Dells Response To Global Supply Chain Management
Dell was originated since 1984 with its founder, Michael Dell, with its limited PCs. He started with selling personal computer systems directly to customers. Later on, Dell Computer Corporation began growing internationally around June 1988 into the market of Ireland. This is the point of time that the logistic planning and supply chain process becomes complexity. At the same time, Dell became one of the lists of the world’s Fortune 500 companies.
In 1996, Dell started using their channel via through websites. Then Dell also expanded its product lines as well to include products such as television, handhelds, digital audio players, and printers. These even increase the complexity of its supply chain process. However, Dell turned out to be somewhat reputable with all the hard efforts that they have put in.
Dell’s headquarters are located in Round Rock, Texas in which it previously moved from Austin, Texas. It also expands its offices and corporate headquarters to other locations such as Las Cimas, Texas. Dell seems to be somehow concerned in environmental friendliness since approximately 60% of its total powers is generated from TXU Energy and 40% from gas.
We agreed on that since Dell has a wide global coverage of markets, they should be greatly concerned on its logistic. The logistic is directly interrelated with lead time, delivery cost, and risk of Dell. They should compare with using centralization or decentralization for the distribution system in each of the market respectively.
Dell’sLogistic Process
One major reason of Dell’s success is the management of its supply chain. Since the foundation of the company in 1984, Dell applied the strategy of direct sales in order to get more information about its customers’ needs and to react on these needs in order to increase customer’s satisfaction.
Dell has developed a strong supply chain and always tries to maintain an excellence relationship with all the other chain members. The company sees the advantage and opportunity it will have if it uses a strong supply chain in order to compete with the other competitors in the computer system industry. In order to prevent errors during the manufacturing process and to avoid the occurrence of too many defects, Dell requires certain standards of its suppliers. These standards include the ISO 14001 certification, which requires the suppliers to apply environmental management systems and also OHSAS 18001 certification which requires the suppliers to provide a safe workplace and to have a safety management.In order to save costs, Dell Inc. seeks for suppliers producing the components needed to assemble the Computer system from all continents. For example, Dell imports hardware components such as the Ram chips and disc drive from Taiwan and the soundcards from France. Other suppliers are located in China, Malaysia, Singapore, Japan and Mexico.
Dell Inc. uses a so called Dell Global Supply Base located in Taiwan. By using this base and a supply chain network with nine 3PL providers, four ocean networks and four air networks, the company can easily ship the product from one part of the world to another and can efficiently manage its supply chain.
After Dell has sent the orders to the suppliers, all components are then shipped to the Dell Manufacturing Plant in Austin, Texas. After the assembling process is finished, the assembled computers will be shipped on demand directly to the customers. In order to increase sales and to increase market share, the company decided to apply a restructuring program. Since Michael Dell was restructured in 2007, the company does not use direct sale as the only way of marketing the product anymore. The firm decided to choose retailer stores to market the Dell computers. These retailers were carefully selected in order to ensure a high level of customers’ satisfaction.
Another reason for its success lies in the decision to use a mixed pull-push strategy. By using this strategy, the company is always aware of the demand and can forward these information directly to the suppliers. By using high sophisticated software applications, Dell can maintain a perfect synchronization between manufacturing and sales.
Dell applies some kind of a just-in-time policy which gives the company the opportunity to make warehouses abundant because the majority of components is only stored for a couple of hours.
Strategy or Market of Logistic Planning of Dell
Dell, a well-known company selling computers and electronic devices, has a high reputation on innovative supply chain management. As nowadays, products and services themselves are not enough to compete with the same level of competitors in the market. Lower down the price to get market share is not the sustainable solution for the industries. Lastly, the one who can practice lowest total cost is the winner standing above others. Beside of operational costs, ordering and inventory holding cost is the primary factor we have to concern about.Dell is well-known for its innovations in supply chain management which consist of intelligent strategies.
