Final Assignments Global Supply Chain Management Topic Dell Corporate - Analysis Global Supply Chain Management.pdf

GLOBAL SUPPLY CHAIN MANAGEMENT

Topic: DELL Corporate - Analysis global supply chain management

Lecturer : PhD Tran Cong Thanh Group : Group 5

Subject code : INS3021.03

Hanoi, December 2022

GROUP PATICIPATION EVALUATION

Completed Report 2 Nguyễn Thi Hanh 2 Strategic priorities

19071348 4.1.4 Forecasting 100% management analysis

3.3 Customers stage analysis

3 Nguyễn Thị Ngọc Ánh | 1 Company profile 100% 19071312 3.2 Manufacturers analysis

4 Dao Khanh Linh 1 Company profile 100%

19071398

3 Manufacturing supply chain of DELL (analysis 3 stages and contribution of

design to DELL’s strategic

priorities)

1 Company profile: 1 2 Strategic priorities 2 2.1 Order winners — Cost 2 2.2 Order qualifiers 3 3 Manufacturing supply chain of DELL 4 3.1 Suppliers 5 3.2 Manufacturers 6 3.3 Customers 7 3.4 Contribution of DELL’s supply chain design to its strategic priorities 8

4 DELL’s supply chain management 9

4.1 Analysis some specific supply chain management in DELL eee 9 4.1.1 Inventory management 9 4.12 Supplier relationship management 9 4.1.3 Manufacturing and logistics MANAQEMENE occ cecces cee eteteeeeeeetenseeeeees 10 4.14 Forecasting management 11

4.2 DELLs supply chatn management 1ssues and soluflons - II

F 5N TL 11 1 11 4.2.2 — Issues and solutions in manufacturing and logistics management 12 5 References 14 6 Appendices 16 6.1 Figures list 16

Dell Computers was founded by Michael Dell in 1984 He founded it on the idea of selling personal computer systems directly to customers instead of through retailers Dell offers products such as: desktops, laptops, network servers, workstations, and storage products Dell was growing rapidly, sales reached an inflection point increasing from $3.5 billion in 1994 to $25 billion in 1999 In 1999, Dell became the company that sold PCs number one in the United States and second in the world with more than 165,000 employees globally (Kraemer, et al., 2001)

Compaq, IBM, and HewlettPackard are Dell's main competitors in the corporate PC market In the consumer and small business markets, it competes with Gateway, as well as Compaq, Hewlett-Packard, Apple, and newcomer eMachines Toshiba, IBM, and Compaq are the primary competitors in the portable PC market Dell competes in the critical server and Internet infrastructure markets with Sun, Compaq, HP, and IBM As Dell expands into new service businesses like Internet hosting, it will face new competitors like Exodus and Corio, some of whom may also be Dell customers Dell competes with regional and local vendors in many markets outside the United States, including NEC, Fujitsu, and Toshiba in Japan, Fujitsu-Siemens and Olivetti in Europe, and Legend in China In Europe, Latin America, and the Asia Pacific region, it also faces stiff competition from Compaq and IBM (Kraemer, et al., 2001)

Students, self-employed people, workers with assigned equipment budgets from their employers, and mobile people who require a device with many features have been identified as key customers These markets trade frequently, necessitating the use of a lightweight machine capable of running specific programs Furthermore, different situations necessitate a specific level of performance from the machine being used, making more expensive notebooks an option to meet this requirement (Rodgers, 2017) Dell has always needed a steady supply of high-quality PC components However, Dell's management did not integrate backwards to become its own manufacturer Therefore, the company always seeks to maintain long-term relationships with well-known and quality PC component manufacturers

Original design manufacturers (ODMs), final assembly, and suppliers from whom Dell purchases directly and/or provides significant product transformation are all included on

suppliers

Dell's List of Suppliers (December 2021) contains two lists The first category shows which products are manufactured at each of Dell's original design and final assembly (ODM) plants The second section lists the suppliers of the supplementary material and indicates which category the product falls under

