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Operation Management

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  • DELLSSUPPLY CHAIN MANAGEMENT

    Presented by:Group 3, FMG 19 B

    Ashima Mathur (191080)Manas Tripathi (191095) Neeraj Sharma (191098)Nishat Parveen (191099)Parul Garg (191103)Yukti Mittal (191122)

  • COMPANY PROFILE

    An American multinational information technology corporation based in USFounded by - Michael DellThe 3rd largest PC maker in the worldListed at #38 on the Fortune 500 (2010)Listed as the #5 most admired company in its industry by Fortune

  • DELL IS IN THE BUSINESS OF

  • DELL IN INDIA

  • PRODUCTS- FOR CORPORATES

  • PRODUCTS- FOR HOMES

  • MAJOR COMPETITORSApple, Hewlett-Packard, Acer, Toshiba, Gateway, Sony, Asus, Lenovo, IBM, Samsung, and Sun MicrosystemsDell and its subsidiary, Alienware, compete in the market against AVADirect, Falcon Northwest, VoodooPC (a subsidiary of HP), and other manufacturers.

  • SUPPLY CHAIN MANAGEMENT Importance of an efficient SCM for Dell:Material Costs account for 74% ($21 billion) of the annual costs for DellImproving SCM by 0.1% has a greater impact than improving manufacturing process by 10% in the PC businessChanging technology makes the materials value obsolete by almost 1% per weekTechnology breakthroughs result in very short product life cycles in this business

  • COMPONENTS OF DELLS SCM

  • DELLS VALUE WEBPhysical flows, including products and servicesInformation flows

  • COMPETITIVE ADVANTAGE OF DELLS SCM90% supplies are ordered online using integrated websites of suppliers and Dell (B2B)95% of Dells suppliers situated very close to assembly plants (within 15 minutes) hence coordination is easierDells factories have only 7 hours worth of inventory for most items while the industry wide it is around 10 days15 suppliers provide almost 80% of the supplies

  • MANUFACTURING

  • DELL COMPUTER EXAMPLE STRUCTURE & INFRASTRUCTUREThey focus on customer service, cost, and speed ERP system developed to allow customers to order directly from DellProduct design and assembly line allow make to order strategy lowers costs, increases turnsSuppliers ship components to a warehouse within 15 minutes of the assembly plant - VMIDell set up a shipping arrangement with UPS

  • SUPPLY CHAIN MODELSDirect sales model, usually referred as direct modelBuild-to-order strategy

  • DISTRIBUTION CHANNEL OF DELL VS. A TRADITIONAL COMPANY

    Indirect Distribution Channel of the PC Industry:

    Dells Direct Distribution Channel:

  • DIRECT SALES MODELReceiving orders directly from customersManufacturing to the customers requirementsDelivering it within daysImplemented just-in-time (JIT) inventory-managementPull based SCM

    AdvantagesPrice for performanceCustomizationLatest TechnologyService & Support

  • CUSTOMER SEGMENTSWide customer mixLarge organizations (large companies or government institutions) - account for 70% revenueSmall and medium businesses Personal consumersBetter forecast demand Facilities that bring Dell and its customers closer:Premier Pages (Premier.Dell.com) Customized IT procurement and support sites for big clientsPlatinum Councils regional meetingsDells Customer Experience Initiative, Dell Forums, the Direct2Dell blog and the IdeaStorm

  • BUILD-TO-ORDER AND INTEGRATION WITH SUPPLIERS A computer is built only after a customer has placed an order; then lean manufacturing and just-in-time production take placeThis means that once an order is placed, configuration details are sent to the manufacturing floor and the assembly begins; once the computer is built and the requested software is downloaded, it is shipped by a 3PL to the customer

  • ADVANTAGES OF BUILD-TO-ORDERSmall level of inventories, low inventory costs and faster response to demand changes For instance, when a new microprocessor comes out in the market, Dell can immediately order it from its suppliers, as there is no excess inventory to get rid of firstPull based systemFor instance, it is common that customers pay for an order before Dell pays its suppliers for the products components, thus letting Dell operate on a negative cash conversion cycle. This way, the customized products are offered, and instead of guessing, that is Dell knows exactly what its customers want before producing it

  • DISTRIBUTION NETWORKUse of Manufacture StorageDirect Shipping Distribution Method

    Advantages Centralized inventories created at the manufacturerHolding of common equipmentsPostponing product customizationReduces fixed cost of storage facilities

  • USE OF RFIDRead at every stage of assembly and during distribution

    Benefits:Production stops have reduced dramaticallyReturns due to wrong shipping of products have been minimized