Push-Pull boundary
In a push/pull strategy, the manufacturer will build to order. This implies that component inventory is managed based on forecast, but the final assembly is made in response to a specific customer request. So, the push part is part of the manufacturer’s supply chain prior to assembly, while the pull part is the part of the supply chain that starts with assembly and is based on actual customer demand. With this strategy, Dell has the lowest level of inventory to avoid computer depreciation in stock.
“Push” “Pull”
Buy-to-Plan Build-to-Order
Every Week Every 2 hours in each mfg center
Material requested to build
customer ordersCustomers
All material is tied to a
customer order – nothing gets
built without an order.
1) Dell facilities act as Manufacturing Centers, not Warehouses – only inventory needed for few hours of orders is on site.
2) Provides direct signal of Dell customer demand for suppliers.
3) Dell’s performance to customer orders is directly linked to their suppliers’ level of support.
4) Absolute synchronization between manufacturing and sales keeps the process balanced.
2. Indirect Channel
From its early beginnings, Dell operated as a pioneer in the “configure to order” approach to manufacturing – delivering individual PCs configured to customer specifications. In contrast, most PC manufacturers in those times delivered large orders to intermediaries on a quarterly basis.
To minimize the delay between purchase and delivery, Dell has a general policy of manufacturing its products close to its customers. This also allows for implementing a just-in-time (JIT) manufacturing approach, which minimizes inventory costs. Low inventory is another signature of the Dell business model – a critical consideration in an industry where components depreciate very rapidly.
You should have quoted the source from Wikipedia.org
At the first beginning of Dell supply chain management, Dell used to focuses on direct channel selling products from manufacturer to firms (business to business) without intermediaries. Dell’s business model proved so successful that the company then began marketing direct to the home PC market using retailers such as their IT city or their own retail stores.
Cost leadership
Lower cost drives increased demand
Competitive pricing ignites demand
Pass cost savings on to customer
Industry’s most efficient procurement, manufacturing and distribution process
Using build to order and effective supply chain management enable the company to have significant cost advantage and extend the market both on business and household users.
Dell’s Market
As I already mentioned, Dell have been successful in business to business direct sell and gradually develop the household marketing. Nowadays the target market of Dell focused on individual users who have low budgets and appreciate the technology rather than focusing only on the executives and managers with no budget limitations. Therefore, Dell increases the number of retailers and intermediary to reach household market in recent years.
Dell markets specific brand names to different market segments. There are 2 product categories distinguish between business and household products.
Their Business/Corporate class represent brand where the company advertises emphasizes long life-cycles, reliability, and serviceability. Such brands include:
OptiPlex (office desktop computer systems)
Vostro (office/small business desktop and notebook systems)
n Series (desktop and notebook computers shipped with Linux or FreeDOS installed)
Latitude (business-focused notebooks)
Precision (workstation systems and high-performance notebooks)
PowerEdge (business servers)
PowerVault (direct-attach and network-attached storage)
PowerConnect (network switches)
Dell/EMC (storage area networks)
EqualLogic (enterprise class iSCSIHYPERLINK “http://en.wikipedia.org/wiki/Storage_area_network”SANs)
Dell’s Home Office/Consumer class emphasizes value, performance, and expandability. These brands include:
Inspiron (budget desktop and notebook computers)
Studio (mainstream desktop and laptop computers)
XPS (high-end desktop and notebook computers)
Studio XPS (high-end design-focus of XPS systems and extreme multimedia capability)
Alienware (high-performance gaming systems)
Adamo (high-end luxury laptop)
Implication in Interrelationships Regarding to Our Course
Chapter 2: Barcode Technique:
A UPC-A barcode symbol
A barcode is an optical machine-readable representation of data, which shows certain data on certain products. Originally, barcodes represented data in the widths (lines) and the spacing’s of parallel lines, and may be referred to as linear or 1D (1 dimensional) barcodes or symbiosis. They also come in patterns of squares, dots, hexagons and other geometric patterns within images termed 2D (2 dimensional) matrix codes or symbiosis. Although 2D systems use symbols other than bars, they are generally referred to as barcodes as well. Barcodes can be read by optical scanners called barcode readers, or scanned from an image by special software. Barcode Printer, Barcode Software, PDT (Portable Data Terminal).
