Dells Supply Chain Management Strategy

Case Study Contents

1. 2. 3. 4. Introduction Dell Company Overview Dell Products and Services Dell Key Facts Key Employees, Top Competitors, Revenues, Manufacturing Facilities 5. Dell Timeline 6. Dell Business Segment Information 7. Dells Evolving Supply Chain Strategy 8. Typical Working of Dells Supply Chain 9. Five key strategies in Dells successful Direct Model 10. A supply chain with old technology is of little value 11. Restructuring at Dell 12. New Distribution Channels Direct Model and Retail Strategy 13. Integrating the Supply Chain 14. Related Reading 15. View sample pages of this case study

Case Study Abstract

The focus of this case study is the supply chain management practices of Dell. Dell has been following its unique direct build-to-order sales model for more than 20 years. Customers can plan their own configuration and place orders directly with the company via the phone or its Web site. Over the years, Dells supply chain efficiencies and direct sales gave it a competitive advantage. Can Dell regain its market leader position from HP? In 2006 however, Dell faced several problems. Many customers complained about long delays in supplies. Recall of Sony battery cells in its laptops brought undesirable media hype to the company. Increasing discontent of customers led to a slowdown in sales. Consequently, Dell lost its market leadership to Hewlett-Packard Co. (HP). Industry analysts felt that, with Dells competitors also improving their supply chains and matching Dells direct model, the company had been losing its competitive edge. Dell will have to bear additional costs with its foray into retail distribution thereby minimizing its cost advantage. Besides, profit margins of Dell will drop further since it will have to offer incentives to compete with HP in retail stores. Though Dell spruced up its product design and range but Apple is clearly far ahead of it.

Many experts feel that such new initiatives will only distract Dell from its supply chain operations. This case study covers the following issues:

Examine and analyze Dells Direct model, its basic working, success and future challenges Typical Working of Dells Supply Chain and future supply chain challenges Highlights Dells evolving Supply Chain practices and strategy and steps being taken by it to recapture its lost market leader position

Case Study Keywords: Dell, Direct model, Supply Chain Management, Supply Chain Strategies, Build-to-order model, Inventory optimization, PC Manufacturing, Retail Distribution Channel, HP, Notebook computers, Desktop personal computers, Competitive Business Strategies, Sustaining competitive advantage, Michael Dell, Distribution Strategy, Supply Chain Case Study

Case Snippets/Update

Dells market share in U.S. and Worldwide (in Q1 2009) compared to other top PC makers

In year 2010, PC sales are expected to rise 12.6 percent, according to research firm Gartner.

Supply Chain Management Case Study:

How Business Logistics Streamlined a Manufacturer's Supply Chain
The Assignment Business Logistics was contracted by a manufacturer with national and international distribution to find ways to streamline its supply chain management, to improve internal and external communications and customer service quality, and to reduce logistics costs. The company was routinely operating in a "hurry-up" mode with little time to plan and to execute its business smoothly. Our initial finding was that process changes, not expensive software, would initially help to vastly improve this company's overall supply chain management.

Our Strategy
To identify and develop solutions for this client we arranged to: 1.) Conduct a supply chain evaluation: In this stage, we conducted interviews with department managers including marketing, sales, production planning, purchasing, manufacturing, accounting, and transportation to develop an overall picture of the company's supply chain operations. These interviews were followed by our preparing flow charts that enabled us to track the flows and timing of materials and information from the moment orders were placed throughout the chain to the moment that customer deliveries were made. All facets of the operation were considered, including sales promotions, order booking, credit approval, sales forecasting, materials and ingredients purchasing, inventory management, order fulfillment, customer service, and freight shipping management to the customer. 2.) Develop a Task Force of involved employees: We worked with our client to appoint an insider manager to work with us to bring together employees within the company having involvement in the various aspects of the supply chain management. This group of people formed a special Task Force, charged with the responsibility of identifying ways to improve the flows of materials and information throughout the supply chain, including flows both to and from the company involving outside vendors. Weekly meetings were held to address various issues and to find ways to resolve them to increase the inter-departmental synchronization of various supply chain management activities.

Results Achieved
Our work with the Task Force team uncovered many "bottlenecks" and communications failures in the supply chain that, once changed, resulted in sweeping improvements throughout the company. For instance, we found that: 1.) Sales brokers were holding orders until the last minute before sending them to our client in case there were any changes to be made. This practice left very little time for our client to make production adjustments to cover any possible inventory shortages. 2.) Credit checks were frequently delaying the release of orders to the production-planning department. We found that the vast majority of orders were approved by credit, and that by

informing the rest of the company that these orders were in "cue", preparations could be made to accommodate orders much faster once the accounting department released them. 3.) The transportation department had been experiencing difficulty getting trucks to handle customer deliveries. We found that truckers were given less than 24 hours notice before orders were to be shipped, not allowing them enough time to position the necessary equipment at the customer's shipping location. The short lead time was mostly due to the fact that the transportation department was not informed of pending orders until the day before they were to be shipped.

Results Achieved: Better Service and Cost Savings

By coordinating upstream communications we were able to increase the transportation department's advance notice of orders by as much as 10 days. In addition, we worked with the department to prepare an advance Transportation Needs Plan that was shared with our client's preferred carriers well in advance of the actual service need dates. This change in the supply chain management enabled carriers to plan for our client's transportation needs, significantly improving our client's customer service levels. We were also able to negotiate reduced freight rates as a direct result of developing the Transportation Needs Plan. Instead of telling carriers when to pick orders up, we reversed roles and asked carriers to tell our client when loads should be picked up so that they would be delivered on the date and time as requested by each customer. This enabled the carriers to increase their productivity through the better and more efficient use of equipment. These improvements are but a few examples of how our client benefited from our Supply Chain Management Consulting Services. One added benefit, for example, was that employee morale improved as a result of the increased levels of inter-department communication and cooperation. The company is now performing well financially and is very competitive.