  • INVENTORY MANAGMENTHigh speed inventory For instance, ask for 6.795 units to be delivered at the door A3 of warehouse, instead of 5000 every two weeksAverage inventory holding time is less than 6 days of inventory, while that of competitors 6 weeks. The main suppliers are required to maintain inventory near or in Dells plants- Either produce close or keep inventories in revolvers or supplier logistics centers

  • DELLS SUPPLIERSTo support direct sales strategy, Dell requires its suppliers to keep inventories within 15 minutes of the manufacturing locationsEvery two hours, the factory planning system sends out a computerized message to suppliers detailing what parts the plant needs.Benefits Almost no inventory of parts or products in the factory Gives working capital advantagesDell can sell computers that are about two months newer than the competition

  • SELECTION OF SUPPLIERSWhile selecting its suppliers, Dell makes sure that they conform to the same social and environmental responsibility (SER) standards that Dell observesThe primary SER principles required to be followed by these suppliers are in the following areas:Ethics Labor Environment Health and safety Management systems

  • HEADQUARTER LOCATIONS OF KEY DELL SUPPLIERS

  • MAJOR SUPLIERSSome Major Suppliers for Financial Year 2010 included:Microsoft CorporationTexas InstrumentsIntel CorporationHitachiIBMSTMicroelectonics Inc.LG Philips LCD Co. Ltd.Samsung Electronics

  • USE OF INTERNET FOR SCMDell shares demand and production forecasts with its suppliers, so they can themselves decide on production levels, avoiding the bullwhip effectWebsite ValueChain.Dell.com For information sharing Operates as an extranet between Dell and its suppliersSuppliers can get informed aboutLevel of inventory in the supply chainSupply and demand dataComponent quality metrics New part transitions

  • IMPLEMENTATION

  • ORDER FULFILMENT

  • REPAIR SERVICE HANDLING

  • INTEGRATING PEOPLE AND PROCESSES

  • COMPETITIVE ADVANTAGEDell competes on all four priorities

  • FOUR PROCESSES THAT MADE DELL INC. COMPETITIVE

  • RECOMMENDATIONS

  • REFERENCEShttp://en.wikipedia.org/wiki/Dellhttp://content.dell.com/in/en/corp/d/corp-comm/about-dell-india-country.aspxhttp://www.ups-scs.com/solutions/white_papers/wp_supply_chain.pdfhttp://www.icmrindia.org/casestudies/catalogue/Operations/Dell%20Supply%20Chain%20Management%20Practices.htm

  • Parul*Parul*Parul*Parul*Neeraj*Neeraj*Neeraj*NeerajDELL is well known for its innovations in supply chain management and electronic commerce

    *Neeraj*Neeraj*Nishat*Nishat*Nishat*Nishat*Nishat*Nishat*YuktiThe mix of customers served is wide (no customer represents more than 1-2% of Dells revenues) and there is a focus on large customers (70% of Dells sales corresponds to them).Proper segmentation with the direct model leads to the ability to better forecast demand

    *YuktiBuild-to-order SC as a strategy is defined as a value chain that manufactures quality products or services based on requirements of an individual customer or a group of customers at competitive prices, within a short span of time, by leveraging the core competencies of partnering firms or suppliers and information technologies, such as the Internet and WWW, to integrate such a value chain.

    *YuktiWhoever gets this slide can memorize the 2 egs also and make the slide less cluttered*Yukti

    Dell uses the manufacturer storage with direct shipping distribution method model. In this option, product is shipped directly from the manufacturer to the end customer, bypassing the retailer (who takes the order and initiates the delivery request). This option is also referred to as drop shipping. All inventories are stored at the manufacturer. The biggest advantage of drop shipping is the ability to centralize inventories at the manufacturer. A manufacturer can aggregate demand and provide a high level of product availability with lower levels of inventory than individual retailers. It allows Dell to hold inventories as common components and postpone product customization, thus lowering the level of inventories carried. This also eliminates the fixed cost of storage facilities.

    *Yukti*ManasInstead of orders such as deliver 5000 to this warehouse every two weeks, the form of orders is more like tomorrow morning we need 6.795 to be delivered at door A3 (of the warehouse) by 7 am. A new notion that Dell has introduced is the one of inventory velocity, and it focuses on minimizing inventory and maximizing speed. supplier logistics centers (small warehouses close to Dells assembly plants, that are shared by suppliers who pay the corresponding rent)

    *ManasDell can sell computers that are about two months newer than the competition. In an industry where component prices fall about 20% per year, this means significant cost-of-goods-sold advantages for dell.

    *Manas*Manas*Manas*ManasFor close collabor