EVALUATING THE SUPPLY

CHAIN MANAGEMENT IN
DELL COMPUTER
NOOR NADIAH BT ROSLI ,821874
Prepared
1 for:
DR. EMY EZURA BT. A. JALIL
 TABLE OF CONTENT
NO TITLE PAGES
1.0 Introduction 4
2.0 DELL company background 5
3.0 Computer innovation 7
3.1 Innovation at DELL 6

4.0 DELL Supply Chain 9

4.1 4.1 i2 Supply Chain Management at DELL 11
(Supply Chain Automation)
4.1.1 4.1 DELL principles in order fulfilment and 13
supply chain strategy
5 DELL VALUE CHAIN 16
CONCLUSION 19
7.0 REFFERENCES 20

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 List of figure

NO FIGURE PAGES
1 company chronology 6
2 Progress of computer innovation 7
3 Business model innovation at DELL 8
4 DELL supply chain 9
5 Dell source 10
6 i2 architecture for the American region 12
7 Illustration Dell “push – Pull “strategy 13
8 Dell direct sell model 14
9 Dell value chain 15
10 Value Chain Analysis 17
11 DELL value chain 18

Lits of video

NO VIDEO PAGES
1 what is supply chain 5
pull push strategy 13

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1.0 INTRODUCTION

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 Supply chain management refers to what is outside the firm to
create high value for customers (Lalonde, 1996). Supply chain
management includes activities within and outside the organization
performed by certain organizations to deliver high value to customers.
This means organizational
management must
create checks and
balances on internal and
external organizational
activities. Supply Chain
Management is a business
practice that has been
used to provide effective
service to customers and
to make the business more effective and sustainable considering
everything from suppliers to consumers.Supply Chain involves many
components such as manufacturers, suppliers, transporters, wholesalers,
retailers, customers and all other elements that link a supply chain. The
main objective of the supply chain is to meet customer demand by
adding value to a product and service.
DELL is a computer technology company that develops sales,
repairs and support, computers and computer-related products. DELL
recognizes that the supply chain is of the utmost importance to
determine the success of the business world today and they need to
work to maintain the competitive edge in the marketplace.Here in this
study, the supply chain process used by DELL will be considered one of
the best supply chains in the world. The DELL supply chain for product
innovation will be much analyzed in the field of supply chain. For futher
information about supply chain shown in the video 1 below.

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 Video 1 : what is supply chain

2.0 DELL COMPANY BACKGROUND

Dell is a computer company that was

built in 1984 by Micheal Dell, the longest-
serving chief executive officer (CEO) in the
history of the computer industry. It has been a
long-term concept by using a simple concept
of direct selling of computer systems to
customers. Dell understands exactly who
needs and wants and they provide the most effective computing
solution to meet customer needs. This direct business model eliminates
retailers acting as a middleman and at the same time adds unnecessary
time and cost, or reduces Dell's understanding of customer
expectations.

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 Direct models enable companies to build each system for orders
and offer customers a robust, rich-configured system and competitive
pricing. Dell also introduced the latest technology that is more rapidly
linked than companies with immovable distribution channels, indirectly,
changing the inventory every three days on average. The diagram
below is the company's historical chronology:

Figure 1: company chronology

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3.0 COMPUTER INNOVATION
The PC industry has introduced many innovations in the 25 years
history. Product innovations include the creation of new product
categories such as notebook PCs and PDAs, as well as the creation of
new product platforms such as multimedia PCs and wireless "mobility"
notebooks. The scope and results of product innovations in PCs are
shaped by the presence of a global architecture standard set by IBM
and now dominated by Microsoft and Intel. (Kenneth L, 2008). Standard
interface standards allow innovators to reach global markets with
standard product lines; Thus, economic scale can be achieved to
support investment in product development and manufacturing
capabilities. Figure 2 below shows the process of computer innovation.

