effective supply chain management enable the company to have significant cost advantage and extend the market both on business and household users.

Dell’s Market

As I already mentioned, Dell have been successful in business to business direct sell and gradually develop the household marketing. Nowadays the target market of Dell focused on individual users who have low budgets and appreciate the technology rather than focusing only on the executives and managers with no budget limitations. Therefore, Dell increases the number of retailers and intermediary to reach household market in recent years.

Dell markets specific brand names to different market segments. There are 2 product categories distinguish between business and household products.

Their Business/Corporate class represent brand where the company advertises emphasizes long life-cycles, reliability, and serviceability. Such brands include:

OptiPlex (office desktop computer systems)

Vostro (office/small business desktop and notebook systems)

n Series (desktop and notebook computers shipped with Linux or FreeDOS installed)

Latitude (business-focused notebooks)

Precision (workstation systems and high-performance notebooks)

PowerEdge (business servers)

PowerVault (direct-attach and network-attached storage)

PowerConnect (network switches)

Dell/EMC (storage area networks)

EqualLogic (enterprise class iSCSIHYPERLINK “http://en.wikipedia.org/wiki/Storage_area_network”SANs)

Dell’s Home Office/Consumer class emphasizes value, performance, and expandability. These brands include:

Inspiron (budget desktop and notebook computers)

Studio (mainstream desktop and laptop computers)

XPS (high-end desktop and notebook computers)

Studio XPS (high-end design-focus of XPS systems and extreme multimedia capability)

Alienware (high-performance gaming systems)

Adamo (high-end luxury laptop)

Implication in Interrelationships Regarding to Our Course

Chapter 2: Barcode Technique:

A UPC-A barcode symbol

A barcode is an optical machine-readable representation of data, which shows certain data on certain products. Originally, barcodes represented data in the widths (lines) and the spacing’s of parallel lines, and may be referred to as linear or 1D (1 dimensional) barcodes or symbiosis. They also come in patterns of squares, dots, hexagons and other geometric patterns within images termed 2D (2 dimensional) matrix codes or symbiosis. Although 2D systems use symbols other than bars, they are generally referred to as barcodes as well. Barcodes can be read by optical scanners called barcode readers, or scanned from an image by special software. Barcode Printer, Barcode Software, PDT (Portable Data Terminal).

Chapter 5: Coping with Bullwhip Effect:

Certified Refurbished PCs are laptops and desktops that have been returned to Dell, put through the production process, and then again retested to ensure they meet all original factory specifications. Certified Refurbished systems may have some observable cosmetic blemishes, but they will not affect performance.

Previously Ordered New systems are PCs that were canceled orders, or PCs that shipped out to a customer who either did not open the box or decided to return the system without ever using it. Previously Ordered New systems do not have any cosmetic damages.

Scratch and Dentproducts are system with considerable cosmetic blemishes that do not affect performance. They are not a great way to save money while still enjoying Dell Outlet’s rigorous rebuilding and testing process. Scratch and Dent computers will not have scratches or pits on the screen, missing or illegible letters on the keyboard, or damage to the touchpad or palm rest.

Dell uses the strategic Partnership with major retailers, such as Wal-Mart, Carrefour, Big C, Power Buy, and Best Buy and so on to extend its market.

Avoid copy and paste directly onto your own work without any changes of wording.

Chapter 6: E-business model:

E-business model is the process of redefining old business models, using Internet Technology, so as to improve the extend enterprise performance. Dell Company uses E-commerce in B2C, sells its products directly to the customers.

¼ˆonline shop of Dell¼‰

Chapter 6: Pull – Push Strategy¼š

The business terms push and pull originated in the logistic and supply chain management, but are also widely used in marketing

A push-pull-system in business describes the movement of a product or information between two subjects. On markets the consumers usually “pulls” the goods or information they demand for their needs, while the offers or suppliers “pushes” them toward the consumers. In logistic chains or supply chains the stages are operating normally both in push- and pull-manner. The interface between push-based stages and pull-based stages are called push-pull boundary or decoupling point.

Dell Company combines the logistic and supply chain management with the marketing, it is deferent with the mean Dell used before, which was just consider to sell products directly to the customers.

Chapter 8: Strategic Alliances:

A Strategic Alliance is a formal relationship between two or more parties to pursue a set of agreed upon goals or to meet a critical business need while remaining independent organizations.