Chapter 5: Coping with Bullwhip Effect:
Certified Refurbished PCs are laptops and desktops that have been returned to Dell, put through the production process, and then again retested to ensure they meet all original factory specifications. Certified Refurbished systems may have some observable cosmetic blemishes, but they will not affect performance.
Previously Ordered New systems are PCs that were canceled orders, or PCs that shipped out to a customer who either did not open the box or decided to return the system without ever using it. Previously Ordered New systems do not have any cosmetic damages.
Scratch and Dentproducts are system with considerable cosmetic blemishes that do not affect performance. They are not a great way to save money while still enjoying Dell Outlet’s rigorous rebuilding and testing process. Scratch and Dent computers will not have scratches or pits on the screen, missing or illegible letters on the keyboard, or damage to the touchpad or palm rest.
Dell uses the strategic Partnership with major retailers, such as Wal-Mart, Carrefour, Big C, Power Buy, and Best Buy and so on to extend its market.
Avoid copy and paste directly onto your own work without any changes of wording.
Chapter 6: E-business model:
E-business model is the process of redefining old business models, using Internet Technology, so as to improve the extend enterprise performance. Dell Company uses E-commerce in B2C, sells its products directly to the customers.
¼ˆonline shop of Dell¼‰
Chapter 6: Pull – Push Strategy¼š
The business terms push and pull originated in the logistic and supply chain management, but are also widely used in marketing
A push-pull-system in business describes the movement of a product or information between two subjects. On markets the consumers usually “pulls” the goods or information they demand for their needs, while the offers or suppliers “pushes” them toward the consumers. In logistic chains or supply chains the stages are operating normally both in push- and pull-manner. The interface between push-based stages and pull-based stages are called push-pull boundary or decoupling point.
Dell Company combines the logistic and supply chain management with the marketing, it is deferent with the mean Dell used before, which was just consider to sell products directly to the customers.
Chapter 8: Strategic Alliances:
A Strategic Alliance is a formal relationship between two or more parties to pursue a set of agreed upon goals or to meet a critical business need while remaining independent organizations.
Partners may provide the strategic alliance with resources such as products, distribution channels, manufacturing capability, project funding, capital equipment, knowledge, expertise, or intellectual property. The alliance is cooperation or collaboration which aims for a synergy where each partner hopes that the benefits from the alliance will be greater than those from individual efforts. The alliance often involves technology transfer (access to knowledge and expertise), economic specializationHYPERLINK “http://en.wikipedia.org/wiki/Strategic_alliance#cite_note-0#cite_note-0″[1], shared expenses and shared risk.
Avoid copy and paste directly onto your own work without any changes of wording.
Dell and Telefónica form strategic alliance to deliver innovative connectivity and communication solutions. Dell and Telefónica today announced a strategic alliance that marks the beginning of a new collaboration effort to develop future products and services designed around enhanced data-first experiences, enabling customers to interact with family, friends and businesses whenever and wherever they choose.
Iron Mountain and Dell® have a long-term relationship focused on helping customers with data protection, archiving, e-discovery and compliance needs across the breadth of Dell storage platforms.
Dell and Perot Systems announce strategic alliance to provide Fully-Integrated Virtualized Healthcare Technology Solutions to reduce cost and improve patient care.
Dimensions of Dell’s Logistic Process
Cost
DELL used the way to sell its product by delivering it to customer directly from factory, it caused very high logistics cost. Also, the costs caused by transportation or other economy-related factors cannot be compensated by reducing inventory cost. Therefore, DELL uses the E-commerce to sell its products. It can help DELL reduce the cost of the services, which is to explore the third profit source of service. The enterprises can be considered include: use of third party logistics (3PL); e-commerce between business operators and the general business operators union, to take logistics integration plans; also can invest in some new logistics information technology, such as operational research, management techniques, SKU management, bar code technology and information technology, to improve logistics efficiency and effectiveness, and reduce the door to door transportation cost and so on.