Figure 2: Progress of computer innovation

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3.1 INNOVATION AT DELL

Dell leads standard and technology through industry groups and

strategic partners. Their strategy is partner, not competitive, with top
industry technology suppliers and original development manufacturers.
This partnership provides Dell a broadly unique perspective on the
computing landscape.

Figure 3: Business model innovation at DELL

Since Dell's first PC was introduced in 1986, Dell continues to shape

the industry by breaking new ground and pioneering critical
developments in homes, small businesses and computing companies.
They collect needs directly through tens of thousands of daily customer
interactions, organized events, social media placements and customer
panels. Maintaining strong internal development capabilities, DELL
innovation drives that deliver value to their customers. Dell's research
and development efforts now embrace the world, driven by a number
of industry-leading designers and engineers. On the core of Dell's
innovation approach, however, remains a steady commitment to
delivering new and better solutions that directly meet customer needs.

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4.0 DELL SUPPLY CHAIN

Better integration in planning and implementation has become

one of the dominant themes in the supply chain. DELL has provided a
special place for the integration of supply chains. The Dell's heartbeat is
an integrated supply chain, which has enabled rapid design,
fabrication, and installation, as well as direct delivery to customers.
Inventories have been dramatically reduced through extensive
information sharing, prudent options that provide the risk of
technological obsolescence and material cost reductions that can
exceed 50 percent. Despite the reduced inventory, Dell's strategic use
of information has enabled a dramatic reduction in time-elapsed from
order to delivery, giving Dell a significant competitive advantage.

Figure 4: DELL supply chain

Dell will introduce the 'Smart Selection' program where it will pre-
build the most popular PC configurations that are desired and delivered
by customers within 24 hours. With this new build-to-order (BTO) model
that complements the existing configuration model for an order (CTO),
Dell hopes to provide a wider range of spectrum options that will be
available to customers to choose from. This initiative has transformed the
supply chain landscape to Dell, as it is now necessary to consider
warehouse capacity expansion, unlike the previous CTO model in which
they were able to store a small inventory space. This helps reduce costs

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and drive revenue. Reduced costs will come from supply chains and
support.

Figure 5: Dell source

Dell implements the Just-In-Time inventory system that operates on

just 6 days of inventory. Dell is able to achieve greater profit margins and
gain profits because of their inventory system. Inventories and labor are
the firm's highest liabilities. Since Dell only operates with 6-day inventory,
they can reduce costs in warehousing, hire people to track and retain
inventory, and avoid holding out obsolete technology. This allows Dell to
release cash flow to invest in other value-added activities.
Dell uses the JIT inventory system as Dell customers can only order
the computer directly through Dell itself. Dell uses their website
www.Dell.com to take customer orders. Dell focuses on direct sales,
cutting out other distribution channels completely. This enables a more
in-depth relationship with customers where Dell can better offer their
customers the services, storage, convenience, and efficiency of their

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 customers. Customers can order their own personal computer, build Dell
in three days and forward it to customers within a week.
Not only does Dell
use the internet to simplify
the process of customer
orders. They also use the
internet to build better
relationships with their
suppliers. For Dell to work
from 6 days of inventory,
their suppliers need to be
involved in the company to ensure superior service is met. Dell uses a
state of art production planning program that predicts the quantity of
components needed to build computers. After the forecast is made, the
supply chain system passes the forecast to suppliers, who respond to cost
estimates and plan their production outcomes (Solis). To achieve the
benefits of their supply chain, Dell uses the solution from the Supply Chain
Management i2. i2 streamlines supply chains by providing Dell
components and planners with a global view of product demand and
material requirements.

3.2 i2 Supply Chain Management at DELL (Supply Chain Automation)

The highly efficient Dell business model allows for customized

computer systems to build and deliver quickly. As part of the company's
ongoing efforts to improve its supply chain processes, Dell recently
deployed the TradeMatrixTM i2 supply chain tool to provide a global
view of the demand and material demand forecasts, as well as better
scheduling of plant and inventory management. With the new supply
chain tools, Dell suppliers and Supply Logistics Centre (SLC), or hub, have
a global view of the short-term and long-term material needs of each
Dell plant. Dell employees can look at material requirements,

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predictions, and factory schedules and produce critical reports from
real-time data and real time.