Partners may provide the strategic alliance with resources such as products, distribution channels, manufacturing capability, project funding, capital equipment, knowledge, expertise, or intellectual property. The alliance is cooperation or collaboration which aims for a synergy where each partner hopes that the benefits from the alliance will be greater than those from individual efforts. The alliance often involves technology transfer (access to knowledge and expertise), economic specializationHYPERLINK “http://en.wikipedia.org/wiki/Strategic_alliance#cite_note-0#cite_note-0″[1], shared expenses and shared risk.

Avoid copy and paste directly onto your own work without any changes of wording.

Dell and Telefónica form strategic alliance to deliver innovative connectivity and communication solutions. Dell and Telefónica today announced a strategic alliance that marks the beginning of a new collaboration effort to develop future products and services designed around enhanced data-first experiences, enabling customers to interact with family, friends and businesses whenever and wherever they choose.

Iron Mountain and Dell® have a long-term relationship focused on helping customers with data protection, archiving, e-discovery and compliance needs across the breadth of Dell storage platforms.

Dell and Perot Systems announce strategic alliance to provide Fully-Integrated Virtualized Healthcare Technology Solutions to reduce cost and improve patient care.

Dimensions of Dell’s Logistic Process

Cost

DELL used the way to sell its product by delivering it to customer directly from factory, it caused very high logistics cost. Also, the costs caused by transportation or other economy-related factors cannot be compensated by reducing inventory cost. Therefore, DELL uses the E-commerce to sell its products. It can help DELL reduce the cost of the services, which is to explore the third profit source of service. The enterprises can be considered include: use of third party logistics (3PL); e-commerce between business operators and the general business operators union, to take logistics integration plans; also can invest in some new logistics information technology, such as operational research, management techniques, SKU management, bar code technology and information technology, to improve logistics efficiency and effectiveness, and reduce the door to door transportation cost and so on.

Time

DELL used the way to deliver the computer to the customer directly from the factory, which causes the lead time is too long. In traditional sales channel, the customers buy the Dell’s computer because consider the brand name and reputation, and if there is some differences between the actual product and what they expected, so they will be disappointed and will not purchase it again. Therefore, the company bears a large market, manufacturing and logistics risk.

For now, DELL uses the e-commerce. It can accelerate the reaction speed of the service, even if the circulation becomes faster service. Rapid reaction force has become one of logistics development. In modern logistics, there are two ways to improve speed, one is improving the transportation speed, such as build highway, develop new traffic management approach of the vehicle. And the other approach is of the great promotion value of the value-added logistics services program, should be optimized e-commerce distribution channels, in order to support logistics link, short the logistics process and improve the logistics systematic rapid-reaction function.

Quality

DELL Global Logistics Teams aim to develop and sustain a global transportation and logistics network that uses the most efficient and effective means for themselves and their transportation providers to distribute their products to the customers. Their job is to get the right stuff, to the right place, at the right time.

Dell is committed to having a true partnership with the Charity Logistics in supporting a range of Charities. With over 17 years experience of this sector we are already working with many of the country’s charities. We actively take part in charity events aimed at enhancing the charities sector. We provide bespoke offers to you via selected pages on our website.

Dell works with its partner- Charity Logistics pride themselves on providing a full suite of technology services and support that charity need to operate. Providing quality technology from Dell is the next logical step for a charity that already has office space, furniture, software, insurance, disaster recovery, communications and much more from Charity Logistics. With a mission to help other charities save money from costs.

Flexibility

DELL uses the e-commerce to increase the convenience of the service. Everything to simplify procedures, streamline operations services are value-added services. Simplification is relative to the consumers, it does not mean the service has been reduced some steps. It means in order to get some services, the customers may do it by themselves before, but it is replaced by some kinds of goods or service, so that the consumers can get the services or goods not only simple but also easy to use, which can increase the value of the goods and services.

In the provision of e-commerce logistics services, implementation of one-stop door to door service, providing a complete operation or operating tips, labor-saving design or installation, agency business, received a face customers, 24 hours a day, automatic ordering, transmission of information and transfer (using EOS, EDT, EFT), the entire process of tracking the logistics of e-commerce sales are a useful value-added services.

Dell’s Current Supply Chain Process Structure

Information

Dell’s current supply chain process structure has been changed from full pull strategy (customer order driven) to Push-Pull supply chain (combined the demand forecast and customer order information).

With manufacturing facilities that span the globe, and a logistics model that sets the standard, they are able to get their products closer than ever to their ultimate destination – the customer. Whether they’re delivering ten systems or ten thousand, our custom factory integration allows us to provide a single-source solution, delivering the exact specs on time, with no impact on lead time.

