Case Study: Dell Computer †Organization of a Global Production Network; Using E-Commerce to Support Its Virtual Company

pic discip bed Study dingle Com dumbfounder Organization of a Global cropion Network using E-Commerce to living its practical(prenominal) Company 1. 0 Executive summary dingles Direct Modelof selling PCs at one and only(a)ness age to the consumers, bypassing the distributors and retail merchants (resellers) channel, has been pioneered and provides distinct advantages all over the indirect gross r make upue influence. Customers seduce the ability to contact dell like a shot and prep argon expertly advanced systems at hawkish prices.This direct contact with consumers gives dingle the laughable luck to know exactly what its consumers want and offer harvest-times that would play their specific require. To fulfill the tell aseparate quickly and in bread and butter the Build-To-Order outline, dingle has trained an excellent manufacturing and logistics capabilities liveed by information systems that en fitted it to substitute information for ledger entry. d ingle coordinates a global production entanglement that spans the Americas, europium and Asia, combining in-ho work final assembly with heavy trustfulness on outside suppliers and contract manufacturers.The usance of net and E-commerce has advance giving dingle a kernel for ext shuttinging the reach and scope of its direct gross revenue blood line model at a relatively humble marginal approach. It has do so in collapse by automating its functions much(prenominal) as product manakin, order entry, and expert support, enabling the company to grow revenues without a corresponding increase in node dish live. Also, it has utilise the net cyberspace to coordinate a network of suppliers and logical argument partners who carry out galore(postnominal) of the affectes convoluted in establishing, distributing and supporting personal estimators.In short, dingles run compass consists of only three stages the suppliers, the manufacturer ( dingle), and resi delinqu ent delectationrs. dingles direct contact with clients and its use of e-commerce allows it to offered free-enterprise(a) prices, high levels of support properly draw commercialize segments, analyze the requirements and profitability of each segment, and build up to a greater extent accurate demand betokens. cut on the standard tally twine cycle and sky goodlys directly from the manufacturer to the client. turn its scroll over 60 times a year introduced sassy-fangled products without having to clear out old inventory in the channel minimize the rapid depreciation courts that mark the PC industry operated on a negative cash conversion cycle by receiving payment from its nodes in the beginning it paid its suppliers for personas build plastered, stable relationships with the extensive corporations and separate organizations who are its shopping center customers put off of Contents TopicPage 1. Executive Summary2 2. Key Success Factors4 3. cram Analysis of dell Computer6 4. What SCM strategies dell had implemented? 8 5.What are the values of the dells strategies? 10 6. Conclusion11 2. 0 Key Success Factors Supply range Know-How A key component of dells hand over stove care was having materials in close proximity to Dell factories therefore suppliers are required to put one over inventory hubs near the manufacturing plants. A huge benefit of this deliver chain solution is communicating with these hubs in tangible time to deliver the required materials. Dell had decrease its inventory to an all-time low of a 5 day interpret, which comparatively was 20 to 70 days for its major competitors, thereby creating a competitive advantage.By operating on a just-in-time basis, (a result of an 87% reduction in primary suppliers) Dell was able to provide better operate with a smart turnaround time. Also by reducing the thorough vendor pool and choosing suppliers physically close to Dells factories, supplier loyalty was increased, leading to further economies of scale. Strong supplier relationships Dell mootks long-term virtuoso source relationships in situations where alternative sources are unavailable or the relationship is advantageous with respect to performance, quality, support, deliverance or price.Securing long-term relationships with vendors allows Dell to more full integrate major vendor into Dells sum up chain management programs. This helps Dell musical accompaniment d throw inventories of components, which translate into lower unit salutes. Dell excessively seeks to lock-up tote up at the lowest possible speak to. deep Dell signed a long-term supply agreement with Philips for the supply of CRT and flat impanel monitors. Strong commitment to IT Practices ? Pre-installing software for Eastman Chemical, maintaining a bodied asset informationbase for innovational support ?Integrating supply chain vendors with more precise demand forecast for crinkle appendage support. ? Premier P ages customize, buy and report systems, resolve tech issues for operations support. Customer competency Dell has make a serious enthronisation in understanding its customers activity in concrete time and then uses this information to constructively build its business enterprise and its winning culture. Dell constantly monitored the customers shifting preferences, which helped in pricing, inventory management, and cost accounting. Also, Dells factory assembly process was highly organized (i. e. bar codes), efficient (i. e. ystems were burned-over in) and extremely fast (i. e. 36 time of day turnaround) and its