2 Strategic priorities 2.1 Order winners — Cost

Figure 2-1: DELL versus competitors

According to Figure 1, the basic method that DELL uses to gain and maintain their competitive advantage is to implement cost leadership strategy while maintaining high quality (Dell, 2007)

Firstly, business strategy focuses on cost leadership - reflected in company mission Dell's mission is to offer cutting-edge technology at competitive prices in order to achieve complete customer satisfaction The goal of Dell has been to be the market leader in computers and computer accessories ever since the company was founded Michael Dell's main goal when he rejoined the business was to establish it as the industry leader once again By concentrating on fusing a cost leadership platform with configurable solutions, Dell has aimed to overtake the competition Based on the idea that consumers are price sensitive when it comes to computers and will look for the least expensive equipment that

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competitive Dell competes both as a product customizer and as a low cost supplier of goods in the customization space

Secondly, direct order services by a website, skip the middleman, see in dell.com While Dell's industry competitors like Apple, hp, Acer sold through resellers, Dell used direct marketing to sell at lower prices In the beginning, the business took steps to cut out the middlemen The organization was able to effectively market its value proposition by determining the demands of the consumer

Additionally, the corporation has a broad range of products For every market segment, the organization has implemented a different category These include for the household, for a small home or office, for a small or medium-sized business, for the government, the healthcare system, or for huge corporations For each main component, sub categories have been submitted The success of the company depends on these tactics The business has built up its grassroots networks all around the world Consumers can buy the goods in practically every nation

Last but not least, to charge less while still making money, switch from the lowest-cost manufacturer to the lowest-cost product supplier (Porter, 1980) A cost leadership approach has been adopted by the majority of market competitors, including HP and Lenovo, with the exception of Apple, whose customers are seen to be less price sensitive By doing this, the business transforms its cost advantage into a pricing advantage for the consumer, increasing its market share Gaining market share offers Dell a fantastic chance to benefit from economies of scale in addition to the drastic cost-cutting efforts the business plans to execute

2.2 Order qualifiers

Beside low-cost strategy, Dell also aims to give the greatest possible customer experience by providing distinctive products and services that are simple to use and purchase as well as outstanding value, high-quality relevant technology, customized systems, superior service, and support (Dell 2012) Global consumers hold Dell in high regard for its high- quality products One of the most durable and useful laptop lines on the market is Dell's

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influences middle-class consumers to choose Dell as their retailer is flexible product customization As opposed to other brands that have a higher fixed price, Dell offers a variety of price possibilities, thus those customers are likely to select Dell Manufacturing and distributing their own products allows Dell to be sensitive and flexible in changes in customer demands and needs Additionally, only Dell employs this kind of differentiation strategy by offering its products in a variety of colors and giving customers additional options to fulfill their purchases by simply giving them their preferred color options Furthermore, Dell also offers customized personalization Consumers in the 21st century, who are technologically spoiled, want VIP treatment and services that can be customized for them One of the few computer businesses that allows customers to customize their laptops directly is Dell Only a few IT companies allow customers to walk into their stores and configure their laptops, including Dell This simple specification demonstrates how sincere Dell is in ensuring customer satisfaction and ultimately increasing market share 3 Manufacturing supply chain of DELL

One of the most important parts of DELL’s external relationships is DELL's relationships

to suppliers DELL’s suppliers are partners and they are considered as a part of DELL (Bragdon, 2001)

In history, DELL had more than 140 suppliers; however, maintaining all of these relationships proved that they are costly, complexity (Schmid & Vogl, 2003) Therefore, DELL redesigned its computer configurations to ensure that the different models can utilize as various of the same components as possible (Zuckerman 1997 in Schmid & Vogl, 2003) Today, DELL has received 75% of their material needs from only about 30 different suppliers (Jacobs 2003 in Schmid & Vogl, 2003) This involves that Dell's suppliers are global suppliers, and they are mainly from Taiwan (Dell, 2009) - the source of a great number of electronics manufacturers which engaged in original equipment manufacturing (OEM) and original design manufacturing (ODM) (Hsu & Hu, 2009) Dell uses the rule in a way, saving cost by having as few as suppliers possible (Magretta 1998 in Schmid & Vogl, 2003); however, DELL chose the way of maintaining the flexible supplier relationship network to avoid risk from single sourcing, that means not all supplier relationships can be last long For example, DELL keeps the long-lasting relationship with suppliers that have stable technologies, e.g with Sony (Sony provides monitors to DELL), but its relationship can be short with whereas in more volatile segments such as memory components (Schmid & Vogl, 2003)