Time
DELL used the way to deliver the computer to the customer directly from the factory, which causes the lead time is too long. In traditional sales channel, the customers buy the Dell’s computer because consider the brand name and reputation, and if there is some differences between the actual product and what they expected, so they will be disappointed and will not purchase it again. Therefore, the company bears a large market, manufacturing and logistics risk.
For now, DELL uses the e-commerce. It can accelerate the reaction speed of the service, even if the circulation becomes faster service. Rapid reaction force has become one of logistics development. In modern logistics, there are two ways to improve speed, one is improving the transportation speed, such as build highway, develop new traffic management approach of the vehicle. And the other approach is of the great promotion value of the value-added logistics services program, should be optimized e-commerce distribution channels, in order to support logistics link, short the logistics process and improve the logistics systematic rapid-reaction function.
Quality
DELL Global Logistics Teams aim to develop and sustain a global transportation and logistics network that uses the most efficient and effective means for themselves and their transportation providers to distribute their products to the customers. Their job is to get the right stuff, to the right place, at the right time.
Dell is committed to having a true partnership with the Charity Logistics in supporting a range of Charities. With over 17 years experience of this sector we are already working with many of the country’s charities. We actively take part in charity events aimed at enhancing the charities sector. We provide bespoke offers to you via selected pages on our website.
Dell works with its partner- Charity Logistics pride themselves on providing a full suite of technology services and support that charity need to operate. Providing quality technology from Dell is the next logical step for a charity that already has office space, furniture, software, insurance, disaster recovery, communications and much more from Charity Logistics. With a mission to help other charities save money from costs.
Flexibility
DELL uses the e-commerce to increase the convenience of the service. Everything to simplify procedures, streamline operations services are value-added services. Simplification is relative to the consumers, it does not mean the service has been reduced some steps. It means in order to get some services, the customers may do it by themselves before, but it is replaced by some kinds of goods or service, so that the consumers can get the services or goods not only simple but also easy to use, which can increase the value of the goods and services.
In the provision of e-commerce logistics services, implementation of one-stop door to door service, providing a complete operation or operating tips, labor-saving design or installation, agency business, received a face customers, 24 hours a day, automatic ordering, transmission of information and transfer (using EOS, EDT, EFT), the entire process of tracking the logistics of e-commerce sales are a useful value-added services.
Dell’s Current Supply Chain Process Structure
Information
Dell’s current supply chain process structure has been changed from full pull strategy (customer order driven) to Push-Pull supply chain (combined the demand forecast and customer order information).
With manufacturing facilities that span the globe, and a logistics model that sets the standard, they are able to get their products closer than ever to their ultimate destination – the customer. Whether they’re delivering ten systems or ten thousand, our custom factory integration allows us to provide a single-source solution, delivering the exact specs on time, with no impact on lead time.
Also, DELL use the new information technology, such as POS (point of sales), bar code technology, operational research, management techniques, SKU management and so on, in order to generate the information from the retailers and customers.
Location and Transportation
Dell is planning to revolutionize its supply chain by transferring huge numbers of shipments from air to ocean, according to new reports.
The Journal of Commerce reveals that the firm, which pioneered the build-to-order business model, is planning a “fundamental change” in its logistics strategy which could “set a touchstone for distribution in the technology sector”.
“Dell’s diversification from strictly direct-to-consumer sales to include more retailers has led to increased outsourcing and a recent announcement to begin to move from costly air to slower ocean freight.
If it is successful the practice will likely become more common, as the company strives to compete with rivals such as Hewlett-Packard, which replaced Dell as the world’s No. 1 computer maker and relies heavily on ocean shipping,” the Journal of Commerce stated.
However, the publication went on to caution that shift in Dell’s core supply chain management business model comes with risks – damage, order cancellation, product value decline during shipment – as well as higher inventory carrying costs: “Dell’s inventory turns – a formula dividing the cost of goods sold by its average quarterly inventory – are its shining star and one that stands to fade with a longer supply chain,” it noted.
