Evaluating Operation Management at Dell Computer Corporation

Introduction

Dell has been market leader in the world of computers. Since the company was established in 1984 by Michael Dell. Dell is the second largest global about design, manufacture and distribution of computer hardware, with a global market share was 13.1%.

Here some of Dell’s historic milestone:

1985-turnover 6 millions USD

1986-turnover 70 millions USD; focused on assembled PC segment

1990-turnover 500 millions USD; and expand product lines

1996-turnover 5.3 billion USD; activities online, get online sales 1 million USD per day

1997-turnover 7.8 billion USD; get online sales 3 million USD per day

2005-turnover 49.2 billion USD

(Direct from Dell Company, http://www.dell.com)

Product life cycle

The product life cycle is the cycles that any product has to go through from the time of introduction till the time that the company stops producing that product.

As can be seen in the figure above, the volumes when a product in introduced are very low and use process-focused, to-order and in a very small batches, after that is the growth stage with higher volumes. Then, it is followed by steady volumes, highly standardized products, produce to-stock and focus on finished product in the maturity stages before the volumes drop while a another product are introduced, this product is gradually retire in the decline stage.

For a company in the hi-tech hardware computer like Dell, the technology is he keys of the product, it always keeps changing because the products and the components have a very short life cycles. Therefore, management of the product life cycle keep introducing new product to response the customer needs, to remain the competitive in this hi-tech industry. The discussion below show how Dell Company manages the product life cycles:

Establish: The Inspiron 518/519 is new product which is higher and version of the Inspiron 530/531. Dell Inspiron 518 is strong on performance and gives many useful case update, the USB port is on the top of the unit not same as differences product.

(http://www.pcworld.com/reviews/product/32125/review/inspiron_518.html )

Growth: To supplying the demand of the customers at that time, the Inspiron 537 was released and has made by the customer design. This is the main strategy of Dell with the slogan is “Make it your”. For this product, the customers can customize their own computer (http://www.dell.com/content/products/productdetails.aspx/desktop-inspiron-537?c=us&l=en )

Maturity: After Inspiron 530, Dell released the Inspiron 531 which is faster than Inspiron 530, this product replaced for the 530. The Inspiron produced for gaming purpose, many user very impressed when they use this product because of its speed and performance.

(http://reviews.cnet.com/desktops/dell-inspiron-531/4505-3118_7-32486097.html#reviewPage1 )

Decline: Dell Inspiron 530 in the first desktop in the branch of Inspiron. It was released on 26 June 2006. After that they released Dell Inspiron 530s which is the same design as 530; however, it was 41% slimmer. After Dell released to the market the Inspiron 530 which is configuration that make the user surprising its features. It has Bluetooth built into its media card reader. It is the dell’s strategy to Mac. (http://www.trustedreviews.com/pcs/review/2007/09/11/Dell-Inspiron-530/p1 )

Operation Management

In Dell industry, there has price and response competition with the basic products becoming completely similar, good service and commoditized among all the customers. That’s also their operations planning and strategies.

Subcontract & Process

Their business is producing and selling many kind products of hi-tech computer industry and there are have 2 steps to design of goods and services. Firstly, the design and the specifications of components those go inside the computer are produced by the current technology. The reason of that is easily to change to keep getting introduced with newer technology and most of components for desktops and notebooks that are undifferentiated and is determined by technology and customer demand.

The main thing that made Dell Company become distinct is how they design outside the computer, the various service and warranties that they provide for their products.

After order, transaction process includes 4 steps: Punch-out; Order Requisition; Electronic Purchase Oder; and PO Acknowledgement. That is greatly helps Dell in their inventory planning, demand estimation and a pull strategy which increases the predictability of what the company has to produce.

Service of Dell

Their customers are 2 general types: Individual customer demand such as selling laptop, PCs, storage devices and Business customers demand such as selling Server, Workstations etc. They made online sales by website www.dell.com since 1996 for selling products directly to the individual customers. Dell Company is the first and only company in the world which does not have store to sell. Moreover, their customer can design the product as per their own specification that other competitors cannot give as much a scope for customer to design their own products. For doing it, Dell makes each and every system built to order which is built to the exactly specifications that customer wanted. In Dell site, customers are provided a list catalog from Dell; they can choose and customize products as they want.

Quality and Quantity factor

There has one more advantage of Dell which has location and well defined processes in place to ensure efficient operations. The key that help Dell’s success is to purchase the equipment from many suppliers. The greatest benefit to suppliers is the efficiency and cost reduction gained along the supply chain cycle. All these companies source various components that go into the manufacture of a PC from suppliers spread all over the world but almost concentrated in Asian countries such as China, Malaysia and Taiwan because it helps to low cost of product.