Since DELL does not invent new computer architectures itself (Magretta 1998 in Schmid & Vogl, 2003), Dell tried to combine with big business,e.g Microsoft Joint design teams were founded, to which suppliers assign their engineers to (Dell 1999, p 195, 196) Although DELL showed that their supplier relationship is a kind of friendship, in fact, they are not Cor-founder of DELL-Michael Dell says that DELL wants to become a tough customer to avoid complacency among all of suppliers (Schmid & Vogl, 2003) That means if any supplier cannot accommodate its expectations about cost, defect tolerance, inventory velocity, etc they will be dropped (Dell 1999 in Schmid & Vogl,

2003)

1s to how fast it’s moving Dell has been working with their supplier continually to reduce

inventory and increase speed (Bragdon, 2001) Dell requires key suppliers to set up commodity systems near its installations This allows the company to link up with real- time warehouses to be able to ship the exact number of parts required in a short time Some of Dell's main software and component suppliers:

Intel Microsoft Philips Electronics NV Compal and Wistron

Dell has their own factory where they build the parts The supply chain for Dell is particularly dependent on assemblers Because they are responsible for putting together the many parts to make a finished product that Dell can sell, and for fixing any problems that may arise

Dell organizes its manufacturing plants by region, so it only builds one or two plants to serve its regional market For example, it has manufacturing plants in Austin, Texas, Nashville, and Tennessee serving the North American market The plant in Eldorado do Sul, Brazil serves the Brazilian and North American markets Xiamen, China serves the Chinese, limerick and Japanese markets Of all the factories, the Austin manufacturing plant is the largest, producing all of Dell's hardware products [YouTube, 2007] Besides, Dell also cooperates with Foxconn, a large assembly plant in the world With the leading speed of manufacturing and assembling components, Foxconn is a reliable partner, especially with a company that sells direct computers like Dell With a strict assembly process, Foxconn always ensures the quality of products assembled here.[ Youtube,2021)

Dell reorganized the assembly procedures in 1997 Dell set established "production

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continually These "teams" combine workers nearby the region where they fully manufacture PCs in accordance with customer specifications The output of production teams has increased, and assembly times have decreased by up to 75%

Dell's use of the revolutionary internet technology in the late ‘90s was one of its manufacturing achievements The most effective channel for creating direct connections between suppliers and customers is now the internet The sales team at Dell has stopped taking orders over the phone in favor of an online gateway where consumers can access all the information they require to design their PC

3.3 Customers

Michael Dell underlines the importance of customers to the company's operations by saying, "Finding ways to become close to your consumers is crucial to your success" (Dell 1999 in Schmid & Vogl, 2003) DELL bases its operations on three key customer segments: the public sector, small and medium-sized businesses, and major corporations (also known as relationship customers) It's interesting to see that DELL refers to these market categories using relationship marketing terminology (Kraemer et al, 2000) Each sales representative at DELL is concentrated on just one client, while telephone service agents are distributed to specific relationship clients 30 DELL staff worked to repair 141,000 PCs for Boeing in 1999 (Kraeme, 2000) The Direct Model is essential to DELL's ability to sustain meaningful relationships with its customers DELL offers many ways to quickly get client feedback because of its close customer interactions This response then provides the company with invaluable insight "Knowledge-based and experience-based marketing” was the term used by (McKenna, 1990) to describe the essential marketing strategy DELL leverages consumer feedback to guide ongoing product enhancements that better meet customer needs The so-called "Platinum Councils” are another strategy for maintaining close customer ties For its largest clients, DELL arranges semi-annual meetings, inviting executives and technicians to talk about the most recent technological advancements and providing them with the opportunity to share opinions and experiences (Magretta 1998)