The reach of Dell’s manufacturing and logistics network is truly remarkable, extending all across the world and creating career opportunity to match. As a member of Dell’s team, you’ll gain exposure to the dynamics of a true, world-class delivery system – and experience that’s without peer. You’ll find Dell’s manufacturing teams in these locations:
Limerick, Ireland
Texas, USA
Tennessee, USA
North Carolina, USA
Penang, Malaysia
Xiamen, China
Rio Grande do Sul, Brazil
Inventory
Dell is invariably discussed, When managers discuss low inventory levels. Their low inventory has really helped out that much.
Reasoning behind need for lower inventory
thefirst thing that needs to be discussed is why low inventory has such a great effect on Dell’s overall performance. The reason is quite simple: computers depreciate at a very high rate. Sitting in inventory, a computer loses a ton of value.
As Dell’s CEO, Kevin Rollins, put it in an interview with Fast Company:
“The longer you keep it the faster it deteriorates — you can literally see the stuff rot,” he says. “Because of their short product lifecycles, computer components depreciate anywhere from a half to a full point a week. Cutting inventory is not just a nice thing to do. It’s a financial imperative.”
We’re going to assume that the depreciation is a full point per week (1%/week) and use that to determine how much money high inventory turns can save Dell.
This means that for every 7 days a computer sits in Dell’s warehouses, the computer loses 1% of its value. Ok, now that we know how much Dell loses for each day, let’s take a look at some of Dell’s data over the past 10 years.
What I got from this was the inventory turns. An inventory turn, as this website successfully describes it, is “cost of goods sold from the income statement divided by value of inventory from the balance sheet”. Typically, this is turned into a value showing how many days worth of inventory a firm has by dividing inventory turnover by 365. I divided the inventory turnover by 52 in order to show how many weeks worth of inventory Dell holds.
Here are the results:
Dell’s Inventory Turnover Data
Year Inventory Turnover Week’s Inventory
1992 4.79 10.856
1993 5.16 10.078
1994 9.4 5.532
1995 9.8 5.306
1996 24.2 2.149
1997 41.7 1.247
1998 52.40 0.992
1999 52.40 0.992
2000 51.4 1.012
2001 63.50 .819
Key point to notice here is that Dell was carrying over 10 weeks’ worth of inventory in 1993. By 2001, Dell was carrying less than 1 week’s worth of inventory. This essentially means that inventory used to sit around for 11 weeks and now it sits around for less than 1 week.
It means a lot to Dell Company
Computers lose 1 percent of their value per week. This isn’t like the canned food industry where managers can let their supplies sit around for months before anyone bats an eye. Computers aren’t canned goods, and as Kevin Rollins of Dell put it, computers “rot”. The longer a computer sits around, the less it is worth.
That said, due to depreciation alone, in 1993 Dell was losing roughly 10% per computer just by allowing computers to sit around before they were sold. In 2001, Dell was losing less than a percent. Based on holding costs alone, Dell reduced costs by nearly 9%.
Since 2001, Dell has continued to lower inventory. Looking at their latest annual reports, day’s inventory has dropped by approximately a day.
And Dell also uses outlet and strategic partnership nowadays:
Certified Refurbished PCs are laptops and desktops that have been returned to Dell, put through the production process, and then again retested to ensure they meet all original factory specifications. Certified Refurbished systems may have some observable cosmetic blemishes, but they will not affect performance.
Previously Ordered New systems are PCs that were canceled orders, or PCs that shipped out to a customer who either did not open the box or decided to return the system without ever using it. Previously Ordered New systems do not have any cosmetic damages.
Scratch and Dentproducts are system with considerable cosmetic blemishes that do not affect performance. They are not a great way to save money while still enjoying Dell Outlet’s rigorousrebuilding and testing process. Scratch and Dent computers will not have scratches or pits on the screen, missing or illegible letters on the keyboard, or damage to the touchpad or palm rest.
