Dell Operations Strategy Innovation

Dell Inc. is a premier provider of products and services required, for the building of information-technology and Internet infrastructures of customers worldwide. Its operations strategy focuses on mass customization marketing strategy, build-to-order production system, as well as on its production and supply chain designed for its agile and fast turnarounds.

OPERATIONS STRATEGY

Operating a plant owned by the company itself is one of the global manufacturing strategies of the Dell Inc. This is to bring their online operation in time, in achieving its goal of meeting the ever-growing customer needs. It also provides good proximity to an available workforce and supports the objectives of its logistics.

In locating its possible plants, it places preference over strategic locations suitable to advance manufacturing and distribution companies serving the East Coast markets. Like Dell’s Winston-Salem plant who will produce their PowerEdge servers, PowerVault and the Dell/EMC products, and OptiPlex and Dimension desktop computers primarily for the US market. The said distribution’s advantages made it to be the company’s site choice. This is its easy access to almost all of the major East Coast markets, within a one-day truck haul.

INNOVATION

Dell Inc. also operates as one of the highest-volume internet commerce sites in the world. According to a study done by Mainstay Partners, the returns of the company will come through cost avoidance in four principal ways. They are by the breakage of the buying cycle and maintenance of expensive proprietary hardware systems; by substantial reduction on administrative and database management costs; by a boost on system capacity while scaling as the business requires; and by raising its availability, thus, the potential for revenue-draining downtime is greatly reduced.

The company uses a sales strategy that was a model of the lean efficiency. It involves direct customer sales, without the use of retailers or intermediaries. Through this high-efficiency business model, the company is able to keep low costs in bringing new technology to its market, faster than any companies, using indirect distribution channels. Dell’s marketplace advantage is brought up by its innovation together with its one-to-one direct customer communication. Another innovation is their web presence through the Dell.com, a massive channel for sale.

In addition, the new system of Dell running Oracle 10g grid on Linux is another success on the company’s part, as it does more work, more quickly compared to their previous one. Among its gains includes doubled session capacity characterized by stronger, more sustainable system performance; higher daily order volume, due to its improved performance and availability for users through the elimination of constraints and slowness; automatic distribution and balancing of the increased workload in case of node/s’ failure; and the elimination of system outrages, that cause gaps in line manufacturing and raises the chances of staff sent home.

The new system delivers seven times the performance for only one-tenth of the cost. Besides, due to its improved performance and reliability, the company will be able to save around $4.6 million for over five years time, as projected by a study. Other area of potential value brought by the grid system is the automated storage management in Dell’s back office operations.

SUPPLY CHAIN MANAGEMENT

Moreover, Dell has become a poster child for outsourcing, using its emerging trend of near shoring. “Near shoring” refers to the companies’ practice of going offshore (but in countries with closer proximity to its home bases) in outsourcing its operations. Its success lies on its developed innovative supply chain together with its just-in-time operation. The latter combined more responsibility pushed onto suppliers with the outsourcing of non-essential functions.

INNOVATION

Dell broke into the big time by developing a business strategy and supply chain strategy that worked together. In the late 1980’s and early 1990’s Dell’s business strategy was differentiation through low cost, speed of delivery, and customer service. The major channel for sales was from customers to call centers. However, the emergence of the internet called for more differentiation and fundamental change. With a well understood business strategy, Dell began to formally integrate operational components (e.g., logistics, manufacturing, distribution, inventory management) and develop a supply chain strategy. The supply chain strategy focused at driving costs out of the supply chain – being the low cost provider – while at the same time supporting a business strategy emphasizing customer service

QUALITY STRATEGY

Dell Perot Systems has established, documented, and implemented an ISO 90001:2000-certified quality management system (QMS) that focuses on meeting customer requirements and enabling employees to do their jobs right the first time. The Dell Perot Systems QMS Manual defines and documents how requirements for quality are met. The design of the QMS is influenced by varying customer needs, particular objectives, the products and services provided, the processes employed, and the size and structure of our organization. We recognize that success comes from focusing on doing things right the first time, on time, every time, meeting customer requirements and exceeding their expectations.

DELL HR

At Dell, HR is divided into “operations” and “management,” explains Price. HR operations coordinates transactional functions, such as benefits, compensation and employee relations, through a service center. Staff members report directly up the chain through HR, and rarely have contact with business units. HR management includes Dell University, the company’s education and training function; staffing; and HR generalists who report to both the vice president of a business unit and the vice president of HR. Management deals with tactical, rather than transactional issues. These HR employees attend the business unit’s staff meetings as consultants; develop the leadership team; produce metrics for such things as turnover, productivity and cycle times; and develop an HR strategy for that particular line of business.

This division between operations and management allows HR to efficiently focus on two different types of customers. Operations supports Dell employees in general, while management supports Dell’s business.

“During the education segmentation, we segmented our sales organization first,” says Price, “then began to prepare marketing and get brand management teams for each segment. That’s why having HR people in those lines of business is so critical – they drive that.”

Dell’s HR management team assists in the segmentation planning process by handling HR issues, such as identifying personnel needs, working out lines of reporting and organizational charts, and defining training needs. HR consults strategically with the business unit but also works out the nuts and bolts of putting people where they need to be, with the necessary skills and training.

IKEA

IKEA’s mission is to offer a wide range of home furnishing items of good design and function, excellent quality and durability, at prices so low that the majority of people can afford to buy them (IKEA 1994). Founder Ingvar Kamprad’s innovative strategy was to design functional furniture that was easy and inexpensive to build, receive it disassembled at stores, and display it on the showroom floor with detailed explanation tickets, making sales person assistance unnecessary.

OPAs IKEA is operating just like a warehouse, it produces a high volume of furniture and products that could be self-assembled. The fact that IKEA can also be found in other countries allow for economies of scale and hence, IKEA is able to bring costs down with its high-volume production. The downside of this would be, as one customer puts it: “I have something which everyone else in the world has. This product is not unique.” Despite having a high-volume business, IKEA has a lean buffering capacity, with only a limited amount of stock bought to ensure that the possibility of unwanted stock is reducedERATIONS STRATEGY

INNOVATION

IKEA’s furniture is ‘value for money’ with a wide range of choice. It is designed to be stored and sold as a ‘flat pack’ but is capable of easy assembly by the customer.

The ‘Swedish’ design emphasizes bold colors, styles and functionality. The company promotes products to be modular, allowing different variations of the same basic product to be customised to produce greater variety. This allows IKEA to provide greater variety for its productswithoutholdinglargeamountsofstock.

Instead of having to wait for a sales personnel to service them, customers have the flexibility to move around and pick up what they want. They are free to browse through the showrooms and even pick up small items directly off the display shelves if they like to purchase them. There is no need to waste any time waiting for someone else to get it for them.

HR AT IKEA

IKEA’s vision was “To create a better everyday life for the many people.” ‘People’ included employees, customers, as well as the community. The company’s human resource philosophy subscribed to the belief that employees were more productive and committed when the company took care of the mand their needs.

IKEA adopted a paternalistic stance toward employees and their needs (as did many other Swedish companies) and promoted employee empowerment. However, although the company had a positive HR philosophy and offered generous benefits, their application was more or less standardized and policies applied uniformly to all employees.

IKEA’s positive HR policies were supported by a strong and nurturing culture that promoted diversity and creativity. Spiers-Lopez said IKEA’s culture was characterized by a family-like quality that made relationships between employees strong and open.