All of the aforementioned instances paint a clear picture of how DELL intends to develop

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value, it also becomes evident that the company values some customers more than others in terms of relationships The largest customers even constitute a segment-of-one.This philosophy is shown when DELL refers to its largest clients as "relationship customers” as opposed to "transaction customers”

3.4 Contribution of DELL’s supply chain design to its strategic priorities

Figure 3-2: Indirect Distribution Channel of the PC Industry

Final Suppliers |p» Dell Customer

Figure 3-3: DELL’s Direct Distribution Channel

Like other PC companies, DELL’s core PC business was organized along the lines of a traditional value DELL focused on building and selling systems, relying on others to take components, services and software However, it sold directly to the final customers without distributor and retailers (Figure 3-3) The business model breakthrough was indeed a huge success for dell The made-to-order process eliminates large inventory costs while providing customers with a sense of custom service Due to its direct sales strategy, Dell is able to keep the margin (between 5% and 10% of the sale price) that would typically go to the dealers (Kimble, C., Bourdon, L., & Lehmann-Ortega, L.2009) This strategy also enables Dell to better understand the demands of its customers and offer them better service (Kimble, et al., 2009), Its ability to be able to produce a PC to order allows it to limit stocks and to adjust its production very quickly to market demand (Kimble, et al., 2009)

Market environment today is characterized by customer preferences and tastes (Hsu and Wang, 2004 in (Gunasekaran and Ngai, 2004) Dell computers is one of the first successful Configure-to-order which builds customized computer models by using the Internet as an order fulfillment vehicle (Gunasekaran and Ngai, 2004)

4.1 Analysis some specific supply chain management in DELL 4.1.1 Inventory management

DELL customers could characterize their computer configurations following their tastes

and preferences on DELL’s website using company’s configure-to-order model Direct

sales and build-to-order model has a key advantage is that inventory cost does not build up in the channel lost value before it can be sold to customers, and it does not to clear out old inventories when new products can be introduced in the channel (Kraemer & Dedrick,

2001) This is also a specific characteristic in DELL’s inventory management which help

DELL pursue the strategy priorities of cost leader ship Comparing to most indirect vendors (12-15 times per year), DELL has inventory turnover rate of 60 times per year (Kraemer & Dedrick, 2001) Moreover, this DELL’s configure-to-order model allows DELL customers free on designing their computers by choosing various models, screen, software configuration, memory and a large number other features (Sanders, 2018) Therefore, DELL scored in the eyes of customers because these opportunities are considered as a great thing for customers

4.1.2 Supplier relationship management

One of key points stand out in value web model of DELL, which its close physical integration of DELL with its partners e.g suppliers In order to success with configure- to-order model, DELL has put a lot of effort in using the Internet and information technology to coordinate its entire value network including suppliers, logistic providers,

system integrators, and service providers DELL’s suppliers located close to the plant and

also suppliers personnel are located on the plant calling for material from warehouse using information from DELL’s extranet (Kraemer & Dedrick, 2001) Moreover, DELL gives preferential rights to its suppliers to create close relationship DELL applies its extranet

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System integrators

manufacturer, hardware and software suppliers (figure 4-1)

CMs/OEMs `*EDI

Tech doc's ™ T a EDI EDI EDI "

These in turn communicate with its own suppliers DELL’s suppliers have access to

information from DOMS to track sales of their own components or peripherals with the aim of replenishing DELL’s supply hub when necessary (Kraemer & Dedrick, 2001) For example, suppliers manage the flow of input materials and also holding inventory until it becomes a part of each computer built (Kraemer & Dedrick, 2001) Such physical integration not only build a closer partnership between DELL and its suppliers and

manufactures, but contributing in reducing the DELL’s inventory holding cost that help

DELL ‘strategy priorities-cost leader ship more efficiency 4.1.3 Manufacturing and logistics management

