1. Examine and analysis Dell’s Direct Model and its basic working and success and future challenges.
Dell’s Direct Model
Dell has been following it’s unique direct build-to-order sales model for more than 20 years. Customers can plan their own configuration and place orders directly with company via the phone or a web site. Over the years Dell supply chain efficiencies and direct sales gave it a competitive advantage.
Dell has also leveraged JIT principle to make its manufacturing process success. Dell’s approach to JIT is different in that they leverage their suppliers to achieve the JIT goal. They are also unique in that Dell is able to provide exceptionally short lead times to their ...view middle of the document...
* There is less or zero inventory than work in process (WIP).
* Components arrive from suppliers just in time for manufacturing through the factory’s cargo doors.
* Manufacturing is synchronized avoid storing parts or finished system.
* This need close relationship with suppliers.
* Dell has small number of suppliers.
* They trust manufactures like Sony, logistic like UPS.
* In 1986, San Francisco, Dell determines the company’s future direction:
* “The first: to really grow our business, we would have to target large companies. The second: to land large companies we would have to offer the absolute best support in the industry. That was how we came up with the idea to provide the industry’s first on-site service for PC’s. If a customer called us with a problem, we’d say, “We’ll be out tomorrow to fix it”
* 1,300 technical support personnel.
* Accessible by phone 24 hours a day.
* 90% of calls can be solved on the phone by standard troubleshooting procedures
* Third-party maintenance providers like Unisys, Wang, Decision one consulting and Digital Equipment
* Tight coordination with supplier, vendors and maintenance providers feels like Just one large company
* The rule: as few partners as possible as long as they maintain their leadership in technology and quality
* In Computerworld’s 1998 survey Dell ranked first in user satisfaction followed by Gateway
* According to Computerworld traditional vendors depends too heavily on resellers that prevents them from reacting quickly to customer needs, because resellers may place their own interests first
Success factors in Dell direct model
* Dependable supplier with ability to meet Dell’s demanding lead time requirements.
* A seamless system that allows Dell to transmit it’s component requirement so that they will arrive at Dell in time fulfill its lead time.
* A willingness of suppliers to keep inventory on hand allowing Dell to be free of this responsibility.
* Selling direct to customers’ cuts out the middleman which increases Dell’s margin.
* Mass customization using standard parts allows Dell to control their cost and enable them to pass saving to customer.
* Build to order allow for JIT reducing costly inventory of components which may quickly become obsolete.
* Dell use JIT system and they didn’t want warehouse. The inventory handling and storage cost is law.
Future challenges for Dell
* Customers not able to touch and fell the product which is large ticket purchase.
* Build to order requires innovation and investment manufacturing technologies and facilities.
* Competitors are able to outsource to third party manufactures pushing the burden of component inventory costs onto supplies.
2. Typical Working of Dell’s supply chain and future supply chain challenges.
Supply Chain of DELL
DELL has a different business model than its competitors,...