Dell’s suppliers from the corporate production and computer components such as Intel, AMD processor; and for the hard drive is got from Seagate, Maxtor, Quantum; Samsung, Toshiba, Micron supply for RAM chips; Samsung, Sony, Phillips, Nokia, Acer ship for the screen; they use Microsoft’s software and operating system.

Quality of product depends of the suppliers; these are 2 kinds of product: Dell’s cheap production which is produced from Taiwan or China such as Quanta and Arima; and Dell’s advanced computer which is produced outside by Dell.

Their Vendor’s manufactures located where can made in close proximity the Dell factory is in order to meet the ultra demanding needs of a company like Dell.

(Dell B2B E-Commerce. http://www.dell.com)

DELL’s Suppliers:

Nowadays, Dell is well-known as the biggest retailer in all over the world. The key that help Dell’s success is to purchase the equipment from many suppliers. The greatest benefit to suppliers is the efficiency and cost reduction gained along the supply chain cycle. Suppliers can also post their product catalogs to the Dell Marketplace, opening their inventory to a completely new set of buyers through Dell’s extensive customer base and other supplier traffic.

Dell Company decide to build a second manufacturing plant in southeastern China.Their new plant will be implemented in Xiamen, Fujian province, where Dell already has one factory with 8000 employees , according to the company(By Jessica Mintz, September 17, 2001). The schedule of new manufacturing will produce PCs for Dell customers in northern Asia, including China and Japan .Their goal is trying to product double by three reason :

The company also sees China as a good source of lower-cost labor ,cheaper operation cost and government incentivesso that they want to use this opportunity to expand rapidly in China market such as a design center in Shanghai, a manufacturing and distribution center in Xiamen.

In addition, the government of china recognize the benefit of Dell operation in their area so that they allows them to open their business with low tax in the first year because this company adds up to 500 more jobs with an expansion at its major operations center in Xiamen(By Kirk Ludendorff, Published: 10:56 p.m. Thursday, Sept. 16, 2010), in southeastern China and in 2006, Dell’s Chinese staff of nearly 12,000 volunteer hours invested a total of 11,000 employees participated in various charitable and community activities. By that way, it can reduce for them the poverty trap and creating more jobs for Chinese people to improve their life. The raw material that use to create their equipment “battery, storage, main board …etc” do not limit so many supplier can produce more for them. (Posted by corporate-social-responsibility, December 2nd, 2009)

In fact, China is the world’s second-largest PC market, after the U.S and continues to grow at a healthy clip. According to Gartner, 14.9 million PCs were sold in China last year and shipments grew by 14.9 percent. Dell has the largest market share of any foreign PC maker in China, but rivals IBM and Hewlett-Packard closed the gap last year by growing faster than their rival from Round Rock, Texas, according to market analysts Gartner and IDC(By Sumner Lemon, MARCH 25, 2005). For example: MiTAC is the best quality supplier for Dell with mechanical components and motherboards. Best defective-parts-per-million record and lead-free manufacturing initiatives are among many reasons MiTAC took the top quality award. Then NEC provides Dell with removable media storage devices. First lead-free optical drive in the industry for Dell and advancements in workplace principles earned NEC high praise. More than that, Quanta Display is a leading manufacturer of liquid crystal displays. The company consistently delivered cost advantages and met Dell’s field-incident rate goals to help the company deliver a superior customer experience. All of them have a good standard for Dell’s company so this is a cause why they have a long contact with supplier to make a cost reduction which is the number-one reason that companies initiate supply chain improvements. However, their material must be innovated to bring the feature for consumer so they can believe that this best choice for them to buy Dell’s computer. In order to having a famous brand in the world, they need to make sure that their product must be contained the good standard that they have created. By this way, it will brings for them the customer loyalty

“Just In Time Inventory”

Dell just sells and produce follow the current technology that is prevailing at that time and this design constantly changes with newer technology that keeps getting introduced. So, Dell has to know exactly what and how much inventory they needs because they can reduce the expensive cost for carrying and cost of customer responsiveness. Then, Dell follows the Just in time philosophy where it does not have any inventory at all; that means Dell’s inventory cost has kept with low carrying cost. Moreover, they just orders inventory only after it receives orders, converts them become finished goods and deliver to the customer. Dell also has other business partners such as the courier companies that can deliver the finished goods to the customer. Dell ensures that supply chain runs smoothly without many disruptions.