Also, DELL use the new information technology, such as POS (point of sales), bar code technology, operational research, management techniques, SKU management and so on, in order to generate the information from the retailers and customers.

Location and Transportation

Dell is planning to revolutionize its supply chain by transferring huge numbers of shipments from air to ocean, according to new reports.

The Journal of Commerce reveals that the firm, which pioneered the build-to-order business model, is planning a “fundamental change” in its logistics strategy which could “set a touchstone for distribution in the technology sector”.

“Dell’s diversification from strictly direct-to-consumer sales to include more retailers has led to increased outsourcing and a recent announcement to begin to move from costly air to slower ocean freight.

If it is successful the practice will likely become more common, as the company strives to compete with rivals such as Hewlett-Packard, which replaced Dell as the world’s No. 1 computer maker and relies heavily on ocean shipping,” the Journal of Commerce stated.

However, the publication went on to caution that shift in Dell’s core supply chain management business model comes with risks – damage, order cancellation, product value decline during shipment – as well as higher inventory carrying costs: “Dell’s inventory turns – a formula dividing the cost of goods sold by its average quarterly inventory – are its shining star and one that stands to fade with a longer supply chain,” it noted.

The reach of Dell’s manufacturing and logistics network is truly remarkable, extending all across the world and creating career opportunity to match. As a member of Dell’s team, you’ll gain exposure to the dynamics of a true, world-class delivery system – and experience that’s without peer. You’ll find Dell’s manufacturing teams in these locations:

Limerick, Ireland

Texas, USA

Tennessee, USA

North Carolina, USA

Penang, Malaysia

Xiamen, China

Rio Grande do Sul, Brazil

Inventory

Dell is invariably discussed, When managers discuss low inventory levels. Their low inventory has really helped out that much.

Reasoning behind need for lower inventory

thefirst thing that needs to be discussed is why low inventory has such a great effect on Dell’s overall performance. The reason is quite simple: computers depreciate at a very high rate. Sitting in inventory, a computer loses a ton of value. 

As Dell’s CEO, Kevin Rollins, put it in an interview with Fast Company: 

“The longer you keep it the faster it deteriorates — you can literally see the stuff rot,” he says. “Because of their short product lifecycles, computer components depreciate anywhere from a half to a full point a week. Cutting inventory is not just a nice thing to do. It’s a financial imperative.” 

We’re going to assume that the depreciation is a full point per week (1%/week) and use that to determine how much money high inventory turns can save Dell. 

This means that for every 7 days a computer sits in Dell’s warehouses, the computer loses 1% of its value. Ok, now that we know how much Dell loses for each day, let’s take a look at some of Dell’s data over the past 10 years.

What I got from this was the inventory turns. An inventory turn, as this website successfully describes it, is “cost of goods sold from the income statement divided by value of inventory from the balance sheet”. Typically, this is turned into a value showing how many days worth of inventory a firm has by dividing inventory turnover by 365. I divided the inventory turnover by 52 in order to show how many weeks worth of inventory Dell holds. 

Here are the results:

Dell’s Inventory Turnover Data 

Year      Inventory Turnover         Week’s Inventory

1992      4.79                                10.856

1993      5.16                                10.078

1994      9.4                                  5.532

1995      9.8                                  5.306

1996      24.2                                2.149

1997      41.7                                1.247

1998      52.40                               0.992

1999      52.40                               0.992

2000      51.4                                1.012

2001      63.50                              .819 

Key point to notice here is that Dell was carrying over 10 weeks’ worth of inventory in 1993. By 2001, Dell was carrying less than 1 week’s worth of inventory. This essentially means that inventory used to sit around for 11 weeks and now it sits around for less than 1 week.

It means a lot to Dell Company

Computers lose 1 percent of their value per week. This isn’t like the canned food industry where managers can let their supplies sit around for months before anyone bats an eye. Computers aren’t canned goods, and as Kevin Rollins of Dell put it, computers “rot”. The longer a computer sits around, the less it is worth. 

That said, due to depreciation alone, in 1993 Dell was losing roughly 10% per computer just by allowing computers to sit around before they were sold. In 2001, Dell was losing less than a percent. Based on holding costs alone, Dell reduced costs by nearly 9%. 

Since 2001, Dell has continued to lower inventory. Looking at their latest annual reports, day’s inventory has dropped by approximately a day. 

