College of International transport and logistics

Ihab Mohamed Tarek

ID: 12105180

Introduction to Supply chain management

Dr. Ahmed tarek

Dell’s direct model

1

Introduction

Supply Chain Management is a business practice that has been employed in order to give an effective service to customers and to make the business sustainable by considering all the aspects from the suppliers to the consumers.

Supply Chain integrates all these features such as manufacturer, supplier, transport, wholesalers, retailers, customers and all other elements which link the above. Its main objective is to fulfill customer demands by adding value to the products and services.

Supply Chain of DELL

DELL has a different business model than its competitors, which can be identified as “direct model”. In this model DELL sells its PC s directly to customers without using a retail channel.

Direct Model

Bypassing the dealer channel, selling directly to consumer Focus on Speed of Execution and Minimum Inventory

Characteristics of Direct Model

Eliminate costs & risks of carrying large inventories JITM : high velocity, reduced channel costs from 15% to 2% of production revenue Direct customer relationship Low-cost distribution Latest tech. introduced faster than indirect channels Use IT to control value chain and achieve a high deg. of coordination Build-to-order

2

Supply chain of HP

Indirect model

Reseller Customized the PC to customer requirements, installed components and provided additional service and support

3

Pull and Push Strategies

1. PUSH STRATEGY

Definition:-

Manufacturing system in which production is based on actual daily demand (sales), and where information flows from market to management.

- A push promotional strategy involves taking the product directly to the customer via whatever means, ensuring the customer is aware of your brand at the point of purchase.

"Taking the product to the customer"

2. PULL STRATEGY

Definition:-

Manufacturing system in which production is based on a projected production plan and where information flows from management to the market.

- A pull strategy involves motivating customers to seek out your brand in an active process.

"Getting the customer to come to you"

4

Advantages

Pull system Push system Limited Inventory Customer centric Improve cash flow Make -to-order

High Inventory Producer centric Make -to-stock Forecasting demand

Disadvantages

Pull system Push system Balanced systems MUST be in place Setup times will greatly impact throughput Any problem will lead to unhappy

customers Every job is a ‘High Stress’ Rush order

Can generate large quantities of scrap before errors are discovered

Requires maintenance of large and complex databases

Requires diligence to maintain effective product flow

However, the direct sales model provides a cost advantage on the production side, in other words, but brings a cost disadvantage on the support side.

Dell is selling directly to customers, it has to shoulder all the related support costs, from handling information requests before the sale to taking and tracking orders to handling service inquiries after the sale. So it can’t offload any of those costs onto resellers or retailers or other distribution partners – because Dell doesn’t have any distribution partners.

5