To sum up, instead of demand forecasting to order, the Dell just ordered immediate attention. In addition, input inventories always stay at a minimum and finished goods inventory stand at the number 0. They can create the competitive advantages from that such as reducing cost of storage, reducing time for producing products. (Michiel R.Leeder, Purchasing and Supply Management); (Competing Again Times, New York. Free Press); (Gate, Business @the Speed of Thought); (Yew York mentor)

Dell’s process

Resource Equipments Planning: MRP & CRP

Dell use e-collaboration model when purchasing equipment and components from their suppliers. Because Dell has many suppliers, so they needs to communication with them that is really important; for example, to distribute products, Dell uses services of FedEx and UPS. Moreover, they use the advantages of information technology and their site to share information and communicate with partners that can reduce inventories cost. Dell has built an information system with 15,000 service providers worldwide by PowerEdge servers and webMethods B2B Integration.

For Customer relationship management, Dell uses lots of ways to provide customer service. Dell’s supports 24.7 online service and direct talk to professional technical support include troubleshooting, user guide, upgrade, downloads, news..etc. Dell’s also use data mining tools, so they can easily control about the demand and need from customers that leads to have a good solutions and better services.

Internet and efficiencies

Along with the rapid popularize of computers, the growth is an explosion of Internet and Intranet in the company and the popularity from broadband communications high-speed optical fiber to create wireless digital technologies. The impact of this information system is to complete product in widely scope, and potential impact on other activities of an enterprise. DELL was famous because of being the first company sold computer through internet in PC retailer industry, almost 40% of Dell’s computer are sold online. Dell also has various forms of online customer services instead of calling to sales agents. Every time they access to Dell’s website, they saved $15 USD for the average cost of phone calls for the company. Generally, what Dell is doing is using the Web-based information system to reduce the cost to increase the relationship between Dell Company and its customers as well as its suppliers. By using the programmers that base on Web foundation to automate the interaction to customer and suppliers, Dell can considerable reduce the number needed of people to manage these interactions, so that it can reduce costs while increasing productivity

Human Resources

Dell is famous for its production system. However, behind the machines are people and Dell is taking a closer look at how to become a great company, a good place to work in. Dell always focuses on the effective management issues, how to make people feel like they are on their career track and that they are ready to work hard in a long period because of the huge payoff. Through programs such as The Soul of Dell, Tell Dell, etc. , Dell can create a close relationship between the managers and workers, Dell managers can actually know what their employees think, feel and to make their employees understand what they care about beyond the result. For example, Dell gives the workers the right to vote for any progress that the company had made. To improve the management quality and company’s culture, they do the survey every year with the Vice presidents, Directors and employees to get a measurement, base on the response from employees of every level in the organization; they can know whether the managers manage well or not. As Mr. Paul Mc Kinnon who is a Senior Vice President for Dell Human Resources said: “The results are important, but how you get results also important”. Dell is a very process oriented company, with well definition for every function’s process. The HR department are trying to have a clearly job design and job description with the job’s responsibilities, and make sure that employees get the points and understand the expectation from the company. Dell arranges people specifically for each job so that they can make an efficient job. In another hand, Dell also encourages their employees to apply other jobs when they are interested. Dell also gives the employees the power to solve problem, it can helps Dell save time and make the employees work more effectively. Motivation also is applied in the company to motivate the workforce. It ensures the continuous training and development of the labor force to improve the work procedures. Dell also uses rewards and incentives such as pay performance plans, merit praise for motivate employees work to achieve the high praise.

Moreover, Dell always guarantee a healthy and safety work environment, giving employees the best conditions to work at Dell company base on their “Human Rights and Labor Policy Statement” that involves free chosen employment, dealing with Management, Freedom, Human Treatment, Non-Discrimination, Minimum Wage, Hours and Benefits. Those are standards to ensure that all the employees’ right is protected and they are treated with the respect and seriousness.

(IdeaStorm.com of Dell) ;( Information Technology JSC. Business World Portal)

Conclusion

Although there are some parts of the Operation Management System which have been presented in this assignment such as Services, Quality and Quantity, Supplier, Inventory, Planning, Communication Technologies and so on. Each part is actually proved that Dell Company is growing strongly by using and understanding the important of the Operating System. By implementing the communication technologies, improve the operating management system, Dell has lead the company to the top place in the global economic, it overcome many challenges, many obstacles in order to effectively compete with many strong competitors of the computer industry.