Analysing The Dell Supply Chain Management Commerce Essay


Dell is a computer manufacturer that was established in the United States in the 1980's. Over the years it became the leader in the E Commerce computer hardware market. It established its brand by selling its products online, in the US at first, and then all over the world. Dell sells its products to corporate clients and individual customers. Dell uses a unique direct method, which is called the Dell direct model, to achieve maximum profitably and sustain their international advantage. This model refers to their relationship with the customers as being direct. It allows customers to customise their PC online and order any additional products they need or desire. This integration is hugely important as it eliminates the need to manufacture everything. Dell uses internet power to share and exchange information with suppliers, customers and vendors to build a superior supply chain that keeps the inventory turnover low and the cost to a minimum. This model helps Dell focus on price for performance, service, support, customisation and latest technology. Moreover, it enables the company to distinguish itself from its competitors with its customised on-demand manufacturing. Following this customisation Dell is able to offer customer more value for their money by eliminating intermediaries in their manufacturing and distribution process.

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Dell supply chain management theory is to shorten the cycle between the components, the manufacturer and the end customer. As Michael Chong (the E-Business Technology manager of Dell computer business) said, "we are allowing them to almost touch each other". This is implemented in Dell by using efficient and effective built to order business model. Dell's online supply management allows Dell's suppliers and customers to work together. Because Dell work directly with their customers it has the ability to connect and understand what products will be required and when. It helps the company to inform its suppliers what supplies are needed based solely on customer demand. As a result there is no excess of supplies in warehouses that will decrease the company's efficiency. It enables the company to have exceptional service and ease in ordering and responsiveness to customer needs.

One of the most important features that gave Dell a sustainable competitive advantage was the implementation of the "just in time" inventory, also known as the Toyota production system. It operates on six days of inventory. This enables Dell to cut the cost of warehousing and of hiring people to track and look after inventory. It allows the company to have more cash to invest in adding value activities especially for customers. The use of such a system suits Dell perfectly as customers can only order computers through Dell itself. It also eliminates other distribution suppliers entirely and makes a direct contact with customers. It allows the development of a deeper relationship with customers who could order their desired computer and Dell offers them better service and savings. The company builds the computer within three days and has it to the customer within one week.

Dell's Internet presence through, is an essential factor for the company's success and to sustain its competitiveness. By involving the customer from the beginning of the ordering process makes business much easier to do for both parties, and establishes customer relationship while providing means for on-going customer service. With a number of links on the web site that focus on certain groups and customers, purchases can be made easily and efficiently. No matter what you are purchasing, can help the customer to customise and evaluate its offers. It can assist an individual customer to choose a single notebook, or can assist larger companies and lease products that will help them lower their costs.

Dell launched a new service in 2000 to offer low cost products to its customers. It made it possible for customers to buy refurbished Dell products like notebooks computers, cameras, speakers and printers online. The returned equipment came from companies who wish to upgrade their systems and continue using Dell products.

Dell has enhanced its supply chain management by jointly working with i2 Technologies (a supply chain company which was acquisitioned by JDA in January 2010). i2 Technologies is an experienced supply chain management company that provides rapidly deployed solutions for factory planning and collaboration. The i2 SCM provides component suppliers and Dell planners with a global view of product demands and material requirements. It also provides a timetable for factory scheduling so employers can establish key reports based on accurate and timely data which shows the latest customers order, supplier commitments and stock status. This enabled Dell to plan orders and to communicate with suppliers every 2 hours, which resulted in increasing the efficiency in manufacturing and delivering exactly what the customers want. Also, it helps Dell to reduce cost, establish a stable working environment and reduce the total cost of production. Dell implements this strategy over its 120 Dell servers and more than 250 suppliers delivering more than 3,500 parts.

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Dell introduced in mid 1999. This web site was specifically set up to improve Dell's communication and relationship with it's suppliers and to improve it's supply chain management overall. The web site allows Dell's suppliers to follow their material throughout Dell's operations. Suppliers can log on the web site, check changes to orders, forecast cost reports, review negotiations, drop off invoices and check out their overall performance.

Dell purchases around 90% of it's supplies online. Central suppliers are usually located close to Dell's manufacturing plants in order to deliver supplies to Dell which are only a few hours old. This whole process is to gain more value out of Dell's relationship with its suppliers. By focusing on inventory control with it's suppliers Dell is able to take advantage of the decline in industry prices, especially relevant in these economic circumstances, and deliver those savings to the customers. This also gives Dell a competitive advantage over its competitors. In the past Dell worked with over 1000 suppliers but today it only works with approximately 100. Dell also uses supply chain management software to improve material management, relationship with suppliers and to reduce inventories. This helps Dell and its suppliers to share information about inventory and improve efficiency.

Dell's primary resources include the most up-to-date technology and IT tools that allow the company to successfully move forward. They allow the company to exchange information and interact with suppliers and customers, which results in providing customers with exactly what they request without needlessly wasting resources in production. It also gives the company a competitive advantage.

Over the years, Dell tried to maintain its employee productivity. A concern for any company that relies on a productive workforce that makes extensive use of digital data is the threat of a system failure. Since Dell is a computer-based company, it relies on computers to do both its internal and external business. A system failure, even for a short period of time, would result in a loss of valuable human resources, a decrease in employee productivity and increase cost. Hence Dell protected itself and its employees from such a problem by installing a back-up/recovery system. Furthermore, Dell protected itself from such a crash through the use of the internet. Since it does the majority of its work through the internet it became recognised all over the world which gave it a further competitive advantage. Another way in which Dell manages to maintain consistently high employee productivity is by providing near unlimited availability to their IT structure. Dell keeps customer service lines open 24 hours a day, 7 days a week. It also has an easily accessible on-line help service.

Dell's reliance on doing business on the internet allows it to re-define and change its image with great ease. This saves the company a lot of money because it is flexible and can easily adapt to change for almost any market and economic change.

Dell has also enhanced it's decision making process by innovation through customer feedback, which is a critical factor for success in a computer based company. It also made the company more distinctive than its competitors.

In addition to all of the above, Dell achieved a competitive advantage in the computer industry because of their knowledge about communication, use of information, e-commerce, design and web technology.

Challenges and recommendations:

Although Dell is an extremely successful business company that has been able to adapt and change to the ever-changing technology environment. We believe that could benefit from the following steps to increase their profitability and competitiveness:

Reduce errors in Dell's direct internet ordering system. Since all purchases are made on-line there is a possibility that the consumer will click the wrong button while customising their computer. It will be very helpful if Dell could send a confirmation to its customers before manufacturing starts. Dell can also start a clearance area on it's web-site for consumers who are looking for cheaper products and don't specific preferences.

Dell could offer an online data back-up. They could offer exsisting customers back-up services on services. For both individual and businessed if anything happens to their computer system they can always retrieve their information from Dell. By keeping this data at another location maintained by Dell, Dell could charge money for the service, therefore increasing its revenue.

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Invest more into research and development. It's crucial for Dell to keep its competitive advantage by offering new and up-to-date products and services.

Customer surveys. In order for Dell to maintain and improve its competitiveness and market share its important that the company sends out a questionnaire to existing and previous consumers to look at where they can improve and what strengths do they have. This also helps the company to build a much deeper relationship with its customers by direct interaction.

Dell might need to consider to selectively adding additional suppliers to its supply chain managemet network. This will enable Dell to negotiate better component costs from new suppliers. New suppliers would like to participate in this because they would be seen doing business with a leading technology expert.

Improve customer support services.