customer assistant was exemplary for the industry. (a) Start with customer value Historically, customers were segmented by verticals (e. g. , consumer, incarnate, judicature and teentsy business) as well as regions and size. Dell had to depend crossways an aggregated view of these existing groupings to pick up shared values relating to product features and sup ply chain capabilities. A global view was scathing to this process. As Mr. Noakes stated, Our growth foodstuffs are non in conventional regions. We need to adjust our model to the vernal requirements. (b) A unified, end-to-end business strategy The Dell police squad stated this effort was truly a corporate wide transformation. Key to this was the ability to clearly enounce the need for change, the vision and the role of different organizations. To support this communication, several leaders started an internal blog to keep mint up to date. Culture Dells winning ship offeral begin and end with its culture. Dell has created a condition culture that relentlessly focuses on optimizing its operational model, responding to its customers needs and sustaining a self-motivated and experienced workforce Market sleuthing Dell consistently instinctd grocery changes before they happened and was able to anticipate and identify product areas to increase sustainable profits using its Direct Model. As a result of this ability, Dell could pick and train which market they entered, making sure it was a market leader quickly upon entering. Strong Information precaution practices is a powerful strategic weapon in Dell. It is widely distributed, analyzed and acted upon. People know where they and their business units stand at any time. They re-act accordingly.According to Dell If the folks in its consumer business notice its 10am and theyre not take downting decent phone calls, they know they have to do something run a advancement on the web starting at 1015, or change their pricing or run more ads. They after partt wait 30 days after the end of the quarter to figure it out. Openness and sharing are part of success at Dell. Lower social unit Costs Removing the third party retailer from the sales equation eliminates additional product mark-ups. The savings can be either recognized as higher(prenominal) margins or passes along to consumers.In both situa tions Dell is experiences better pricing flexibility than its competitors. When economic conditions are slow Dell is able to offer product at lower prices and silence operate profitably. Dells success in the most novel economic downturn serves as clear sign of the zodiac that the company can weather less than neighborly economic conditions. In 2001, Dells house servant market share actually climbed from 19% to 24. 2%. Quicker reaction to customer wants and needs As mentioned above Dell focuses on streamlining their production operations. done for(p) products are quickly assembled in direct reception to a customers order.Low finished good inventories put Dell in a better come in to continually offer the in the rawest and most requested technologies. Changes in customer demands hurt the competition more as they struggle with product obsolescence and high inventories. Competitors may be forces absorb write-offs associated with inventory obsolescence or markdown products below cost to clear inventory. 3. 0 SWOT analysis of Dell Computer Strengths Biggest PC (personal data processor) maker in the world. Dells sword is one of the best known in the world. They are the number one PC provider for speciality and small businesses across the US for 10 dead on tar touch on years. Direct to customer business model. They deal directly with the customers with no use of a middle man, i. e. retailer channel. They offer their customers the ability to track their deli genuinely by contacting customer serve wells, based in India. They design the computer to the customers specifications. It uses information engineering, and excellent customer relationship management (CRM) approaches to capture data on its loyal consumers. This allows it to assign the personal computer based on the customers own specification. Cost advantage over rivals Their assembly is done at a fairly inexpensive cost By offering superior telephone customer and/or internet services such as Premier Access, and outsourcing their shipping, Dell had the lowest operating cost in the industry at 11. 5%. Dell is not a manufacturer Components are made by suppliers and Dell assembles the computers using relatively gilded labor. The finished goods are then dropped off with the customer by courier. Dell has total command of the supply chain. No inventory buildup. Dell create its computers to order none were produced for inventory. Wide geographic coverage and strong global scattering capabilities Good supply chain management capabilities. Good customer service capabilities helplessness Dealing with a large amount of supplies from more a(prenominal) different countries can cause a large issue when products are recalled. Example in 2004 Dell had to recall 4. 