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Dell supply chain management strategy on how they are able to their competitive advantage
Dell supply chain management strategy on how they are able to their competitive advantage
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DELL’S VALUE CHAIN Since Dell unfolded its integrated supply chain in early 2000, world has paid attention to the model as a new strategy that helps the company to increase its cost efficiency and the customer value. Dell’s revenues had grown up rapidly from $12 billion to $61 billion over the past 10 years. How has Dell used its direct sales and build-to-order model to develop an exceptional supply chain? Dell, which is an American computer company, mainly operates on direct sales to the corporate and institutional customers. With the direct sales model, Dell can collect its customer information; computer specification and location of each customer including feedbacks. After Dell sold the computers to its customers, Dell and the customers still have close relationship because the company still has to work with them as IT service and consulting. So Dell can have more communication with the customers and gain more information. Dell knows what its customers want and when they want to replace their computers and equipment through that communication. Also as technology changes very fast and some technological equipment have short lifecycle, Dell finally comes up with equipment to cope with those problems. Since Dell can forecast the sales by communicating with its customers, to achieve build-to-order model, Dell realizes that they need to improve its operation and supply chain. The greatest challenge of build-to-order model is lead-time. Customers do not like to wait or hear an excuse of any delay. Thus to avoid dissatisfying the customers, Dell decided to create its integrated supply chain. First of all and the most important element of the effective supply chain is information technology. High information technology effic... ... middle of paper ... ... information will be sent to the suppliers directly. So the suppliers can know exactly what the number of products they have to produce. To achieve build-to-order model and create the efficient supply chain system, Dell and its suppliers need to invest much on information technology. Toshiba, IBM, and Samsung, which are leaders in technology industry, are some of the Dell’s partners. These companies have high IT efficiency and enough resources to support Dell’s supply chain. With expertise of those companies, Dell’s supply chain has been success. This system also provides Win-win business relationship between Dell and its partners. When Dell can implement its customer needs, the Dell computer’s orders will increase. So the revenue of Dell’s suppliers will increase as well. REFERENCE: http://crito.uci.edu/papers/2001/dell_ecom_case_6-13-01.pdf
Dell's strengths were oriented around listening to the customers, responding to the customers, and delivering what the customer wanted. The direct relationship was first through telephone calls, then through face-to-face interactions, and now through the internet. It has enabled them to benefit from real-time input from real customers regarding products and future products they would like to see developed. The company also doesn't use reseller or retail channels because every computer is built-to-order, which allows less inventory. The direct model allows them to take the pulse of whatever market and provide the right technology for the right customers.
Speaking about the business model of Dell, it has ability to remain on the higher end of the scale for a particular time period. Dell has business model, which primarily focuses on direct selling line of attack. It in a straight line supplies the PCs to the regulars. It does not believe in intermediary, retailers for the business practices. Undeniably, this gives them an edge to serve customer well. Nevertheless, it understood the importance of retailers and start offering products on the premises of retailers, such as Wal-Mart, Sam’s Club and so on. Next, Dell administration is certain of the exclusive business of PCs. As time goes on, however, observing the
Dell Inc., with fiscal 2005 net revenue of $49.2 billion, is a premier provider of products and services worldwide that enable customers to build their information-technology and Internet infrastructures. Dell offers a broad range of enterprise systems (servers, storage, workstations, and networking products), client systems (notebook and desktop computer systems), printing and imaging systems, software and peripherals, and global services. During calendar 2004, Dell was the number one supplier of personal computer systems worldwide as well as in the United States. Dell's global market leadership is the result of a persistent focus on delivering the best possible customer experience by selling products and services directly to customers.
Dell Inc. has realized that the most efficient path to the customer is through a direct relationship, with no intermediaries to add confusion and cost. With the power of their direct model and their team of talented people, they are able to provide to their customers high-quality, relevant technology, customized systems, superior service and support and products and services that are easy to buy and use.
Dell made the bold decision in 1994 to eliminate their products from retail stores and focused on mail order customers. In 1996 Dell began selling through their website as well. By eliminating the retail store presence Dell was able to reduce costs, reduce inventory, and maximize profit. Dell utilized a built to order system that allowed customers to specify exactly what they did and did not want on their Dell computer. Dell's just in time inventory system lowered inventory to 6 days and storage costs were saved.