Manufacturing and logistics management is one of the most important part for DELL An important thing to manufacturing is managing inbound logistics with suppliers and manufacturers In briefly, when DELL needs a PC to assemble at the right time, DELL asks suppliers to hold inventory in warehouse within a 15-30-minute drive of its plants Then, when goods are replenished, DELL informs the warehouse, and they are moved to the plant and pulled off of the trucks as needed Finally, it is sent to an outbound logistics hub with the monitor and peripherals to complete and arrive the customers All of these

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with its suppliers, its own logistics hubs, shipping companies (Kraemer & Dedrick, 2001) With its configure-to-order model, Dell identify final assemble as a core competency, but it outsourced components, pre-assembly and logistics Service and support were also considered as a key part of relationship selling, therefore, DELL remains this function but outsources functions associated with service delivery to business partners Thus, DELL became a virtual corporation as a matter of business strategy The key to DELL’s strategy was fully exploiting information technology, the Internet and E-commerce (Kraemer & Dedrick, 2001)

4.1.4 Forecasting management

Dell keeps close relationships with its customer base to improve the exact of its demand forecasts These are created using customer historical databases, based on the products bought, in an effort to comprehend future computing requirements of major accounts by jointly planning the business infrastructure and talking about their wants (Viswanadham, 2002) Dell needs to forecast demand for two issues: customer demand (push) and determine the ability to assemble factories at the point of origin order (push) The planning for demands includes a push and pull system, understanding customer needs in terms of cost issues, locating goods at the right distribution centers, all these to reduce working capital and the key to control inbound logistics with agreed contractors and manufacturers Given the rate required at the exact time it takes to collect a computer, Dell needs contractors to process in-store records within 15-30 minutes of the factory Dell will then notify the warehouse when components must be stocked and they are taken to the factory, where they are towed out of trucks on their request

4.2 DELL’s supply chain management issues and solutions

4.2.1 Issues and solutions in inventory management

Although, DELL’s configure-to-order model creates a great thing for customers because of various options, the combination of options led to a big issue for DELL because this created a result of over seven septillion possible outcomes of computer configurations In practical of terms this created an inventory mess for DELL (Sanders, 2018)

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DELL has decided to use an analytically driven system to optimize inventory decisions The aim was to meet the diverse customers’ requirements but also keep the costs as low as possible Analytics team of DELL run cluster analysis by using historical customers order data to find the most common configurations customers ordering (Sanders, 2012) Through cluster analysis, DELL saw that there was a number of similarity in computer configurations, therefore, they were able to decline the seven septillion outcomes down to few million Then they also were able to identify certain models that company could stock them a little in preconfigured inventory Those common configurations could be built ahead of time and kept in inventory with the lowest margins (Sanders, 2012) As following DELL, this new analytically driven system increased customer service and reduced inventory cost, and resulted in an additional $40 million in revenue (Sanders,

2012)

4.2.2 Issues and solutions in manufacturing and logistics management DELL follows a configure-to-order model or build-to-order and has no mass-production It expected DELL and its suppliers to have available components at any time without predictable quantities (Kraemer et al, 2000 in Schmid & Vogl, 2003) It requires the cooperation of shippers, suppliers' customers, and the commitment, cooperation and holistic approach of many others If suppliers are not willing to update the company's parts in a timely manner, the company adopting this model will be forced to have higher inventory costs and will not satisfy customers by providing give customers the best status (Edirishinghe, 2015) The company consequently would fail in price competitive as well

> Solutions

To make this complex process work efficiently, DELL needed to manage its supplier relationships by applying a lean just-in-time pull concept, requiring suppliers to only add parts as needed, and the supply chains of DELL and DELL's suppliers are closely intertwined, and can therefore be called virtual integration (Dell, 1999 in Schmid & Vogl, 2003) Dell willing to shares inventory datas related to designing and quantity, quality data, technology plans as well as daily production demands openly with its suppliers

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through a ‘real-time window’ into its information systems (Magretta, 1998 in Schmid &

Vogl, 2003) In addition, Furthermore, DELL passes customer feedback directly to its suppliers, so they can benefit and adjust quickly something such as outputs DELL also notifies its suppliers of volatility in demand for certain models, to enable suppliers to rapidly adopt customer demand (Dell, 1999 in Schmid & Vogl, 2003)

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