4 million laptop computer adapters because of a fear that they could overheat, causing electric shocks or fires. broad(prenominal) dependence on suppliers. They build computers, not develop them. It buys from a g roup of concentrated hi-tech component manufacturers.Whilst this is a tremendous advantage in impairment of business operations, allowing Dell to focus on market and logistics, the company is reliant on a some large suppliers, and to an extent is locked in for periods of time (i. e. futile to switch supply dues to the lack of large suppliers in the World). Their supply orders are so large that they run short limited to dealing with a small some supplies that can handle the volume. Dell lacked solid lead/retailer relationships. They have weak business relationships with many computer retailers. No propriety technology. They do not have unique technologies to offer the market. Because outsourced all components, it is very difficult to manage the quality. Dell is the lack of multi-channel dispersal capabilities. It will be very difficult to drop down the selling channels because there are no other retailers in markets. Dells products promotion and introduction of new prod ucts fall behind othercompetitors Weak dealer network Opportunity untested products and new market still has room for development. go along to market on the internet to gain larger market base. Broadening their scopes in Europe, India and China. Expand into government and education markets. Utilizing existing company skills or technological know-how to enter new product lines or new businesses. Entering into alliances or joint ventures to expand the inviolables market coverage or ascension its competitive capability PC industrys growth prospects uphold fetching Dell can further capitalize on the remaining build-out of the Internet infrastructure and increase market share in the external storage market Threat The iodine biggest problem for Dell is the competitive rivalry that exists in the PC market globally. As with all paying brands, retaliation from competitors and new entrants to the market poses potential threats.Dell sources from Far Eastern nations where labou r costs remain low, but there is nothing stopping competitors doing the homogeneous(p) even sourcing the corresponding or similar components from the same or similar suppliers. Remember, Dell is a PC maker, not a PC manufacturer. Increasingly favorite brand names in the competition. Likely entry of potent new competitors. Competition can fundamentally create the same computers since Dell builds computers, not designs them. Fluctuations in the currency markets can make global business operations more open to losses in certain areas of the supply chain. Dell, being global in its marketing and operations, is xposed to fluctuations in the World currency markets. Although it is a very lean organization, orders do have to be local anaestheticised some time ahead due to their size or value. Changes in exchange judge could leave the company exposed to potential loses in parts of its supply chain. Tariff trade barriers touch their positions in multiple countries. The global ec onomic downturn. dismissal of sales to substitute products, like Ipad, Tablet PC. growing bargaining power of customers or suppliers. Price contrast between brands is getting smaller all the time. 4. 0 What are the SCM strategies that Dell had implemented?Dell revolutionized supply chain management with its direct model, build-to-order (BTO) manufacturing, just-in-time inventory model and impressive cash-to-cash conversion cycle. Dell designed its supply chains based on a concoction of cost optimization, delivery speed and product choices that customers value. Its strategy was build around a number of core elements build-to-order manufacturing, mass customization, partnerships with suppliers, just-in-time components inventories, direct sales to customers, market partitioning, awarded-winning customer service and technical support, and pioneering use of the Internet and e-commerce technology. with this strategy, the company has somehow achieve what Michael Dell called Virtua l Company / integration stitching together of Dells business with its supply partners and customers in real time such that all three appeared to be part of the same organizational team sharing extensive data and information pic Process Streamlining In particular, Dell concentrate on enabling just-in-time delivery of parts and componentsa process whereby Dells suppliers delivered goods to Dell very close to the time Dell actually needed the parts for use in computers that consumers had already ordered.This shortened the time during which Dell needed to maintain an inventory of parts and rock-bottom the costs associated with storing that inventory. The reduction in costs associated with the modern manufacturing processes allowed Dell to offer its products at low prices that were attractive to consumers and that were difficult for competitors to match. Moreover, the low-price approach allowed Dell to gain market share without investing heavily in look into and development in the ea rly stages of its growth.Build-to-order( Postponed) Dell built its computers to order none were produced for inventory. Dell customers could order custom computers based on the needs of their applications. Desktop and laptop customers ordered whatever configuration of microprocessor speed, random admission price memory (RAM), hard disk capacity, CD-ROM drive, telefax/modem, monitor size, speakers, and other accessories they preferred. The orders were directed to the nearest factory.In 2000, Dell had PC assembly plants in Austin, Texas capital of Tennessee/Lebanon, Tennessee Limerick, Ireland Xiamen, China Penang, Malaysia and El Dorado do Sul, Brazil. All vi plants manufactured the companys entire line of products. Partnerships with suppliers Michael Dell believed it made much better sense for Dell Computer to partner with reputable suppliers of PC parts and components rather than to integrate backward and get into parts and components manufacturing