Case Study: Dell Supply Chain Evolution

CASE STUDY
Introduction
Dell responded to changes in the market by determining how different segments of customers derive value from
its products and services. The company’s analytics showed customer demand had become quite complex. The B2B
market demands predictability, speed, customization, services and precision delivery. Consumers want multiple channel
options, the ability to personalize for niche products, low-price options and devices that deliver content. This
complexity will only increase as content and virtualization begin to drive the market. To address these issues, Dell
segmented its supply chain as part of a multiyear transformation.
Dell Supply Chain Evolution
Historically, Dell was organized by products and/or region. As part of globalization, the company aligned organizations
to customer value consistently across regions. In 2008, it began to leverage its partner network of suppliers where
capability, quality performance and cost had improved. Dell would retain its in-house network where strategic
differentiation was valued by customers and provided a competitive advantage. This work was a precursor for and
an enabler of supply chain segmentation. In this research, we review the "Customer Value — Segmented Supply
Chain" portion of Dell's transformation.
The Challenge
Dell had three main challenges to solve in end-to-end segmentation:
Long-term demand sensing to continually refine its portfolio — Dell's direct model provided extensive customer
insights, with over two billion online customer visits per year. But the company also had to figure out how to
predict where the market was headed, define a three-year outlook of customer needs and support multiple global
customer groups.
Supply chain design for a new environment — It had to address a changing business strategy, product commoditization
and proliferation, emerging markets, global supply networks and multichannel sales and fulfillment.
Complexity reduction — Dell had to carve out an end-to-end, "low-cost" supply chain focused on efficiency, while
maintaining its responsive heritage provided by its CTO capability. This required simplification of product designs,
configuration management and planning processes
Approach
The transformation moved through six different phases, resulting in a governance process focused on continued
improvement and portfolio evolution:
Identify Customer Values
Dell used historical customer knowledge from contracts, survey results, business intelligence (BI) data and platform
sales to begin its customer-centric view of value. To provide a robust, outsidein perspective, Dell invested in
resources to complete detailed configuration profitability analysis, targeted surveys and external marketing insights
from multiple industries.
Understand Dell’s Strengths
As Mr. Raven stated, "We had to figure out what we needed to change and what we needed to retain based on
what customers value. We were trying to identify what skills would be most important for long-term supply chain
excellence." The company identified the following core competencies: deep customer relationships, supply chain
agility and a lean culture that continually improved and automated processes.
Understand the External Environment
An external perspective was provided through partnerships with Dr. David Simchi-Levi (then professor of engineering
systems at Massachusetts Institute of Technology), Dr. John Gattorna (then a visiting professor at Cranfield School
of Management), cross-industry leaders and various consulting firms. According to Ms. Clayton, “The perspective of
looking outside in is extremely important. We learn from who we believe is doing things best from a variety of
industries." Dell's competitive analysis focused on price points by configuration, new market entrants, such as
tablets and smartphones, emerging market requirements and supply chain services.
Chart Clear Course and Benefit
With a good understanding of customer requirements and the direction of the market, Dell began to design the
new supply chain portfolio. It started by defining the supply chain extremes of agility and efficiency.
Chart a Clear Course: Align Product Strategy to Customer Values

Results
Dell's transformation yielded both financial and qualitative gains:
Stronger connection to customers — In Ms. Clayton's words, "We knew we had to leverage supplier
capability and scale, but still control the things that are most important to the customer. We redeployed
our resources focused on controlling imaging, delivery and parts of design. We enable best value solutions
... giving the customer the exact value they want."
Complexity reduction — Product options had become too complex. In response, Dell reduced configuration
complexity in line with customer requirements. As Mr. Noakes stated, "Product offerings had exceeded
customer requirements and were adding unnecessary cost and responsiveness waste in the supply chain."
Improved internal collaboration — Identifying and managing functional interdependencies have driven
collaboration across product design, supply chain, marketing, sales and finance. Dell also simplified
interactions by centralizing global operations, while aligning to customer verticals.

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CASE STUDY

Dell Supply Chain Evolution

Chart a Clear Course: Align Product Strategy to Customer Values

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