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Supply Chain Management

Supply Chain Management CASE STUDY; DELL INC.: IMPROVING THE FLEXIBILITY OF THE DESKTOP PC SUPPLY CHAIN

CASE STUDY; DELL INC.: IMPROVING THE FLEXIBILITY OF THE DESKTOP PC SUPPLY CHAIN

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INTRODUCTION

Dell Inc. is one of the leading low cost computer manufacturers in this era and is still growing strong against their competitors. Dell is one manufacturing company that has a direct business model (supply chain) that has no intermediary involvement but starts and ends with their consumers. Dell also utilises on the unique integration of level 5 versus level 6 manufacturing process with more reliance on third party integrators. Dell’s one key strategy and strength is basically having customer loyalty, the company manufactures to the preferred configuration of the customer demands which then is directly shipped to the customer, who generates a more reliable and satisfying customer experience. Dell could be the leading low cost computer manufacturers in the world but there are some problems that could evolve from inefficiency from their supply chain management.

FORECASTING ACCURACY

It was evident from the case study that Dell Inc. has a problem with forecast accuracy. According to research studies, forecasting is the basis of business planning because every plan depends on it. The more accurate the forecasts, the better would be the business plans. The problem which arises at Dell is when the actual demand surpasses the forecast which Dell than needs to source extra supply or risk the possibility of not meeting customer demand. This problem occurs because the lead time for manufacturing, assembling, testing and delivering the product is on average 13 weeks, such a long lead time makes it difficult for the suppliers to provide the additional supplies in order to meet Dell’s demand schedule. The forecasting accuracy problem which potentially happens at Dell is the cause of lead-times that is generated between Dell and the suppliers.

The recommendations for Dell to decrease the forecasting errors within the organisation is to aggregate the forecast. Aggregate forecasting is an estimate of sales, often time phased, for a grouping of products or product families produced by a facility or firm.

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Huntress stated that aggregate forecasts tend to be more accurate than detailed forecasts. Also, aggregate forecasting drives effective decision-making, as well as operational plans.

SUPPLIER ISSUES (THIRD-PARTY INTEGRATORS)

It was apparent from the case analysis that Dell Inc. has a problem with the third party integrators in order of supplying the specific materials to the organisation. In supply chain management of a manufacturing firm, third party logistics is useful in an effective manner to increase the quality of products and to minimise cost, especially, when outsourcing. According to the case, third-party integrators have the highest manufacturing cost which has been determined by the process complexity involvement. It has been identified that Dell does not have any dedicated manufacturing resources or capability to manufacture level 10 products to gain effectiveness and the complexity of bioregional procurement organisation of Dell Inc. When considering the on time deliver issue and uninterrupted supply inconvenience, third-party logistics meet the diverse issues in order to source the goods and services to the manufacturer. High transportation costs and long transit times would involved when the contracts are being moved into China for lower product prices and labor costs. In addition, issues recounting the essential economic efficiency where, size and mix of the transportation, cost of fuel consumption, utilization of maintenance and depreciation, capital cost and a range of wages defiantly. Also, this issue has been highlighted at Dell, ‘level 6’ (L6) chassis manufactures in Mexico who are retaining a difficulty of transportation and unfavourable customer infrastructure in relation to providing equipments as well. Furthermore, Mexico’s poor infrastructure and lack of efficient transportation also make company to avoid choosing the contract manufacture in Mexico.

QUALITY ISSUES

In this case study, Dell Inc. has also encountered a motherboard quality problem which is also one potential problem in the increasing of level 5 (L5) manufacturing. Motherboard is one of the key components of a desktop PC.

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Dell Inc. motherboards have been produced by contract manufacturers in China.

Therefore, they would require focusing on other manufacturer who can deliver the motherboards to level 6 (L6) manufacturers on time. Though, to remain on top of the list of contract manufacturers, it has to create, exploit and sustain competitive advantage. Dell may need to consider other motherboard manufacturers to overcome this particular quality assurance problem. But on the other hand, Dell can also solve the motherboard quality problem by improving relationship with present motherboard manufacturer instead of changing it.

BPI Team

To find a way to decrease the cost of L5 manufacturing by CMs Dell organized a

business process improvement (BPI) team. This team came up with 6 different options

and rated each based on complexity and cost.

The case never stated Dells target cost

reduction and since all of the options lower the cost of L5 manufacturing the complexity

of each option should be given primary consideration.

The option of integration in

factories in Mexico offers the lowest cost but its complexity score is the highest because

of a lack of necessary infrastructure in Mexico. This option is taken to be unrealistic because of it complexity, but in the future as Mexico improves its infrastructure this may

become a realistic option and the best.

Option 2 (revised):

Integration at DAO work

cells has higher costs and a high complexity.

Choosing option 2 and bringing in new

work to the currently well run Dell factories would interfere with customization one of

Dells core competencies.

Dell Inc. motherboards have been produced by contract manufacturers in China. Therefore, they would require focusing

Option 3A: Integration at SLC/hub has the lowest complexity

score but is only one point lower than option 4: Dell-managed 3PI.

The problem with

option 3A is the SLC/hub is not a facility originally built to handle this type manufacturing process it may turn into a big mistake if chosen due to capacity restrictions.

Dell Inc. motherboards have been produced by contract manufacturers in China. Therefore, they would require focusing

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