Process Capabilities in Terms of Dimensions
Cost
Combining of E-commerce with logistic process, Dell can lower down the cost of service using logistic integration planning among third party logistics (3PL). This sharing of information and integrating of strategy among third party logistics can lower down the transportation cost; more importantly, can reduce total lead time for customers order. With the improvement of logistic information technology, Dell can reduce the cost of direct transportation cost to compensate in others information technology cost.
Time
After using E-commerce, the respond rate and reaction to customer demand are amazingly increasing with mean that the turnover rate of computer using by customers are increase with shorter lead time. Utilization of E-commerce clearly is seen as a great benefit to short the logistic process and improve rapid-reaction function.
Quality
Working with Charity Logistic, which provide a full suite of technology service combining with quality technology from Dell, help Dell in order to get the right stuff, to the right place, at the right time, and at the right cost. Moreover, they take a responsibility of charity events.
Flexibility
E-commerce upgrades level of convenience of service in order to reach value-added service. Some logistic services are providing a complete operation or operating tips, labor-saving design or installation, agency business, received a face customers, 24 hours a day, automatic ordering, transmission of information and transfer. These approach can facilitate customers with easy to track and easy to order the product. Therefore, Dell never gives up emphasis on customers convenient.
Current Problems and Weakness of Dell’s Logistic
1. The first problem that Dell has to face by using the current logistic system is that the company tries to reduce lead time and costs as well as improve customers’ satisfaction by sharing system and customer information with other supply chain members. This sharing of information increases operational risk because other firms will be able to get the same information as Dell has. If a supplier simply stops having a relationship with Dell or in a more dangerous case swaps to be the supplier of a competitive firm, that supplier might give or sell confidential data used by Dell Inc. to the competitor. This fact bears a further problem, the problem that Dell will not be able to change its suppliers frequently in order to ensure that the previous mentioned situation will not occur. Even though Dell would like to change the supplier because a new supplier provides components with better quality or at lower cost, it will be a conflict situation for Dell to change the supplier.
Solution: In order to make sure that the supplier will keep all shared information confidentially and to turn this operational risk to be an competitive advantage, Dell needs to emphasize very hard on choosing its supplier and building a very strong relationship with them so that Dell can trust its supplier to 100%. In this case Dell can share all information with its supplier without risk and use this sharing of information to maintain and increase market power and market share.
2.The second weakness of Dell’s logistic process is that Dell uses direct sales through telephone and internet as well as a few exclusive sales stands in the United States and some other countries. This leads to a few problems. The first problem to be mentioned in this context is that customers, especially private customers, who decided to buy a Dell computer do not have a chance to test and try the product before purchasing, compared to other brands that mainly use retailers for marketing the computers.
Solution: This weakness can be eliminated by opening more Dell shops in department stores or having stands on IT exhibitions. In this case the company would need to be restructuring itself to a certain level because it would have to focus more sales through third parties and less through direct line such as internet and telephone.
3. The third problem that Dell faces under the current logistics system is that the company has some opportunity loss because due to the fact that the customers can only purchase the computer systems through phone calling, internet or going to one of the few available Dell stores, many customers will see this way of purchasing as inconvenient because after having placed an order on the website of Dell, it will take approximately three days until the customer receives the ordered product. Not every one is willing to wait such a long time. Some customers need to by a new computer very fast and go to the department stores or supermarkets to choose the next best available computer unit.
Solution: Dell can simply address this problem by reducing the lead time, so that the customers will receive the order within 24h or the company needs to open more Dell stores for those who need to make a fast decision. In this case a Dell store could also work as a Dell service center where customers can take their defected computers in order to let the Dell staff search for the errors. But in order to reduce the lead time, Dell needs to find a way how to reduce lead time first. One way can be changing supplier so that the delivering process will take less time. Furthermore, the company could build up centralized distribution center close to main target markets in order react fast to customers demand and orders.
