dell supply chain managment

In 1994, Dell made the bold decision to remove their products from retail stores and focused on direct to customer sales. In 1996 Dell began selling through their website which is to this day their most successful sales channel. By eliminating their retail store presence Dell was able to reduce costs on multiple fronts, reduce inventory, and maximize profits. Dell created an order system which allowed customers to specify and select options, components and features they wanted on their Dell device. Dell 's just in time inventory system lowered inventory holdings to just 3 days from 9 days and storage costs were thus minimized significantly. In 1995, Dell entered the Chinese market where a population of 1.3 billion was a great opportunity to create a significant market presence; IBM, Compaq, and Hewlett-Packard had all penetrated the Chinese market prior to this date and had opened offices in China during the early 1990’s. It wasn’t long before Dell proved to be worthy competition with not only international companies but also with local companies like Toshiba, Samsung, NEC and Acer. With so

Dell is a computer corporation recognized for manufacturing computer systems through parts assemble. In 1983, Michael Dell saw an opportunity in using IBM compatible computers for a new assembly line that can be sold to local businesses. The idea as explained by Michael Dell, in one of his interview, is that in the early days of computers' manufacturing, companies had to be able to produce every part of the system. As the industry matured, companies started to focus on single parts and to become specialized in creating items that can be assembled with other parts to prepare a computer. As a result, Dell understood that to have a competitive edge in the market, they needed to

Dell has been quite a leader when it comes to manage its inventory and supply chain issues but it faced some challenges too while growing. In this case study two aspects of two Dell have been discussed which Dell faced while growing. The first challenge was Inventory Management while continuously meeting the demands and requirements of its customers and second challenge was how to maintain its customer relation.

In 1993 IBM reported a $5.6bn loss for the fourth quarter of 1992 ending a yearly deficit of $4.97bn; which at

Dell’s target market consists of personal computer users and corporate users. Dell is known for their ability to build computers suited to their customers needs. Because their largest customer base is marketed online, their geographic area is unlimited. Since technology is rapidly progressing and moving away from traditional PC’s, Dell has to diversify their products.

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.

• Transactional buyers – SMB and Personal,user call centers, and AD’s by DELL to reach out to them

Dell was more capable of maintaining the Direct Model strategy than most, if not all, of its competitors. The resources that supported this advantage were the close relationship Dell had with its suppliers, a solid just-in-time inventory management system, and proximity of warehouses and production facilities to assembly operations. In addition, Dell’s computers developed a reputation of reliability and the company excelled at customer service. While the Direct Model seemed to challenge competitors, many other companies were able to imitate Dell’s reliability and customer service.

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.

Dell Computer Corporation, the second leading computer manufacturer, began by selling PC's directly to consumers. Their first customers ordered over the phone and Wold Wide Web. To this day Dell still has no brick and mortar retailers and does not distribute its product to resellers. In the business to business market Dell has excelled, but until recently, the profitable company was not so profitable in the home-user segment,(Industry Survey, Apr. 2000). The company's new strategy, to gain market share, has proven very effective. Dell now posts a 62% gain in world wide PC shipments and a 2.6 share-point gain from 8.2% in `98 to 10.8% in `99,(Industry Survey, Apr. 2000). Recently Dell's presence has been felt in the growing PC market. This has forced competitors to be very careful about pricing in this highly elastic industry. Dell's profitability is also notable, since it has minimal distribution costs and does very little advertising Dell is extremely profitable. However, rough times may be on the horizon for Dell. Analysts are worried because profit growth

sustain its profitability in light of the industry’s -10% growth rate and 50% reduction in profit margins in late 2000, or should it change its expectations and react to the commodity nature of the environment? Dell’s immediate challenge is to try and sustain its positive growth rate, spike its stock prices, and conquer new markets. But how does Dell choose its next product or service to offer the world ? It must make the right choices as to what is the next value proposition that really matters to its customers. Another challenge for Dell is how to cope in a new world where technology devices and components cost less and less (resulting in shrinking profit margins) that become obsolete practically overnight. Perhaps, Dell’s biggest challenge will be to have the discipline to know when and how to change strategies that have worked so well up to now. If Dell does not have the vision and adaptability, it will be just a matter of time before another company does a Dell on Dell.

Dell computer is a customer focus company that has maximized its value chain for the profitability of the company; the company focuses on researching their customers wants, needs, and leverages the research information to enhance the profitability of the company and its suppliers. To this end, Dell uses direct sales business strategy; offering products to customers mainly through the internet. Furthermore, by offering unlimited varieties of their build- to- order desktop, note book and other products, the

▪ Communication. Maintenance of close ties with their most profitable corporate customers. By keeping open lines of communications, installing custom software, and keeping up with its customer’s business inventories for them, Dell is increasing customer loyalty and satisfaction. Dell has also built and maintained a Premier website for corporate customers. The website can be accessed by any customer subsidy worldwide, and not just a company’s purchasing agent. Through the website customers are able to purchase computers according to the automated policy (Kotler & Lane, 168).

The finished products are transported to customers once finished. As Dell has promised, customers will receive their orders generally within 7 working days.

Over 2 decades of time Dell’s Configured to Order (CTO) business model did fine. However, over the period due to revolution in IT business, changing needs of the customers and strong competitive challenges in the PC market, Dell’s ability to grow revenue and deliver strong profitability was undermined. This forced Dell to review its business model and make it more competitive in line with the changed scenario in IT business. Following factors played crucial role in forcing Dell to revise its business strategy involving retail channels, pre-built PCs and smart selection methods for customers with new less time consuming Build to Order (BTO) strategy (Blanchard, 2012):