Examining the Success and Supply Chain Management of Dell

The computer industry bottomed out in the year 2008 and 2009 due to the recession, even though they showed a surprising breakthrough in the latter part of the year. During these years, many computer companies have suffered a great setback due to this recession. It takes two years for these companies to regain their previous market reputation. Some computer companies such as Intel, IBM, Apple computers and dell are doing quite well. Due to the rising demand and the new innovative products like iPhone this industry has received god result during the year 2010. The other of areas of growth and expectations in the computer market are netbooks, handhelds, notebook, e-book and tablets system, storage area networks, Smartphone, cloud computing and server virtualization. The performances of newly emerging companies are much better than the Europe, Japan and US. Due to the growing demands and global computer production, China is emerging as the fastest growing country. The acquisition of the sun Microsoft by the oracle will be a significant contribution in the server market. This market is entering into a new phase of the applications like cloud computing and virtualization and this can be benefitted by the sun oracle tie up. The major players of this field are HP for its acquisition of Compaq computers, IBM for its leadership in the enterprise system, Dell for its hyper growth after the many years of struggle, Apple for its class leading innovation. The personal computer markets are rebounding after a decrease in the demand of the 1H09. According to IDC, the total growth in the year 2009 was 2.9 percent but in the mobile computing it was 18.4 percent. In the year 2010, the overall growth was 12.6 percent due to the market growth. The figure shows 2009-2014 world PC unit shipment.

The sales of the notebook may be affected by the netbook sales. Acer and Asus are the leading company in this field. Apple is going to continue with the premium segment with the market share of $1000. In the category of the e-book, Apple iPad is emerging as a trend setting product. Microsoft can able to re-establish with the windows7. The desktop PC could be helped by the virtualization. Cloud computing could help the hardware sales. X86 server technologies which is used in the PC server architecture has RISC server architecture proprietary but most of them are damaged. HP and IBM is good proprietary segment even during the downturn. Due to the increased pressure, the ASPs have come in the place of the X86 and parallel system. The given figure shows the IDC worldwide server factory revenues 4Q09.

Supply chain management strategies within dell computers

Supply chain management is a management of the interconnected businesses which is involved in the provision of the service and product packages that is required by the end customers. It spans all storage and movement of raw materials, inventory and finished good from the point of origin to the consumption point. Due to the increasing complexity and competition, supply chain management become very important for the business world. Dell computers are one of the most profitable and successful computer corporations. It is known for its innovative products and customer service configuration. Dell is basically in the business of manufacturing servers and computers. In the earlier concept of ordering computers, the customers went to retail or electronic store to buy computers. In this case customers do not have interaction with the manufacturer. They basically interact with the salesperson and because of lack of knowledge about the products the salesperson was not able to increase its market value. Dell adopted the concept of direct interaction with the customer via phones and internet. The supply chain management system created by Dell ensured that the right computers parts are always available where and when needed. Dell’s strong relationship with their customers and suppliers helps them to meet their customers demand as soon as possible. This approach of Dell towards the demand of customer gives them a competitive advantage. The business strategy of Dell basically focused on creating most effective SCM system via i2 that will provide the streamline to the supply chain process by linking planners and suppliers of Dell together in order to meet customer demand and requirements. In order to meet supply chain needs, dell deployed the software i2 collaboration planner, i2 supply chain planner and i2 factory planner. This i2 technology is used to coordinate the process build-to-order. The company can able to integrate the demand and supply side of business by using the software that will eliminates the inventory overages. This system enables the company to pull the materials directly into the factories in every 2 hours depending on the real time customer orders. The result of the new supply chain strategy is the lowest inventory levels of Dell in the computer industry. Just-in-time inventory and real time scheduling resulted in the efficient inventory deliveries and turnovers. The maintaining cost of inventory in a supply chain is included in the final cost of the PC. Therefore when there will be a reduction in the inventory cost, the customers of Dell will benefitted by the reduced product prices. The quality of product will be higher with the low inventories because Dell has ability to detect the problem more easily than with the high inventories.