Additional Capabilities
Besides the capabilities already mentioned in the previous suggestions of solutions, Dell Inc. might use a more sophisticated IT system which better connects and shares data with its supplier. Talking in this context, Dell could apply point of sales appliances which directly send certain information to the suppliers if a computer or hardware is purchased at a Dell store. This strategy is closely related to the capability of process integration and network integration. Another capability Dell could develop is the creation with other not directly competitive companies in order to share information, experiences and resources. These capabilities would mean lead to more cost savings and a more efficient manufacturing process to the firms. Furthermore, Dell might create a contract with different suppliers of the same component in order to diverse risk but not relying on only one supplier per hardware component.
Reconstructing Supply Chain Process of Dell
Based on our previous analysis of the weaknesses in logistics of Dell Inc. we can do the reconstruction of the supply chain process of the company. The first area of the supply chain we are going to redesign is the supplier side. As mentioned before, we are planning to diversify our risk by selecting more than one supplier for each hardware component in different market areas, so that in case one supplier is not able to deliver the goods on time, we do not lose profit because we still get the supplies from our second supplier. Therefore, a smoother supply chain process will be guaranteed. Dell does not only need to look for new suppliers in the world wide market but Dell also needs to create strong relationships with these suppliers because trust is essential for Dell’s business activities and success.
Another action necessary to be taken in order to redesign and improve Dell’s supply chain processes is to seek for new distribution channels. The decision to distribute the products not only through internet and telephone but also through retailer stores has lead to an increase in sales and profit. Based on the effect of this decision, Dell should decide to distribute its products through more distribution channels, such as department stores or hypermarkets. This would once again increase sales revenue and profit as well as reputation and market share. In order to keep the customers satisfied, because Dell does not use its own staff anymore when selling the product through these distribution channels, Dell still needs to be able to provide the expected after sales service.
A further step in changing and improving the supply chain process will be redesigning the IT system used by Dell for sharing information with the suppliers and retailers. The company will design a new, more sophisticated supply chain management system in order to get and bind itself closer to the suppliers, customers and the other members of the supply chain. This system will include a process and network integration tool in order to let the suppliers know when and how many new components need to be produced and delivered to Dell’s manufacturing plant.
(The above diagram shows the centralization distribution system of our recommendations to Dell’s logistic process for both Direct Sales and Retail Sales)
A last step in reconstructing the supply chain process will building up centralized distribution centers in different market areas. In order to save costs, Dell decides to build one distribution center for every main market. Therefore, Dell came to the conclusion to build up one distribution center in Singapore for the Asian – Pacific area because Singapore’s Changi airport works as a hub and connects most of the Asian countries. For the European market, Dell decided to set up a new distribution center in Germany, since the German market is a major market for Dell and it is located in the center of many very important markets, such as the Spanish, British or French market. For the NAFTA – market, our manufacturing plant will be redesigned so that we can use this plant as manufacturing plant as well as distribution center. This would decrease our lead time to a high degree and increase our flexibility in serving our customers.
Global Supply Chain Process
The figure above demonstrates the flow of the raw materials or components of Dell’s finished computer products to each of its target market respectively. We found that Dell’s manufacturing plants are sited in Mexico, and it ships its component parts from Taiwan, Japan, Singapore, Hong Kong, China, France, and Malaysia accordingly. Therefore, it is really important to manage the logistic process in order to shorten down the lead time from complexity of supply chain process.
We would like to suggest Dell to use ATO (Assemble-to-Order) logistic system in order to shift the customer decoupling point at the downstream activities so that the customer order lead time would be reduced. In other words, it is using push strategy or Make-to-Stock system during its upstream activities and stores and components inventory at Mexico or the major distributions around the world. Later on, Dell should use pull strategy or Make-to-Order system at its downstream activities in order to shorten down the lead time as well as increasing its customer service level.
Affects on Key Dimensions
Cost
The costs would be approximately equivalent to Dell’s former distribution system. Nevertheless, the service level or the delivery time is a lot shorter and they can also develop a better reputation or perception from this competitive advantage. Therefore, we really think that the new logistic process of Dell will bring those results in benefit.
Even though the cost at last is about the same, the inventory cost and delivery cost alters from place to place. In fact, the inventory cost is higher due to building up more distribution centers according to the regions. The deliver cost, on the other hand, lesser since Dell doesn’t have to ship its product half way across the world but to ship from its major centralized distribution centers.
