DELL’SDELL’SSUPPLY CHAIN MANAGEMENTSUPPLY 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 US

Founded by - Michael Dell The 3rd largest PC maker in the world Listed 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 COMPETITORS

Apple, Hewlett-Packard, Acer, Toshiba, Gateway, Sony, Asus, Lenovo, IBM, Samsung, and Sun Microsystems

Dell 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 Dell Improving SCM by 0.1% has a greater impact

than improving manufacturing process by 10% in the PC business

Changing technology makes the materials value obsolete by almost 1% per week

Technology breakthroughs result in very short product life cycles in this business

COMPONENTS OF DELL’S SCM

DELL’S VALUE WEB

Physical flows, including products and services

Information flows

DELL

Logistics Companies

System Integrators

Customer

Repairs and

Support Companies

DistributorsThird Party

HW and SW

suppliers

Component Suppliers

OEMs

COMPETITIVE ADVANTAGE OF DELL’S SCM

90% supplies are ordered online using integrated websites of suppliers and Dell (B2B)

95% of Dell’s suppliers situated very close to assembly plants (within 15 minutes) hence coordination is easier

Dell’s factories have only 7 hours worth of inventory for most items while the industry wide it is around 10 days

15 suppliers provide almost 80% of the supplies

MANUFACTURING

DELL COMPUTER EXAMPLE – STRUCTURE & INFRASTRUCTURE

They focus on customer service, cost, and speed ERP system developed to allow customers to

order directly from Dell Product design and assembly line allow “make to

order” strategy – lowers costs, increases turns Suppliers ship components to a warehouse within

15 minutes of the assembly plant - VMI Dell set up a shipping arrangement with UPS

SUPPLY CHAIN MODELS

1. Direct sales model, usually referred as direct model

2. Build-to-order strategy

DISTRIBUTION CHANNEL OF DELL VS. A TRADITIONAL COMPANY

Indirect Distribution Channel of the PC Industry:

Dell’s Direct Distribution Channel:

DIRECT SALES MODEL Receiving orders directly from customers Manufacturing to the customer’s requirements Delivering it within days Implemented just-in-time (JIT) inventory-

management Pull based SCM

Advantages Price for performance Customization Latest Technology Service & Support

CUSTOMER SEGMENTS Wide customer mix

1. Large organizations (large companies or government institutions) - account for 70% revenue

2. Small and medium businesses 3. Personal consumers

Better forecast demand Facilities that bring Dell and its customers closer:

1. Premier Pages (Premier.Dell.com) –Customized IT procurement and support sites for big clients

2. Platinum Councils – regional meetings3. Dell’s 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 place

This 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-ORDER

Small 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 first

Pull based system For instance, it is common that customers pay

for an order before Dell pays its suppliers for the product’s 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 NETWORK

Use of – Manufacture Storage Direct Shipping Distribution Method

Advantages – Centralized inventories created at the

manufacturer Holding of common equipments Postponing product customization Reduces fixed cost of storage facilities

USE OF RFID

Read at every stage of assembly and during distribution

Benefits: Production stops have reduced dramatically Returns due to wrong shipping of products have

been minimized

INVENTORY MANAGMENT

“High speed” inventory For instance, ask for 6.795 units to be delivered

at the door A3 of warehouse, instead of 5000 every two weeks

Average 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 Dell’s plants- Either produce close or keep inventories in

revolvers or supplier logistics centers

DELL’S SUPPLIERS

To support direct sales strategy, Dell requires its suppliers to keep inventories within 15 minutes of the manufacturing locations

Every 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 advantages Dell can sell computers that are about two months

newer than the competition

SELECTION OF SUPPLIERS

While selecting its suppliers, Dell makes sure that they conform to the same social and environmental responsibility (SER) standards that Dell observes

The 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 SUPLIERS

Some Major Suppliers for Financial Year 2010 included: Microsoft Corporation Texas Instruments Intel Corporation Hitachi IBM STMicroelectonics Inc. LG Philips LCD Co. Ltd. Samsung Electronics

USE OF INTERNET FOR SCM

Dell shares demand and production forecasts with its suppliers, so they can themselves decide on production levels, avoiding the bullwhip effect

Website ValueChain.Dell.com For information sharing Operates as an extranet between Dell and its

suppliers Suppliers can get informed about Level of inventory in the supply chain Supply and demand data Component quality metrics New part transitions

IMPLEMENTATION

ORDER FULFILMENT

REPAIR SERVICE HANDLING

INTEGRATING PEOPLE AND PROCESSES

COMPETITIVE ADVANTAGE

Dell competes on all four priorities

FOUR PROCESSES THAT MADE DELL INC. COMPETITIVE

RECOMMENDATIONS

REFERENCES

http://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