The i2 tool is used for each operating area, with some components
living in Austin and others in areas around the world. All reporting tools
look around the world live in Austin. About 250 Dell's biggest suppliers will
use this tool. Most of these suppliers are doing business with SLC, which
provides inventory management and is close to Dell factories to ensure
timely delivery. The SLC then refined the material requirements with Dell.

Figure : i2 architecture for the American region

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3.3 DELL principles in order fulfilment and supply chain strategy
Dell's "Push-Pull" is just a supply chain strategy, which reduces the
cost of inventory obsolescence by maintaining the minimum inventory
amount. However, at its core, it is the order fulfillment strategy, which
drives the company's supply chain by allowing it to refuse the ready-
made goods for its customer base. As soon as customers place orders,
their unique needs attract components and consumables through the
company's supply chain. The "pull-push" illustration illustrates in the figure
below.

Figure: Illustration Dell “push – Pull “strategy

Video : pull push strategy

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4.1.1 Minimal Inventory Counts

One of the most important rules of Dell's strategy is that it relies on

maintaining the minimum amount of inventory and materials consumed.
Inventory weight loss is avoided at all costs and measures are always
taken to reduce the cost of outdated and old-fashioned inventory. Most
of these strategies are borne by the needs; Companies must maintain a
minimum inventory level due to the rapidly changing technology in the
computer industry, changes that make inventory and inventory
components all but obsolete from one day forward. However, this
strategy also helps reduce the company's capital costs.

The Dell Company reduces the cost of financing the inventory and
financing received by just taking what is guaranteed to be sent to the
customer. This enables the company to reduce capital costs, improve
cash flow and most importantly, reduce its funding. Basically, Dell paid
for his product via a direct selling model before the company had to
pay its own vendor.

Figure: Dell direct sell model

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4.1.2 Custom-Made Finished Goods

The strategy order fulfillment section allows Dell to provide

customized custom custom, where the customer decides which option
is handled by the manufacturer of the computer itself. There are several
benefits available to provide products made directly to end users. First,
the company eliminates the need to sell through wholesalers and
retailers, reducing their scores and removing intermediaries in network
value. Secondly, providing finished goods directly to end users allows a
manufacturer's computer to use a direct selling model, which can be
used to drive other products and services to its customer base. Third,
providing ready-made goods that their competitors provide to provide
value-added products and services, tailored to unique customer needs
and rarely match Dell's competition.

Figure: Dell value chain

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4.1.3 Strong Direct End-User Customer Service

Dell uses a powerful end user customer support system. Customers

can deal directly with company's service technicians and customer
support centers. Although Dell is a big company, it does not appear that
way in the eyes of its customer base. In essence, it is not seen as a large
and non-faceted company. Removing the above-mentioned retailers
allows Dell to have more control over its product offerings, and more to
handle the type of customer service received by its customer base.

The company acquired invaluable insight of its customers and

multiple customer segments in its market. The cost to manage such
information is much lower than if the company had to define market
segments and customer preferences through multiple retailers. Basically,
using a direct selling model reduces the cost of managing important
customer data. Dell does not have to rely on others (retailers) to
determine their market, their customers and their business cycle.

4.0 DELL VALUE CHAIN

Value chain analysis is analytical framework that helps in

identifying business activities that can generate value and competitive
advantage for businesses. Figure 1 below shows the essence of the value
chain analysis. It is important to note that Dell's value chain
management pattern has been widely imitated by other companies,
including companies outside the consumer technology industry due to
the clear contribution to the company's success.

