Dell Supply Chain Analysis

10 October 2016

Dell’s Position in PC market Service level: high customization, etc Competitive Strategy: Dell chooses the customers who prioritize Variety: high product variety Quality: reasonable quality Price: reasonable price Lead time: approximately one week Implied Demand Uncertainty Impact of customer needs on implied demand uncertainty Conclusion: The competitive strategy in meet high variety and service level contribute to Dell’s high implied demand uncertainty. Dell SC Capabilities 1. Facilities 2. Inventory 3. Transportation 4. Information 5. Sourcing 6. Pricing 7. Customer service

Facilities • Location: Regional approach, suppliers’ facilities built next to door • Capacity: Lowest raw material shipping time, perform intended functions, little excess capacity will be more efficient per unit; high-utilization facility difficult to respond to demand fluctuations , customer could conveniently send orders via internet and telephone. Summary: Dell’s facilities strategy reduce inbound shipping time, and the logistics cost, and increase service level. Inventories • Safety Inventory: on-site inventories to copy with the next few hours of orders • Seasonal Inventory: Level of Product Availability(time): High Level and just-in-time Delivery 4 days across the entire operation Summary: Dell’s low inventories strategy minimizes inventory and overstock, therefore it could meet customer high variety by quickly transferring to latest products.

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Transportation • Leave it to the Suppliers • Design of Transportation Network: Air Networks mostly in Asian Market: Shanghai, Taiwan, Singapore, Hong Kong • Choice of Transportation Mode: Summary: Dell’s transportation strategy could minimize the production lead time, and also could provide high service level by shipping products directly to customers’ home.

Information • Push Versus Pull • Coordination and Information Sharing • Forecasting and Aggregate Planning: how to make and to what extent to rely on • Enabling Technologies: EDI, Internet, Extranet, B2Bi Summary: Shared Information strategies could realize supply continuity. Thereby it could meet the high customization and product availability. Sourcing • In-house or Outsource • Supplier Selection: 50 suppliers • Procurement: Consolidated supply, 80% of procurements to ensure low transaction costs Summary: Stringent supplier selection criterion could increase product availability, and reduce supply uncertainty.

Pricing& Customer Service • Pricing – Eliminating the by distributors and retails as well as the added value; – Pricing is not Dell’s main strategy, but Dell provides a reasonable price with good quality. • Customer Service – Customer orders conveniently via phone and internet; – Shipping the products to customers’ home; – Service Center is dedicated in Dell’s brands. Summary: Dell’s strategies in pricing and customer service could provide products with high service level and reasonable price. Responsive Supply Chain ………

Supply chain responsiveness includes a supply chain’s ability to do the following (Chopra & Meindl, 2010): • Respond to wide ranges of quantities demanded • Meet short lead times • Handle a large variety of products • Build highly innovative products • Meet a high service level • Handle supply uncertainty Conclusion: Dell realize a supply chain with high variety, service level, and flexible to hand supply uncertainty, Dell supply chain is high responsive. The responsiveness spectrum Somewhat Somewhat efficient responsive Dell: Highly responsive Highly efficient Why it works well . Facilities 2. Inventory Service level: high customization, etc 3. Transportation Variety: high variety 4. Information Quality: Reasonable quality 5. Sourcing Price: Reasonable price Lead time: approximately one week 6. Pricing 7. Customer service Strategic Fit Why it works well High implied Uncertainty VS. Responsive SC Strategic Fit–Intercompany Interfunctional Scope • • • Dell SC considered different functions inside the company; Dell SC considered different stages; The intercompany interfunctional scope could obtain the maximize profitability. Suppliers Dell Customer

Intercompany Interfunctional Scope Competitive Strategy high [variety, customization, service level], reasonable [price, quality, lead time]. Supply Chain Strategy Build facilities next to Dell plant floor; Managing manufacturing per Dell MRP forecast; Ensuring freights were last loaded in order to be unloaded first. Build to order; Lowest inventory; No distributors and retailers; Shipping to customer home, etc. Online sales; Sharing MRP forecast, order flow, Inventory with suppliers, etc Direct contacting with customer Ordering computers on line; Customizing the computers.

Information Strategy M&S Strategy F&A strategy Tight cash flow Limitations of Direct Model • Time: – Relative long lead time for customers(one week); • Cost: – Suppliers’ next to door facilities increase suppliers’ cost; – High delivery cost, especially for rural areas; • Service Level: – Complex and time-consuming after sale service; – Low inventories may impact in production continuity; – Lack of first hand experience before buying; • Variety – Limited diversity due to Dell’s commitment to Intel; • Innovation – Less innovative, relying on suppliers’ intellectual property.

Challenges in Emerging Markets • Printers and TVs markets – Difficulties to make outsourcing printers work seamlessly with dell’s products; – Less innovative; – Competitors start to sell online; • New geographic markets – More expensive than other competitors in low-end products; – Customers dislike to buy on the phone or internet; – Expensive cost in delivery, service and support in rural areas; – Limited diversity and higher cost due to Dell’s commitment to Intel; – inability to serve all market needs due to limited vendors; – Requirement for better information and communication technology.

Proposals for Dell • Printers and TVs markets – More innovative; – More TVs displaying in public places to raise customer awareness; – More development in high-end products; • New geographic markets – More product availability and diversity in low price products; – Long term cooperation with dedicated logistic companies or huge wholesalers to reduce the delivery cost (e. g. Amazon); – More localized channels to place and pay orders; – Setup franchisee to provide customer service and support. The End. Thank you!

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