Dells Direct To Customers Business Model Commerce Essay


In 1990, dell realised that distribute its products through retail outlets was unprofitable. Nevertheless, dell had shifted gear and reforms their supply chain. And today Dell s supply chain has been considered as number one as AMR RESEARCH SUPPLY-CHAIN TOP 25.Dell the concept of adopts this Business Model is about to sell computer systems directly to customers (build-to-order) in figure 1.Dell removed middlemen and the resellers, who were part of the traditional distribution channel. However, the customers can order directly from Dell. Customer can see dell s supply chain transparency and Dell have see one out of three computer tin the US stated in M.Dell (2006) . Sharon Klinker, et el,(2006) stated that can allowed Dell to build a good relationship with customers, provide best service to them, and promote repeat or expanded sales to them. This can let the customer to become loyalty to dell and dell has proven as the best satisfaction for customer at phone support, repair time, and delivery time. Build and order production also can let the customer choose the latest technology and customise their own desired computer. Craven, et el(2000) stated that build to order enabled bring new product of technology to market faster than other competitor cited in S. Kumar and S. Craig (2007). Cutting out the middle man that helps saving cost and low cost inventory, however customer can enjoy the best value. Dell has using internet application to become virtual organisation with integration of CRM (customer relationship management) and SCM (supply chain management). The integration of CRM (customer relationship management) and SCM (supply chain management) have improved their strategy of doing business and these initiatives have resulted in net revenues of between $30 and $60 million over the last five years stated in Sharon, et el (2006).

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Figure 2

In supply chain, Dell s have used little technique to enable to forward and reverse supply chain. S. Kumar and S. Craigh stated that postponement and modular design technique enable the mass customisation have successful in Dell s supply chain in figure 2. Demand management meeting customer requirements and allow Dell to smooth back some of the peaks in demand. Supply chain partnership allow Dell have close relationship with suppliers and allow to integration of information application to share customer information or demand and enable the supply chain run smoothly.

Postponement is a technique of delaying as long as possible to the final configuration of the product that allow in the assembly of a product to change in last minute and also can shorter lead time of the products for the company. Dell try hold uncommitted product component for customisation so they can maintain economies of scale. D.hannon (2005) stated that, if a sudden change in the market occurs, the unneeded component in shipping space can easily replace with needed component so that they can manage the schedule of shipping and this is one of the postponement strategies.

Virtual supply chain

Type of information system that dell s virtual organisation have used

? CRM (customer relationship management)

? SCM(supply chain management)

? SRM(supplier relationship management)

Sharon Klinker, Ronald Terrell, Ahmed Y. Mahfouz, (2006, pp.87-99) stated that Customer relationship management (CRM) is used about creating a process of maintaining good relationships with their business customers or consumers This can ensure their long term relationship with the customer insure of repeat business with them. The integration of CRM (customer relationship management) is about making a relationship with business customer or consumer and provides them information on what requirement of computer they need and after sales provide them technical support and warranty support. It can build a strong business relationship and long term business repeat between the dell companies with the customer. Nevertheless , there are few service that dell provide is custom design web page call (premier page) that including purchase data , marketing automation software and these have bring benefit like sales, marketing, financial and management segments of Dell. In the early of 1990 before the concept of (built to order), dell have found that salesperson in the retail shop had lack of knowledge about their selling product. Subsequently, they have introduce new idea and cutting off the middle man to using new method to interacting with customer by using phone or internet to built to order and they can customise their own computer base on their budget or need. Nonetheless, time is their main problem of (built to order) and deliver to their customer. Dell have create a SCM(supply chain management) system that provide real time stock control to make sure computer part always available when where needed. Dell using SCM (supply chain management) to play an important role in the dell business strategy to engage with both supplier and customer to have a stong relationship to make sure every computer part from supplier is available to meet customer demand. And this system will ensure all the product will shipped and delivered to customer in the first place with effectively and efficiently. Yet, dell need create a system to link up supplier with the supply chain to build to order computer to meet customer demand. So they have to create another system called SRM (supplier relationship management).

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Nevertheless, Dell has implemented the integrated of (CRM), (SCM) and (SRM) that involve in the virtual organisation of dell. Basically dell has implemented a system tool call I2 system that playing an important role in the virtual organisation in (figure 2). The I2 Tradematrix Platform system have integrated supply chain, supplier relationship management, and customer relationship management tools can help optimize a wide range of business processes. These systems have linked up all system together and bring a lot benefit to dell business strategy.

Figure 3 i2 Technologies Issue 1 (2001)

I2 Tradematrix Platform

I2 system is about creating a sophisticate information system for collaborate with dell s business. i2 provides best solution to supply chain management tools, as well as collaborative for commerce solutions and business-to-business (B2B) solution. I2 system is base on technologies and standards such as Extensible Markup Language (XML), Common Object Request Broker Architecture (CORBA?), and Java script. These solutions run on industry-leading application servers to provide scalability, reliability, and value to i2? users . i2 provide good solutions available on Windows operating system to allowed customers to choose a better decisions in every phase of business, including:

? Direct and indirect procurement

? Dynamic sourcing

? Intelligent product allocation

? Collaborative demand planning and forecasting

? Inventory visibility and management

? Supply planning and optimization

? Intelligent order promising and real-time order status

? Collaborative logistics planning

? Collaborative product life cycle management (PLM)

I2 systems have brought different part of advantage strength to different position to the Dell value chain system.

The benefits from i2 SCM (supply chain management)

? Improved customer satisfaction and loyalty

? Differentiated response to customers

? Increased throughput and better product mix

? Fewer stock shortages

? Reduced inventory and obsolescence

? Reduced warehousing, transportation, and returns costs

I2 Customer Relationship Management (CRM) brought solution planning and execution processes to optimize each step to customer life cycle. This Concluded marketing, sales, fulfilment, and service management processes to give the best customer satisfaction. The benefit included:

? Consistent and personalized interactions with customers

? Intelligent selling

? Improved service costs and execution

? Data mining

Figure 4 (supplier relationship management)

Supplier Relationship Management

Figure3. With using I2Supplier Relationship Management (SRM) suite, focusing on reducing design, sourcing, and procurement time and costs and the benefit include

Figure3. SRM: design, sourcing, and procurement

? Reduced product development costs

? Reduced time to volume

? Reduced materials costs

? Reduced inventory costs

? Increased assurance of supply

Figure 5 (i2 TradeMatrix Platform design) i2 Technologies Issue 1 (2001)

I2 Tradematric platform design has enable distributor, supplier, manufacture and customer can interoperate in real time to work together see (figure 3). The I2 TradeMatric platform design benefit:

? Synchronized multi-enterprise business processes

? Support for a wide breadth of services

? Distributed transaction management and decision support without replacing existing systems

? A common platform for both i2 and non-i2 solutions compliant with open standards

Type of internet technology that used by dell

Figure 6(Headquarter Locations of Key Dell Suppliers)

Swot analysis on dell business model