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 Figure 1 Value Chain Analysis

4.1 Inbound logistics

Dell works with more than 165,000 channel partners in login every
year. Dell uses the Just-in-Time philosophy (JIT) in handling logins and Dell
can save huge inventory costs and maintain cost leadership for the
majority of its products and services. Customer orders are registered by
Dell and its vendors concurrently by an integrated system. Subsequently,
the material was transmitted by the supplier within 2 hours and was
rapidly received in the Dell assembly unit for geographical distance

4.2 Operations

The main point between Dell's operations and its competitors is

related to the fact that Dell is not a computer manufacturer, the
company only installs parts produced by other companies. At the same
time, a high level of product adaptability is adapted as one of the
cornerstones of business and operational competitive advantages
which are mostly composed of three levels - standard part assembly,
custom section installation and configuration of product testing.

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 Figure: DELL value chain

4.3 Outbound logistics

Outbound logistics consists of five levels marked in red in Figure 2 above,

Dell can complete the order fulfilment within a short period of time. In
general, Dell completes timely delivery of customers, remains committed
to the product adaptation promise due to the cumulative advantage
of modularity, vendor-managed inventory program, demand
management and mass adjustment.

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4.4 Marketing and sales

Marketing and sales are recognized by Dell as a critical activity

and the company's marketing strategy has changed since the
company became private in August 2013. Specifically, Dell's marketing
management aims to link the brand image with entrepreneurial spirit by
paying close attention to the fact that the company is no longer listed
openly, therefore management is released from the need to track stock
prices daily.

5.0 CONCLUSION

In the modern era of technology firms either their manufacturing or

service is hoping to increase their efficiency and performance. Supply
Chain Management is one of the key tools that plays an important role
in enhancing the efficiency of the organization in this new technology
world. This paper is written to know the evaluation of product supply
chain in Dell Computer manufacturing company, which are
indispensable for any organization to improve efficiency in the supply
chain management. Supply chain management focuses on the
management how Dell computer distribute their product to end user.
The entire study concludes that there is some strategy that use by Dell to
make their company one of the best supply chain. Which is use Just in
Time(JIT) Concept and pull push strategy in their business. These
strategies are closely related to each other and have a greater impact
on Dell company performance.

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6.0 REFFERENCES

[1] Dell, M., & Fredman, C. (2002). Direct from Dell: Strategies that
revolutionized an industry. SAGE Publications.

[2] Essays, UK. (November 2013). Function of Supply Chain in Dell Business
Essay. Retrieved from:

http://www.ukessays.com/essays/business/function-of-supply-chain-in-
dell-business-essay.php?vref=1

[3] Essays, UK. (November 2013). Supply chain management: Dell

computers. Retrieved from:

http://www.ukessays.com/essays/business/supply-chain management-
for-dell-computers-business-essay.php?vref=1

[4] Dell Inc. - Company Profile, Information, Business Description, History,

Background Information on Dell Inc. Retrieve from:
http://www.referenceforbusiness.com/history2/68/DellInc.html#ixzz5D2
oUUTZi

[5] Dudovskiy.J (September3,2015) Dell Value Chain Analysis. Retrieve from:

https://research-methodology.net/dell-value-chain-analysis/

[6] Kenneth L (2008). Globalization of Innovation: The Personal Computing

Industry Presented at the Sloan Industry Studies Annual Conference
Boston.

[7] Lalonde, Bernard, J. (1996), “Issues in supply chain costing”, The

International Journal of Logistic Management, Vol. 7, No. 1, pp. 1-12.

[8] Rajan.C. S(September 4, 2013) Supply Chain Management. Retrieve

from : (http://cmuscm.blogspot.my/2013/09/dell-modifies-its-supply-
chain-strategy.html)

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[9] Victor . K (2001) Supply Chain Automation: Dell Deploys i2 Globally.
Retrieve from:

http://www.dell.com/content/topics/global.aspx/power/en/ps1q01_ko
ncaba?c=us)

[10] Ian.J (August 14,2012) Dell Push-Pull: An Order Fulfilment and Supply
Chain Strategy. Retrieve from:

http://www.driveyoursuccess.com/2012/08/dell-push-pull-an-order-
fulfillment-and-supply-chain-strategy.html

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