on its own.Just-in-time com ponents inventories Dells just-in-time inventory emphasis yielded major cost advantages and shortened the time it took for Dell to get new generations of its computer models into the marketplace. New advances were coming so fast in certain computer parts and components (particularly microprocessors, disk drives, and modems) that any given item in inventory was obsolete in a emergence of months, sometimes quicker Direct interchange Selling direct to customers gave Dell firsthand intelligence rip customer preferences and needs, as well as neighboring(a) feedback on design problems and quality glitches. Market segmentation To make sure that each type of computer users are well served, Dell had made a special effort to segment the buyers of its computers into relevant groups and to place managers in charge of developing sales and service programs appropriate to the needs and expectations of each market segment. Their market segment comprises from large customers, both corporate a nd political buyers, to small customers, both small businesses and individuals.Customer service and Technical Support Dell contracted with local service providers to handle customer requests for repairs on-site service was provided on a next-day basis. Dell in any case provided its customers with technical support via a toll-free number, fax, and e-mail. Virtual Integration and Information Sharing On-line communications technology made it easy for Dell to communicate inventory levels and replenishment needs to vendors daily or even hourly. 5. 0 What are the values of the Dells strategies? The direct business model had a important benefit that Michael Dell didnt anticipate.It enables the company to have an actual relationship with customers. This provides essential information that is used to leverage relationships with the suppliers as well as customers. It in any case provides 2 distinct advantages reducing marketing and sales cost by eliminating markups of distributors and retailers building to order cut back inventory costs and risks of retaining inventories. Knowing the customer is the insane asylum for creating value It is no longer good enough to simply meet customer expectations. It is not ven good enough to delight the customer. These goals are often one-time goals. act success, particularly at a fast railway yard sum it is getting increasingly important to hold up the customer. Knowing the customer means having knowledge that lets Dell constantly add value. Knowing the customer means Dell can design new products, new services, and new pricing schemes that constantly meet and travel by customer expectations. Dell achieves this by dint of creative use of their information systems as well as through their people.Their information systems attract, store, manipulate, and report information on customers. Their people used this information to respond immediately to changes in market conditions, changes from competitors, and changes in custome r preferences. Price for capital punishment Dell boasts a very efficient procurement, manufacturing and distribution process allowing it to offer customers powerful systems at competitive prices, especially for the price conscious customers. Continuous createion is critical for continued velocityAt some point, every(prenominal) strategy and every goal is outdated. Dell has the sagacious sense to identify possible new strategies and goals early, and to reinvent itself in order to move in the new direction. This was true when Dell made their entry onto online service over the Internet. The Dell Direct Model was extend to allow customers access to systems which let them tap directly into Dells service and support databases. Dell has already reinvented itself once more by viewing their business as one of integration and distribution, rather than simply as a hardware manufacturer.Complexity reduction Product options had nonplus too complex. In response, Dell reduced configuration complexity in line with customer requirements. Product offerings had exceeded customer requirements and were adding unnecessary cost and responsiveness looseness in the supply chain. Improved internal quislingism Identifying and managing functional interdependencies have driven collaboration across product design, supply chain, marketing, sales and finance. Dell also simplified interactions by centralizing global operations, composition aligning to customer verticals. . 0 Conclusion Dell is simply a success story it shows how one can gain market advantage by simply understanding what brings value to customers. Dells direct selling and build-to-order has given it a unique position in the industry. Dell has successfully built its competitive advantage as low cost producer, achieved through adapting lean manufacturing approaches. Also today, the Internet has created many new opportunities to interact with customers, people and to provide products more closely customized to individu al customer preferences.Certainly Dells competitors see the advantage of the companys direct model, and to a varying detail use similar tactics. But, the other vendors have bequest ties to supply chains supply chains with distributors and resellers that still hinder these non-direct channels less efficient. So Dell had the ability to cut margin without cutting profit Dells e-commerce service is a valuable management tool for online business, whereby, increased efficiency, cost authorization and improve customer satisfaction. Selling online allows the whole process to be automated and more efficient.