Dell’s approach to establishing relationships with its suppliers and customers

In the 1990s, Dell tried to sell its product through retails outlets but after some time they realize that this approach was unprofitable. Then they decide to focus on improving customer relationship and this resulted in the unique strategy. Dell has a simple strategy for the supply management is to sell the PCs directly to the customers. The aim of the Dell Company is to combine the close coordination of the vertical integration with the cost advantage of the horizontal specialization. Dell basically deals with the three types of customers. First one is large corporate customers which are also known as relationship customers, another is small businesses and home and last one is public sector. The communication channels used by the dell company are call centers and internet to help their customers. Dell also assigns telephone and sales service representative to each relationship customers. They also provides a website facility where all the registered customers are able to communicate with them at faster speed and able to place order online and can ask for the technical support for 24 hours a day. The central role in the success of the Dell is played by the direct model. This model basically helps in maintaining customer relationships. Another method used by the Dell in maintaining customer relationship is Platinum Councils. According to this they organize meetings for their relationship customers inviting technicians and executives to discuss about their latest products and give them chance to share their experiences and views. The relationship of dell with their suppliers is an important column of direct model. These types of bond are also called business to business relationships. According to palmer, it can be described as vertical relationship in which they integrate a part or all the supply chain. The relationship of Dell with their suppliers has undergone through various development in the last twenty years. In the past, Dell had more than 140 suppliers. As the time past, the maintenance of these relationships was considered very costly and declined its performance. Then Dell redesigned its computers in such a way that different models can be utilized by as many components as possible. Now, Dell has only 30 suppliers which provide them with 75% of their material needs. Now days, the strategy adopted by Dell is to have few suppliers as possible. Dell maintains a dynamic relationship network with their suppliers so that they can stay flexible. The concept applied by the Dell in year 1999 is just-in-time in order to manage its relationship with its suppliers. According to this concept, the suppliers will restock its part when they are needed. In practice, this concept is little bit sophisticated, but the fact is that dell company has no mass production so they produces build to order. Dell’s supply chain and its suppliers are correctly interwoven and helped them to make this process work. Dell shares its design databases, inventory data, quality data, daily production requirements and technology plans openly its suppliers with the help of the real time window information systems. Dell Company passed their customer feedback directly to their suppliers so that they can be adjusted accordingly.

Flow of materials and information

The flow of materials and information in the dell works as follows. Customers can place their order either through internet or by phone. After that, Dell will process the order through configurations evolution and financial evolutions which will takes three to four days then they will send the order to its manufacturing units in Austin. These plants have the efficiency to build and package the product in just eight hours. The general rule for the flow of materials is first in and first out and according to Dell planning they will dispatch the order within five days. Most of the suppliers basically situated in the Southeast Asia and it takes seven days to transport the parts to Austin range. The information about any new product will be available on the Dell websites and on the other information channels also. Dell provides a real advantage to the customers is that they can directly placed their order without any intermediate. The customers of Dell are global wide and range from small business, individual, organization like hospital and schools and large businesses. Dell produces the wide range of the products which are useful for all the customers. Optiplex which is desktop PC mainly used for small offices, Vostro notebook series used for the offices, n series notebook accomplished with Linux used for the professional persons, Latitude notebook series for the business focused customers and there are many products which are used the customers according to their needs. The function of Dell organization is to produce a product as soon as possible and without any defects so that their customers do not have any problem and their demand will increase in the market. Dell’s mission statement is to become the most successful PC Company in the world by providing the best customer services. Michael Dell called this strategy as virtual integration with customers. Dell basically concentrates on the cost of the inventory management because the assembly units hold these inventories for the few hours and the company target is to reduce this cost. The company used the vendor management inventory arrangement according to which they decide with their suppliers the amount of inventory and when to order these inventories. The company is also able to save the inventory cost by analyzing the previous year trend according to which they will order the inventories.

Compare and contrast dell with other companies

The main competitors of Dell Company are IBM, Apple and Hewlett Packard. HP Company also adopted the concept of the direct selling but their main concentration on the demands of the customers. At the time of recession also the production figure of the HP is very high because of its products which were made according to the demands of the customers at low cost. The other competitor of Dell is Apple. The products of Apple basically based on the new technology which brings a new revolution in the field of technology. Apple adopted the mix strategy for the supply chain management and this will help them to reduce its inventory cost. IBM planned its supply chain strategy on the five themes. They are supply chain visibility, customer requirements, cost containment, supply chain risk management and globalization. The strategy which is going to adopt in future for the better supply chain are better instrumentation, supply chain intelligence and improving integration.

SCM strategy adopted by Dell

The SCM strategy followed by Dell is direct selling model in which the need for the distributors and middlemen eliminated. Dell believes that by selling the computers directly to customers helps them to understand their needs and demands. In order to maintain the low cost for the inventories, dell maintains good relationships with suppliers. The procurement decisions of company were based on the criteria like cost, quality, technology and delivery. The company maintains a database to visualize the purchasing patterns of the customers and according to that they can forecast the demands. With the forecasting techniques, the company is able to determine demand with accuracy of 75%. The company openly communicates with their suppliers on the changing demand pattern. Dell directly received the orders through internet, telephone, email. The company also tries to maintain zero inventories for some of the components. If the cost of inventory will decline then it will also reduce the product cost.

Limitation

The company has faced various problems in the year 2005 and 2006 because of the strategies adopted for the supply chain management. Dell lost its position and HP emerged as the largest selling computer manufacturer. HP was able to move ahead of Dell by producing components at cheaper price and by improving their supply chain management strategy. The problems of Dell were the growing complexities in the manufacturing of the products and the existing price system. At the same time, the sales figure of Dell Company was also fell because of the demand from the corporate sector got reduced. According to the survey conducted by CIO sight in year 2006, the money spend on the technology by Dell got reduced by 1.3%.

Further recommendation

Dell should concentrate on providing the good facilities to the customers so that in future if recession takes place it will help the company to maintain its production levels. The company should also try to find new techniques to reduce the cost of the products and time of dispatching the products. The company is needed to change its existing strategy of cost control based model to the innovative based model according to the needs of the customers.