Dell Supply Chain Strategy Essay

Dell. Dell’s products—computers, servers and printers—are commodities. Dell tends not to develop the technologies underlying these products. Instead, it purchases the components from firms that develop the technologies (semiconductors and computer software). Dell’s direct-to-customer marketing strategy is not unique, but the extent to which Dell performs this strategy better than anyone else in the industry gives it a competitive advantage. Its size, purchasing power, quality control, and efficiency permit it to operate as a low-cost provider.

Present CEO and chairman of the board Michael Dell founded Dell in 1984, as a leading technology provider that designs, develops, manufactures, and supports PCs, software and peripherals, storage and servers, and associated services. With operations in four geographic areas and additional business centers and manufacturing sites in more than 20 locations around the world, Dell is able to reach more than 24,000 retail locations worldwide. Dell’s ability to process in-depth customer knowledge and the tailoring of solutions to the specific customer, through a direct customer sales model, catapulted the company in 2008 to the top PC provider in the United States and second worldwide in terms of sales.

Dell Computer Corporation was founded in 1984 by Michael Dell. From the early 1990s until the mid-2000s, Dell was ranked as a PC market leader relying on their distinctive marketing pattern “Direct Model” which undertook direct communication with customers and provided customized products. Recently, the PC industry is facing inconceivable worldwide competition, and Dell is gradually losing their competitive advantages by using its direct model in critical business segments. The company is facing shrinkage of growth, increasing competition, declining quality of customer service, and limitation of expansion. These issues have an enormous impact on Dell’s position as a technological giant in the PC industry.

Ford Motor Company is facing a major decision with regards to its supply chain strategy moving forward. The underlying question is, “how should the company use emerging information technologies and ideas from new high-tech industries to change the way it interacted with suppliers?”. Within Ford, there are 2 major, and opposing views. First, there are those that feel strongly that Ford should follow Dell’s model of “virtual integration” (reaping the benefits of vertical integration without vertically integrating) – using the model to communicate effectively with its suppliers, achieve and focus on inventory velocity, and allow its component suppliers to specialize. The other group believed that the Dell model would not

In the past, Dell's supply chain was focused on being able to provide customers with a made to order computer. Dell are finding that although this strategy is profitable for customers that customise their configurations to the higher end of the configuration price bracket, when they are selling the base model, the cost of their complex supply chain is not efficient, as most of the complexities are not needed. Dell have recognised that not all segments of the market want a customisable computer, and are happy to purchase a limited configuration with slower delivery time. This will be especially true in emerging markets, where Dell believes customers will be looking to buy cheaper personal computers with fixed configurations. One of the major changes to their sales approach will see them entering the retail market, which they have already started to do. However, Michael Cannon did confirm that the direct model will remain important to Dell (SCN, 2008).

Third, Dell has a rapid-response system for linking all suppliers, workers, managers, and customers to Dell’s value chain. This interactive real time communication system is employed to order parts, manufacture and outsource computer modules, and coordinate assembly and distribution of products to customers. Managers employ this system for all human resource functions, workers and suppliers for all coordination sequencing and quality control processes,

The technology industry is one predicated on constant innovation. Products within the field must provide a compelling value proposition for consumers in order to properly maintain both margins and revenue. Technology companies, particularly those who manufacture products are realizing decreasing margins as the competitive environment matures (Bodie, 2004). Competition for foreign competitors has reduced margins and subsequently profit margins. Cost conscious consumers are now purchasing product based primarily on price rather than specifications. Combine this fact with the macroeconomic factors prevailing in the market and the industry has significant headwinds going forward one year from now. This is particularly true of Dell who has seen an erosion of market share due to the influx and demand of tablet computers. Less demand for traditional laptops has also decreased the profit and operating margins of the firm. Even within its own market, Dell has encountered significant competition for rivals such as HP, IBM, and Microsoft who recently announced its own tablet (Scheck, 2008). Below is a chart indicating markets share within the PC market over the last decade. Notice that market share gains after the housing market collapse have deteriorated. This reflects changing consumer sentiments regarding the overall purchase of PCs and heightened demand for alternative products such as tablets and notebooks.

A critical aspect of logistic management is managing inventory moving raw materials into the facility and moving finished goods out to customers. Moving finished goods out to customers is known as distribution. Distribution refers to the process through which goods and services go on their way to customers. The faster and more accurate accompany can fill customers order , the lower the cost for the organization the greater the likelihood that the customers will return .Dell uses a direct channel of distribution. Logistics management helps to contain costs as it relates to transportation when it is well coordinated. Example :when a customer orders a pc from Dell using the direct channel of distribution a courier is contracted to deliver the product to the customer in a specified. With logistics management a customer will be able to receive products ordered on

Dell has also employed two major strategies, customization options for clients who demand cutting edge technology along with a build-to-order option. As a result this has drastically increased its value to customers and also allows Dell to carry fewer inventories which could in turn result in obsolesce. In other words the overproduction is greatly reduced as the production is essentially in line with the demand and the market.

Started in 1984 as PC Limited, at first the company sold IBM PC-compatible computer built from stock. Later in 1985, the company produced the first computer of its own design, the Turbo PC that was sold for $795. The company changed its name to Dell Computer Corporation in 1988 and began expanding globally.

Even on the manufacturing side, Dell seems to have been reconsidering its position. The company has not lately been as much as profitable it would like and some of the reasons for such performance have been allocated to the fact that the company owns its manufacturing plants. For this reason, the company would have approached some contract manufacturers to take over what in the 1990s was the envy of its competitors: its production plants.

Supply Chain Management is becoming more and more important for the success of today’s business world. Dell has realized this trend from its very first steps and has become one of the most successful PC companies in the world by putting emphasis on its supply chain, orchestrating its build-to-order and direct sales strategies. While most of the literature that covers Dell’s business and supply chain strategies is too theoretical, we suggest an analysis of a lower level using knowledge-based techniques. So, we have developed a business

As the market stands now there are fewer and fewer non-users and with the current life of a PC the replacement time frame is becoming shorter and shorter. Overall, the strongest recommendation is for Dell to focus on winning the competitors’ customers. With Dell’s proven satisfaction ratings as seen in the study mentioned above, Dell has the service and support as well as the commitment to fulfill the dissatisfaction of the competitions’ customers.

Dell responded to changes in the market by determining how different segments of customers derive value from its products and services. The company 's analytics showed customer demand had become quite complex. The B2B market demands predictability, speed, customization, services and precision delivery. Consumers want multiple channel options, the ability to personalize for niche products, low-price options and devices that deliver content. This complexity will only increase as content and virtualization begin to drive the market. To address

The PC industry has seen many changes in the past decade, such that there was a time when Dell was considered as one of the beloved brands of the internet era and now due to competitive and consumer behavioural changes, sales is not as prominent as it once was.