And Dell also uses outlet and strategic partnership nowadays:

Certified Refurbished PCs are laptops and desktops that have been returned to Dell, put through the production process, and then again retested to ensure they meet all original factory specifications. Certified Refurbished systems may have some observable cosmetic blemishes, but they will not affect performance.

Previously Ordered New systems are PCs that were canceled orders, or PCs that shipped out to a customer who either did not open the box or decided to return the system without ever using it. Previously Ordered New systems do not have any cosmetic damages.

Scratch and Dentproducts are system with considerable cosmetic blemishes that do not affect performance. They are not a great way to save money while still enjoying Dell Outlet’s rigorousrebuilding and testing process. Scratch and Dent computers will not have scratches or pits on the screen, missing or illegible letters on the keyboard, or damage to the touchpad or palm rest.

Process Capabilities in Terms of Dimensions

Cost

Combining of E-commerce with logistic process, Dell can lower down the cost of service using logistic integration planning among third party logistics (3PL). This sharing of information and integrating of strategy among third party logistics can lower down the transportation cost; more importantly, can reduce total lead time for customers order. With the improvement of logistic information technology, Dell can reduce the cost of direct transportation cost to compensate in others information technology cost.

Time

After using E-commerce, the respond rate and reaction to customer demand are amazingly increasing with mean that the turnover rate of computer using by customers are increase with shorter lead time. Utilization of E-commerce clearly is seen as a great benefit to short the logistic process and improve rapid-reaction function.

Quality

Working with Charity Logistic, which provide a full suite of technology service combining with quality technology from Dell, help Dell in order to get the right stuff, to the right place, at the right time, and at the right cost. Moreover, they take a responsibility of charity events.

Flexibility

E-commerce upgrades level of convenience of service in order to reach value-added service. Some logistic services are providing a complete operation or operating tips, labor-saving design or installation, agency business, received a face customers, 24 hours a day, automatic ordering, transmission of information and transfer. These approach can facilitate customers with easy to track and easy to order the product. Therefore, Dell never gives up emphasis on customers convenient.

Current Problems and Weakness of Dell’s Logistic

1. The first problem that Dell has to face by using the current logistic system is that the company tries to reduce lead time and costs as well as improve customers’ satisfaction by sharing system and customer information with other supply chain members. This sharing of information increases operational risk because other firms will be able to get the same information as Dell has. If a supplier simply stops having a relationship with Dell or in a more dangerous case swaps to be the supplier of a competitive firm, that supplier might give or sell confidential data used by Dell Inc. to the competitor. This fact bears a further problem, the problem that Dell will not be able to change its suppliers frequently in order to ensure that the previous mentioned situation will not occur. Even though Dell would like to change the supplier because a new supplier provides components with better quality or at lower cost, it will be a conflict situation for Dell to change the supplier.

Solution: In order to make sure that the supplier will keep all shared information confidentially and to turn this operational risk to be an competitive advantage, Dell needs to emphasize very hard on choosing its supplier and building a very strong relationship with them so that Dell can trust its supplier to 100%. In this case Dell can share all information with its supplier without risk and use this sharing of information to maintain and increase market power and market share.

2.The second weakness of Dell’s logistic process is that Dell uses direct sales through telephone and internet as well as a few exclusive sales stands in the United States and some other countries. This leads to a few problems. The first problem to be mentioned in this context is that customers, especially private customers, who decided to buy a Dell computer do not have a chance to test and try the product before purchasing, compared to other brands that mainly use retailers for marketing the computers.

Solution: This weakness can be eliminated by opening more Dell shops in department stores or having stands on IT exhibitions. In this case the company would need to be restructuring itself to a certain level because it would have to focus more sales through third parties and less through direct line such as internet and telephone.

3. The third problem that Dell faces under the current logistics system is that the company has some opportunity loss because due to the fact that the customers can only purchase the computer systems through phone calling, internet or going to one of the few available Dell stores, many customers will see this way of purchasing as inconvenient because after having placed an order on the website of Dell, it will take approximately three days until the customer receives the ordered product. Not every one is willing to wait such a long time. Some customers need to by a new computer very fast and go to the department stores or supermarkets to choose the next best available computer unit.

Solution: Dell can simply address this problem by reducing the lead time, so that the customers will receive the order within 24h or the company needs to open more Dell stores for those who need to make a fast decision. In this case a Dell store could also work as a Dell service center where customers can take their defected computers in order to let the Dell staff search for the errors. But in order to reduce the lead time, Dell needs to find a way how to reduce lead time first. One way can be changing supplier so that the delivering process will take less time. Furthermore, the company could build up centralized distribution center close to main


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