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Dell's Value Chain Essay

980 words - 4 pages

History of Dell

Michael Dell, who is the founder of Dell Computers, began his venture towards revolutionizing the computer industry in 1980. In 1980, Dell purchased his first computer; an Apple II, and took it apart to understand how it was designed. In 1981, IBM introduced the Personal Computer (PC) and Dell saw this as a business opportunity. Dell switched from the Apple computer to the IBM PC and began to learn all of the possible components. Michael Dell’s hobby was to disassemble computers, rebuild them with improved components, and sell them directly to the user. Traditionally, in the computer industry, manufacturing companies built computers, which were distributed to ...view middle of the document...

As Michael Dell has stated, “the supplier effectively becomes our partner”. Dell selects supplies that have “expertise, experience and the ability to deliver value”. Their performance is regularly evaluated against pre-agreed measures.

Conclusively, relationships with customers and suppliers allow Dell to know what it can supply in real time and quickly and precisely meet customers’ demands while maintaining low inventory.

2. How has Dell exploited the direct sales model to improve operations performance?
Dell's biggest advantage as compare to its competitors is its manufacturing operations and just in time inventory control. Dell builds PC only after it receives order from customer via web or call centre. Once order is confirmed, it relays to its suppliers details of the components required, all the components are delivered at the factory and complete computer is shipped out, all within few hours. Dealing directly with suppliers helped dell in controlling inventory, which had a direct impact on customers. Dell holds an average of less than 6 days of inventory, while the corresponding average of its competitors is 6 weeks. Hence Dell was able to pass along to its customers the savings from reductions in system component costs quickly because of it's just in time inventory control.

3. What are main disadvantages of Dell’s direct sales model?

One of the few negatives for Dell’s model is that it results in higher outbound shipping costs than selling through distributors and retailers. Dell sends individual products directly to customers from its factories.

But there's another side to the PC business: the support side. And here, the direct model looks less attractive. If, after all, 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. Dell...

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