1st Assignment Supply Chain Management (IVth trimester)

Submitted By: Hemam Johnson Singh Roll no.141217 Sec (A) PGDM 22nd Batch

Supply Chain drivers of Dell: Date: 10/07/2015

1. Facilities

2. Inventory

3. Transportation

4. Information

5. Sourcing 

6.Pricing

Role of each driver in maintaining the efficiency & responsiveness of dell’s supply chain are as

follows: 

1. FACILITIES: 

Activities such as coordinating with its manufacturing facilities & managing inventory are of

primary concern for dell because they impact the price of the final product to customers. Dell has

a manufacturing arrangement with its key suppliers such as Sony. Thus suppliers’ employees

work in the dell facilities & work on the planning & product development. Now because of the

close relationship with its suppliers & their reputation for building certain component dell does

not perform quality checks on their components .Thus dell does not maintain any inventory on its

own. It is owned by its suppliers. Moreover when required it instructs to get the components

matched in the delivery process which eliminates the need for dell to have a distribution centre to

perform all these kind of functions. 

2. INVENTORY: 

The inventory in its facilities is not owned by dell, rather owned by suppliers which indirectly

adds to the components price & finally the final product. Therefore, any reduction in inventory

definitely reduce the product price & finally benefits the customer & definitely the company.

Low inventory also lead to higher product quality because it becomes easy for dell then to

identify any defects in the inventory. The vendor-managed-inventory (VMI) arrangement of Dell

lets its suppliers decide how much inventory they need to order and when to order while Dell

sets target inventory levels and then records deviations from the targets for each supplier. Dell

chose an inventory target of 10 days i.e. it make a plan for 10 days about the inventory targets to

achieve.

To help suppliers in making accurate or nearly accurate ordering decisions, Dell shares its

forecasts with them once per month. They not only focuses on Product-specific trends, but also

reflect the seasonality factor.

For example Christmas is the top time of the year, back-to-school season and country-specific

seasons for foreign purchases (foreign language keyboards are especially influenced) etc. Dell

revive its forecast weekly accounts to the various factors & suppliers receive forecasts monthly. 

3. TRANSPORTATION: Dell in some cases has significantly less time to respond to customers

than it takes to transport components from its suppliers to its assembly plants which require 7

days to as much as 30 days to transfer various components to assembly plants. To compensate

for long lead times and buffer against demand variability, Dell requires its suppliers to keep

inventory on hand. Thus small warehouses are located within a few miles of Dell’s assembly

plants. Each of the warehouses is shared by several suppliers who pay rents for using that. Thus

it store inventory there according to the forecasted demand keeping some level of buffer stock

accordingly & thus reduces its transportation cost by ordering purchases in batches rather than

individual purchase. 

4. INFORMATION: 

By selling directly to customers dell computers uses e- commerce to communicate with

customers, maintains low cost & customize products according to customers’ specifications. Dell

computers are driven by the desire to create value for customers.

Through the use of internet, dell’s customers gain access to the same product, service &

catalogue information as its employees. Tailor made internet sites called premiere pages gives

customers direct access to purchasing & technical information about the specific configuration

they buy from it.

www.dell.com was launched in June 1994 and as soon as it was launched customization become

very easy for dell. Product list is available with price there. Customer can directly purchase by

credit card. Brochure is sent directly through e mail. Complaints are also registered there &

technical support is provided to the customers. Thus customers can order, configure & even

gather technical advice online & get a completely customized product.

The corresponding Web site valuechain.dell.com is an extranet for sharing such information as

points of contact, inventory in the supply chain, supply and demand data, component quality

metrics, and new part transitions. Dell envisions using this site to exchange with suppliers

current data, forecasted data, new product ideas, and other dynamic information that might help

it to optimize the flow of information and materials in the supply chain. Value Chain is a

program intended to extend Dell’s successful direct-sales approach back into the supply chain

with the goal of increasing the speed and quality of the information flow between Dell and its

supply base. 

5. SOURCING: 

Dell has a virtual relationship with its suppliers who manufacture components & maintain just in

time for dell which are assembled in its assembly plants. Moreover, for the customers who want

or need more personalized assistance, dell send out one of more than 10,000 service technicians

to their site. However only a small no. are dell employees. Most are contract employees (supply

chain partners). This allows dell’s employers to focus on activities that create more value for

customers. 

6. PRICING DRIVER:

Dell follows comparative Lower price to match the customer's expectation of value for money

(Comparative Pricing) - Low inventory cost & Direct Distribution • Depend on supplier’s price

(Cost plus Pricing) • Customization (Optional feature Pricing) - No price tag effect - Pricing

strategy based on customer’s needs. Therefore, customization & reduction in price benefits the

customer & definitely the company.

Conclusion:

Dell’s operation can be described as "High Velocity Mass Customization".

All the drivers of dell’s supply chain can be attributed to decreased cost & increased customer

service. The result was when retailers who aligned with dell’s competitors began charging higher

rates for servicing & supporting dell products, customers remained loyal.

Unique product offerings, cost reductions, high responsiveness towards customers demand has

resulted in customer loyalty.

Performance Matrices Dell:

Widely known for its super-efficient supply chain, Dell Computer Corporation successfully uses

a BUILD-TO-ORDER manufacturing program to hold down its inventory to only a five-day

supply while shipping 95 percent of customer orders within eight hours. In an industry where

materials costs are dropping and where technologies are rapidly becoming obsolete, this strategy

gives Dell a key competitive advantage as a low-cost producer. Dell can reap the benefits of

lower material costs almost immediately and reflect that benefit in its consumer product prices.

In addition, it can minimize any excess or obsolete inventory by responding immediately to

softening demand.

With a goal of replacing inventory with information, Dell uses i2 Technologies software to track

its supply chain activities. Monitoring the system constantly, Dell is able to make immediate

changes (within hours) to respond to fluctuations in consumer demand.