Time
The lead time would definitely reduce due to the increase numbers of distribution centers. That means that Dell doesn’t have to ship its product half way through his world but to ship from the regional distribution centers to its customers. For example, Dell may shift it product from its Spanish customer from its regional distribution center located at Germany. Transportation of railways, trucks, or airline would be depending on the countries and the location of its customers.
In fact, the lead time is reduced because of the change of the customer decoupling point. In order to understand this idea, the following diagram should demonstrate the idea clearly:
Quality
Because of the decision to choose more than on supplier for each hardware component and our plan to emphasize more on total quality management and other tools to diagnose error or certain quality problems during the early stage, Dell aims to increase the quality of its products. The fact that Dell now receives the supplies from more than one supplier will make the production processes smoother and the processes do not need to be stopped as often as before due to the problem of not having enough or the right components. This as well will increase the quality and of course the satisfaction of our customers. The fact that Dell will focus more on strengthening the network integration and process, Dell will be able to collect more customer and supplier related data. This will give Dell the opportunity to react more to customer needs and manufacture the computers based on customers wants. By taking this action, more quality will be added to Dell’s products.
Flexibility
By applying the new supply chain process structure, Dell will be able to work more efficient and flexible. Dell decided to set up more centralized distribution centers in the major market areas. This plan gives Dell the possibility to reduce lead time and transportation cost. Also the fact that Dell expands its supply chain network in such a way so that the company has more suppliers for each hardware component improves the flexibility of the company. A last aspect which will make Dell’s operations more flexible is the decision to use more developed supply chain management software and to emphasize more on network and process integration. Through this new system, Dell’s suppliers will be automatically informed when and where and how many new hardware components are needed. All in all by reconstructing Dell’s supply chain process, Dell’s flexibility will be increased a lot.
Timeline Implementation
Gantt Chart
One Year Time Table and Planning (Monthly Basis)
Shift of Logistic
Months
Year.2010 – Year.2011
Oct
Nov
Dec
Jan
Feb
Mar
Apr
May
June
July
Aug
Sep
Finding New Alternatives of Suppliers
Find New Alternatives of Distribution Centers
Set Up New Distribution Centers
Market Testing or Market Survey
Adapting the New Supply Chain Process
Control and Adjust the New SC Process
We would like to recommend Dell to use the technique of Gant Chart as a guideline as well as tactical objectives in achieving the final goal of shifting its supply chain process for improvements. It is essential for Dell to divide the goal to smaller tasks. Therefore, the employees and the customers can adjust to the change of Dell correspondingly.
The first activity or task that Dell has to do is to find new alternatives of suppliers and distribution centers. They should have several options to choose, so Dell can actually choose the best alternative possible. After that Dell would have to start setting up its regional distribution centers followed by the Market Testing in order to find out the customers’ reflection towards this logistic change. At last, Dell has nothing to do besides to adapt the new logistic process and to control for any further necessary alternations.
Potential Resistance
Risk
There’s always a risk of changing the current system of any operations within a company. For instance, the new system may not work or may be working at a lower efficiency rate. Therefore, it is important to state the benefits that exceed the current one in order to convince Dell to this necessary adaption.
Ethnocentricity
Ethnocentric, also known as “self-centered value”, illustrates the idea that Dell thinks that everything they are doing is the best and need no further changes or improvements. It’ll be really hard to convince Dell for the change if Dell doesn’t care about its successfulness in its industry of several markets.
Customer Reflection
The customer may not like the alternation of Dell and shifts to Dell’s competitors. Therefore, Dell may use market testing, market research, or etc to make sure that this doesn’t happen. The change of the new logistic plan should only benefits but not to worsen the competitiveness of Dell.
Management and the Flow of System
New logistic system also means new management system or process. There’ll be many changes needed to apply with the change of the logistic process. For example, more trucks are needed or employees may have to operate their job differently. It is important to set up a new delivery system into procedures and clear tasks so that the change will be its max efficiency possible.