Case Study - Dell Value Chain

Dell uses a just in time order fulfillment policy and accurate forecasting of sales to minimize inventories. This allowed Dell to hold inventory of finished products far below levels of their competitors (10-20% compared to 50-70% industry level) and furthermore allowed them to quickly implement changes to their product lines as new technologies became available. This quick inventory turnover also allowed Dell to retain more capital. Finally, this policy enabled Dell to respond immediately to technological progress in components and deliver state of the art new finished products (e.g. Pc’s holding the newest Pentium microprocessors) while competitors

The advantages of Dells model are: The internet allows Dell an extensive scope and reach for its products at a relatively low price (Dedrick and Kraemer 2001). Using the internet Dell has been able to automate many of its business functions, such as product configuration, order entry and technical support (Dedrick & Kraemer 2001), therefore the company can achieve higher revenues without customer service costs increasing greatly. Online configuration ensures that the customer gets exactly what they want. Dells build to order strategy means that inventory levels are low, they only hold approximately 4-8 days of stock, therefore inventory costs are low (Breen 2004).

Dell is a multi-national information technology corporation which designs, develops, manufactures, markets, sells, and supports a range of computer systems and services that are customized to individual customer requirements. As one of global PC suppliers, Dell set 2 strategic objectives to achieve, to be the No.1 global market share PC supplier, and optimize the balance of liquidity, profitability, and growth with a focus on increasing the mix of their product portfolio to higher margin products and recurring revenue streams. (Dell annual report 2009, pg 4). Dell existed in one of the biggest

Dell is a software company that started off with changing up the buying aspects of a computer. Dell would personally customize

Dell is able to sustain a competitive advantage over competitors in the computer industry because of an extremely efficient supply chain/distribution system and its JIT inventory system. Since inventory and labor are the highest liabilities of a firm and Dell operates with a few days of inventory, they are able to cut costs on warehousing, hiring people to track and maintain inventory, and avoid holding on to obsolete technology.

For some consumers it is an inconvenience that Dell PCs cannot be purchased through retail outlets

This enabled strong customer relationships and increased customer satisfaction. One of the characteristics that distinguishes Dell from its other competitors is that Dell provides the facility to customize computers of their choice and taste and deliver the system to the customer as it is. This is the most crucial and critical success factor behind Dell Computers. Dell’s direct to consumer model concept helped them reach above-average returns and remain in business today. Customers have developed a brand-name loyalty to Dell because of their cost efficient differentiation strategy. Their strategic moves for their products created an image for themselves in the market and is the reason for their dominant existence. This enabled them to earn more market share in the industry. The customer segmentation that Dell focuses on is the corporate segment and large businesses form the majority of its clients. This customer segment targeting is more likely a result of its operational strategy and not the other way round. However, with corporate segment customers seeking high performance, reliable, affordable solutions, Dell fits in comfortably. Dell also appeals to those customers who want hands on experience of the latest technology and the idea of customized computers is very appealing. For Dell, it focused on providing superior quality services to its customers through its sales representatives. It also shifted

In addition, Dell gain competitive advantage through its supply chain management by requesting that key suppliers develop inventory hubs in close proximity to their assembly plants. By doing this, Dell could communicate with the inventory hubs of their suppliers in a timely fashion so that delivery is done in a short span of time. Also, Dell’s new PC models could now be brought to the market quicker which resulted in drastic cost advantages (Strickland,

Dell hold and maintain its business model on integrating five key strategies: rapid time to volume, products built to order, elimination of reseller markups, superior service and support, and low inventory and capital investment.1 They designed project and the resulting tools to support Dell’s low-inventory and low-capital-investment strategy and to widen its impact further than the plant floor into the foregoing stage of its supply chain. Tom Meredith, at the time chief financial officer, said in the May 18, 1999 earnings conference call: “Customers see no advantage in a manufacturer low-ering inventory to six days if there are still 90 days in the supply

Started by Michael Dell, Dell Computer Corporation is one of the world’s leading direct marketers of personal computer systems. Dell Computer Corporation designs, manufactures, markets, services, and supports a wide range of computer systems, including desktop personal computers, notebook computers, and network servers. In addition, it also markets peripheral computer hardware and software, as well as service and support programs. The success of Dell Computer Corporation can be traced to Michael Dell’s strategic vision and distinctive competency.

Some companies like Dell and Apple directly sell their products to customers without involving a distributor and hence get a better idea about the actual sales and demand of their products. Finally as was seen that long resupply lead times aggravate the bullwhip effect. Improving operational efficiencies and just in time replenishments can mitigate the effect.

With the advent of Internet and particularly the e-commerce business, the scenario has changed to a large extent. Hence the system at Dell needs modification to stay updated with the competition. The following factors have changed:

Dell has a build-to-order model for its PCs. Customers love that they can pick and choose what kind of system will fit their needs right from the internet. Since Dell makes most of its money in a B2B approach, they build customized intranet views for their enterprise customers. It allows the customers to plan ahead, and configure the product how they want

Finally, since Dell builds computers on a just-in-time, built-to-order basis, it does not have to keep a stock of components and ready-made computers. Keeping a stock of parts and pre-built computers costs money, which ultimately gets passed on to the customer; since Dell doesn’t do this, they are able to sell their computers at a lower price. The ultimate result is that Dell’s customers are able to get high-quality products for a reasonable price.

Dell generates more than $50m revenue per day in sales through its worldwide websites.4 Core to Dell’s e-business success is a series of customised websites provided to its various customers. Dell.com provides a high level of service to its customers and suppliers. Ordering and production is speeded up, greater accuracy follows direct ordering by customers, and current technologies are delivered to consumers. Dell.com gives consumers the ability to purchase online and access technical advice. It is a fundamental feature of Dell.com to offer time to market technology. Dell.com offers the customer the ability to: • Upgrade the system so it can be configured to the technology the consumer wants • Style the product of their choice by selecting the colour, trim and art