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Dell Inc assures its customers that they can get their product within minimum of five days from the day of giving the order. In order to achieve this Dell follows properly planned operations. Even though Dell's factory has no warehouses they won't manufacture a single machine taking an order into account. The orders are sorted out by the factory planner, which decides the order to be given to the dell's suppliers. The suppliers have to respond within two days for the orders and the assembling part is done in the factory site according to each orders including software installation. The manufacturing of other components of the computer like key board, mouse is sub-contracted and they also have to respond within two days. The flat box containing these sub-contracted components is called as the Pizza box by the workers. The barcodes on all the shipping box, system box, and pizza box are scanned to check whether they match and for the address to which it has to be delivered. Finally the finished products are transported through their logistical hubs. (www.allbusiness.com, 2011).
3. DELL'S DECLINE
This was the key for the success of the Dell Inc for a long period of time. But the same idea proved to be reason for the fall of the company share in this modern business environment. Because the lack of showrooms proved difficult for the customers to claim warranty and check the models before buying the computers. In 2006, Dell faced a catastrophic decline in market shares from between 18% and 19% to 8.9% in the same year which is lower than HP. During the same period HP gained a upgrade from 15% to 17.4%. In order to solve this problem Dell opened kiosks in countries including Australia, Canada, and Singapore with facilities to advice customers about the best model which suits them before ordering through internet or phone. From 2006 Dell started retail shops in India, one exclusive showroom in Texas, USA, a retail shop in Budapest in 2007 and started retailing around the world through some of the big dealers like Tesco, PC world in 2008. But by 2010 Dell closed all its kiosks around the world without revealing the reason. (Wikipedia, 2011).
4. DELL VERSUS HP
HP was taken over by Dell during 2003 with its direct sales strategy. HP struggled a lot to improve its direct sales system but after 2005, it found the drawbacks in Dell's strategy like
· Overwrought relations with partners
· Imperfect deliveries of the products
· Lack of marketing focus.
As a remedy for these problems, HP started to improve its retail distribution channels. They introduced new designs and concentrated solely on retails sales rather than direct sales. The result was fruit full and they took over the market position above Dell. (www.marketingmo.com , 2010).
5. MARKET CHANNELLING
The market channelling involves planning, implementation, control and related information about the finished products. It means that "Getting the right product to the right customer in the right place at the right time" (Kotler, P. 2010).
The market channelling can be done through different intermediaries like wholesalers, retailers and advertisement, which is solely done for attracting the customers. Now a day this concept has become "Customer-centred logistics" which works from customers towards the factory. It makes a state of getting the product to the customer has become difficult than selling the products. The channelling should be suitable for a particular place, because expectations from the customers vary in different parts of the world. Because in some places people like online shopping more than direct purchase. So it became necessary for a company to be very focused on channelling decisions which in turn can affect the other marketing decisions. Every product of the company should fit the abilities of the channel members and everyone them should agree with pricing policies and offers. Some it leads to a channel conflict and the management has to speak with them and solve the problem. For example in a computer manufacturing company's channel wholesalers expects the retailers to make bulk orders, retailers look for more attractive offers from the company and low price from the wholesalers, etc. (Kotler, P. 2010).
The channelling is done for getting the finished products through different chains to the customers. The main part of the channelling is the logistics, which is responsible for the proper movements inside the channels.
The channelling decision can be taken under the following six different concepts.
Gravity & Gravity
Push and Pull strategy
Product (or service)
Consumer location (Wikipedia, 2011).
