Supply Chain Drivers of Dell

Supply Chain drivers of dell
Introduction
Founded in 1984, it is a multinational technology corporation that develops,
manufactures, sells & support personal computer& other computer related
products. It has got largest market share of PC business with 19.2% market share
just after HP with market share of 23.9%. Companys revenue for the year 2008
totaled $47.3 billion
Major setbacks:
1. First setback was experienced in year 1984 when huge stock of 256 k memory
chip became useless due to increased capacity of the chip from 256 k to 1Mb
overnight.
2. Second was when defected batteries were sold with laptops in 2006.
How it overcame?
It replaced all the defected batteries by calling back all the laptops that were sold
back to its service centers.
It improved its customer service by investing $150 mn
Dells Supply Chain:

After a customer place an order, by phone or through the
Internet on www.dell.com, Dell processes the order by doing financial evaluation i.e.
check credit limit and check the feasibility of a specific technical configuration,
which takes two to three days, after that it sends the order to one of its
manufacturing plants. These plants can completely build and package the product
in almost eight hours. The general rule for production is first in, first out, and Dell
typically determines to ship all orders within five days after receipt.
Dell applies a customer focus, supplier partnerships, mass customization & just in
time delivery to implement the strategy to create & sustain customer value by
efficiently responding to them.
Supply chain drivers of Dell:

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1.
2.
3.
4.
5.
Facilities
Inventory
Transportation
Information
Sourcing
Role of each driver in maintaining the efficiency & responsiveness of dells supply
chain are as follows:
1. FACILITIES:
Activities such as coordinating with its manufacturing facilities & managing
inventory are of primary concern for dell because they impact the price of the final
product to customers. Dell has a manufacturing arrangement with its key suppliers
such as Sony. Thus suppliers employees work in the dell facilities & work on the
planning & product development. Now because of the close relationship with its
suppliers & their reputation for building certain component dell does not perform
quality checks on their components .Thus dell does not maintain any inventory on
its own. It is owned by its suppliers. Moreover when required it instructs to get the
components matched in the delivery process which eliminates the need for dell to
have a distribution centre to perform all these kind of functions.
2. INVENTORY:
The inventory in its facilities is not owned by dell, rather owned by suppliers which
indirectly adds to the components price & finaaly the final product.Therefore, any
reduction in inventory definitely reduce the product price & finally benefits the
customer & definitely the company.Low inventory also lead to higher product quality
because it becomes easy for dell then to identify any defects in the inventory.
The vendor-managed-inventory (VMI) arrangement of Dell lets its suppliers decide
how much inventory they need to order and when to order while Dell sets target
inventory levels and then records deviations from the targets for each supplier. Dell
chose an inventory target of 10 days i.e. it make a plan for 10 days about the
inventory targets to achieve.
To help suppliers in making accurate or nearly accurate ordering decisions, Dell
shares its forecasts with them once per month. They not only focuses on Productspecific trends, but also reflect the seasonality factor. For example Christmas is the
top time of the year, back-to-school season and country-specific seasons for foreign
purchases (foreign language keyboards are especially influenced) etc. Dell revive its
forecast weekly acc to the various factors & suppliers receive forecasts monthly.
3. TRANSPORTATION:
Dell in some cases has significantly less time to respond to customers than it takes
to transport components from its suppliers to its assembly plants which require 7
days to as much as 30 days to transfer various components to assembly plants. To
compensate for long lead times and buffer against demand variability, Dell requires
its suppliers to keep inventory on hand. Thus small warehouses are located within a
few miles of Dells assembly plants. Each of the warehouses is shared by several
suppliers who pay rents for using that. Thus it store inventory there according to the
forecasted demand keeping some level of buffer stock accordingly & thus reduces
its transportation cost by ordering purchases in batches rather than individual
purchase.
4. INFORMATION:
By selling directly to customers dell computers uses e commerce to communicate
with customers, maintains low cost & customize products according to customers
specifications. Dell computers are driven by the desire to create value for
customers.
Through the use of internet, dells customers gain access to the same product,
service & catalogue information as its employees. Tailor made internet sites called
premiere pages gives customers direct access to purchasing & technical information
about the specific configuration they buy from it.
www.dell.com was launched in June 1994 and as soon as it was launched
customization become very easy for dell.Product list is available with price there.
Customer can directly purchase by credit card. Brochure is sent directly through e
mail. Complaints are also registered there & technical support is provided to the
customers. Thus customers can order, configure & even gather technical advice
online & get a completely customized product.
The corresponding Web site valuechain.dell.com is an extranet for sharing such
information as points of contact, inventory in the supply
chain, supply and demand data, component quality metrics, and new part
transitions. Dell envisions using this site to exchange with suppliers current data,
forecasted data, new product ideas, and other
dynamic information that might help it to optimize the flow of information and
materials in the supply chain. Value Chain is a program intended to extend Dells
successful direct-sales approach back into the supply chain with the goal of
increasing the speed
and quality of the information flow between Dell and its supply base.
5. SOURCING:
Dell has a virtual relationship with its suppliers who manufacture components &
maintain just in time for dell which are assembled in its assembly plants. Moreover,
for the customers who want or need more personalized assistance, dell send out
one of more than 10,000 service technicians to their site. However only a small no.
are dell employees. Most are contract employees (supply chain partners). This
allows dells employers to focus on activities that create more value for customers.
Conclusion:
Dells operation can be described as "High Velocity Mass Customization".
All the drivers of dells supply chain can be attributed to decreased cost & increased
customer service. The result was when retailers who aligned with dells competitors
began charging higher rates for servicing & supporting dell products, customers
remained loyal.
Unique product offerings, cost reductions, high responsiveness towards customers
demand has resulted in customer loyalty.
Key Objectives
Price is the amount of money changed for a product or service, or the sum of the
values consumers exchange for the benefits of having or using the product or service
(Kotler et al., 2003, p.332).
Historically, prices were determined through bargaining or negotiations between

buyers and sellers. Different prices were set based on the buyer needs and bargaining
skill. The establishment of one price for every customer is relatively new phenomenon
that came about with the rise of retailers but price still remains a major factor in
affecting consumer buying decisions. In addition, it is the most flexible of those
components. The ability of price to affect consumer decision and its flexibility makes
pricing strategies important in meeting Dells objectives in a competitive environment.
The main objective of Dell is to produce the low price and profitable notebook for the
customer.
For Dell Company, all the prices that they sell are posed to the internet and they
usually based on the e-commerce market. The main reason for successful pricing
strategy is having a reasonably accurate idea of supply and demand. Too high a price
and demand fall as less buyers purchase the product. Too low a price can increase
volume of sales but reduce margins profit. So, Dell has aimed for the e-commerce which
is the multiple markets operates at different times of day and may interact or affect
each others.
Dell Company had set different types of price based on the home user, small
business user and medium or large business user. The pricing structure changes as the
products move through their life cycle. The company also always changing costs to
make sure that they are still able to survive in the competitive environment. From there
we can see that Dell company success to do that especially they can provide any prices
and products that the consumers wants although promote and sell their product
through the Internet.

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How does Dell manage its inventory?

How does Dell optimize the flow of information between itself and its suppliers?

Supply Chain drivers of dell

Dells Supply Chain:

Supply chain drivers of Dell:

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Historically, prices were determined through bargaining or negotiations between

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