Supply chain management has been defined as that process that involves the management of information, materials, and all the finances that are handled within and across the entire supply chain process (Christopher, 2016). The management is usually done through out the entire supply chain management from that moment when the suppliers are involved through all the manufacturing activities, different distribution activities, and the way that the products are served to the final product consumer (Turban, et al., 2002). The process also includes all the activities that different organizations offers to their customers as after sale services for purposes perfecting their services and products towards their highly valued customers (Christopher,
Dell Computer have recently announced changes to their business strategy and supporting supply chain. They will no longer focus on a made to order direct sales model for their personal computers. Nor will they continue to refine their renowned supply chain model that supported their sales model. Instead, they will be looking to produce personal computers with fixed configurations at lower prices. This essay looks at why Dell have changed their strategy, and then considers the customer value proposition of the new strategy, as well as lessons that other organisations can learn from the Dell experience.
A supply chain is a network of facilities that procure raw materials, transform them into intermediate goods and then final products, and deliver the products to customers through a distribution system [1]. The basic objective of supply chain is to “optimize performance of the chain to add as much value as possible for the least cost possible.
Dell is currently adopting an integrated cost leadership-differentiation strategy for its PC business. This strategy has been effective for a long time. Dell was able to produce their products at comparatively lower price by assembling the products by themselves, cutting out unnecessary cost by selling their products directly to the customers. Dell also allowed customers to customise the components and colours of their PCs, allowing customers more choices.
Dell have used their internal resources and competences as a way of gaining a competitive advantage to great effect over the past few decades. There are three basic resources: tangible assets, intangible assets and organisational capabilities. Dell’s greatest resource in generating a competitive advantage has been their direct model approach to sales. This direct model approach means that customers buy directly from Dell through their website. The advantages this brings are that the customer can customise their product, buying exactly what is right for them. Whereas competitors offer the customer the choice of number of models, Dell allow the customer to choose exactly they want. Dell’s direct model means that Dell does not have to sell via
This strategy was carried out by selling via phone, fax and direct sales, instead of selling through retail stores. Not only this approach differentiated Dell from other competitors at the time, it also reduced its operating costs as it did not have to rent expensive retail space. In addition, Dell’s strategy of selling customised computers allowed it to hold only a small amount of inventory, which reduce...
Dell Inc had very effectively used the direct marketing channel for the sales of computers to the end consumer. When all the other pc makers were selling through retailers and distributors, Dell had started efficient use of the direct channels.
Dell has managed to become remarkably successful in a short span of time by following a direct "business to customer" model. By selling computers directly to customers, they have been able to best understand their needs and provide effective solutions to meet those needs. Dell built PCs to order, so customers received only what they wanted. Dell's just-in-time inventory system allowed them to order only parts that customers demanded, thus keeping the minimal inventories and enjoying the cost-reductions which in turn were passed to customers. Dell's extensive use of e-commerce contributed to further cost minimization, reduced the order and delivery time for customers, and customization. There are three golden rules at Dell: disdain inventory, always listen to the customer, and never sell indirectly.
It is very obvious that the role of technology and innovation as an influence on Dell’s business. Dell is one of the first companies that integrated ecommerce in their sales process. Dell’s e-commerce operation began as a static page in 1994, integrated online sales features and were soon selling more than 1 million dollar a year (Netonomy 2013).
Case Study of Dell Computer Corporation Introduction Michael Dell founded Dell Computer Corporation in 1984 with a simple vision and business concept – that personal computers can be built to order and sold directly to consumers. Michael believed his approach had two advantages: (i) by passing distributors and retail dealers eliminated the markups of resellers, and (ii) building to order greatly reduced the costs and risks associated with carrying large stocks of parts, components and finished goods. Its build-to-order and sell-direct approach proved appealing to growing numbers of customers in the mid 1990s as global PC sales rose to record levels. In 1998, it was already the 3rd manufacturer in the United States with a 12% share of PC market and a nearly 6% share worldwide. The company’s fastest growing market for the past several quarters was Europe.