6. INTERNATIONALIZATION PROCESS
Framework of Internationalization Process
(Waters, D. 2010)
Fig: 1 explains the internationalization process of a business in general. In the case of Dell they already have a good fame internationally and a fine experience in this process but out of fashion. So they need some changes in the process following the same steps.
a. Evaluation of the new market:
The research for the evaluation of the new market has to be done with the aspects of comprehensive analysis of the market, overall status, and it's feasibility to meet their objectives. Dell needs change from its direct sales style, so they have to evaluate places which should have a good demand for computers especially Dell products and also logistical facilities from its plants, as they already running their plants in different parts of the world.
b. Strategic Planning:
The strategic planning involves budget for the new plan, time schedule, and different divisional functions of a company and at the top, a clear goal. Here Dell is going to add a new function that is proper showrooms like all the other competitors. So they should focus on appointment of the showroom staff and make people aware of their new face.
c. Logistics Planning:
This includes inbound, outbound and in-house logistics. Dell is going to face major changes in outbound logistics. By a proper planning of this process they still can manage without having major ware houses and with little inventory holdings. They are presently transporting with the proper processing of the customer's orders as soon as they reach them. Additionally, they have to appropriately plan their logistics according to the demand or stock needed in the show rooms. So they can deliver the stock without storing them in stock points.
d. Implementation of the logistics system:
The managers should be continuously monitored whether their supply meets the need of their customers. Several uncertainties can happen in this process, so they should be well equipped to meet those problems both tangibly and intangibly. Owing to the instantly delivering process, the firm becomes more vulnerable for the out-of-stock state. Through a proper survey this can be proves to be more cheaper and time-saving method. (Waters, D. 2010)
7. JUST-IN-TIME STRATEGY
As mentioned earlier, Dell can reduce inventory and warehousing cost by a proper planning of the logistical system. This strategy is called as Just-in Time strategy. This was primarily introduced by Japanese in 1950s. The main scrutiny of this strategy is to reduce or completely avoid the work-in progress inventories.
The Just-in Time strategy says that, "To manufacture products only when needed and as efficiently as possible by eliminating wasted or duplicated activities." The firm should work towards producing products with zero defects at the first time itself thereby they eliminate returns or warranty claiming. As per this concept the inventories are used only to cover the problems, so the problems will be exposed by reducing the inventories. Solution for certain problems should be found before reducing the inventories. In other words we can simply explain this concept as "zero inventory or stockless production".
From a logical point of view this is what Dell is doing right now. But they are currently just-in-Time directly to the customers; they should be Just-in-Time in delivering the products to their exclusive showrooms and retailers. So that they can improve their retailing capacity and in addition they can maintain their inventory and warehouse policy to some extent. This includes some of the strategies like
a. Reduced Lot sizes and Set-up Time:
This is one of ways to reduce the inventory level. In order to achieve this economically, set-up costs and times should be abridged. This can be done from low technology level like performing changeover at the job site to high technology level of improving the technology at the manufacturing site like installing automatic equipments. This can reduce the set-up time from days to hours and sometimes even to minutes. But the logistical system should be highly flexible with the variations in these processes.
b. Balancing the work-load:
The work load for the employees and plant equipments should be balanced in order to maintain the speed of the processes in the factory. As a result of this, logistical system needs some changes in correspondence with the changes which are done to level the work load.
c. Combining the works:
This includes minimizing the distance to be travelled by reducing the number of trips, avoiding unnecessary moves and make it pinpointed to achieve a selected process. We have to apply the group technology by avoiding the storage of spare parts. This means that they have to fulfil a cycle of production. For example in a computer manufacturing company, they have to finish the product including software installation instead of manufacturing only monitors at one stage and processors at another stage. This needs unnecessary storage area and inventory holdings.
d. Intense process control:
Maintaining the quality of the product is the key strategy in Just-in-Time process. Return of the products and warranty claiming causes unnecessary costs and inventory holdings. This can be achieved by proper inspection of workers and also proper maintenance of the equipments. This is a statistical procedure which measures and determines the variations in the processes of the plant by continuous monitoring and takes action if the variation occurs beyond the acceptable quantity.
e. Prevention measures:
A proper planning must be there to apply during unexpected breakdowns or crashes. Because, in this procedure of reducing work-in-process inventories, these breakdowns can cause serious variations in the company's schedule. It is believed that a proper maintenance and adjustments can reduce the overall production costs. (Bowersox, JD. 2010).