Running head: SUPPLY CHAIN MANAGEMENT 1

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DELL’s SUPPLY CHAIN MANAGEMENT 2

Table of Contents
Introduction ........................................................................................................................... 3
The Target Audience ..................................................................................................................... 3
Performance Objectives of Dell and its Market Position ...................................................... 4
Performance Objectives model ................................................................................................... 4
Dell’s Key Marketing Channels ........................................................................................ 5
Distribution Channels of Dell and Logistics Flow .................................................................. 5
Dell’s Direct Sales Model ....................................................................................................................... 5
Build-To-Order ........................................................................................................................................... 6
Suppliers Integration................................................................................................................................. 6
Dell’s Manufacturing Plants and its Transformation Process ................................... 7
Transformation Process of Computers ..................................................................................... 8
Transformation Process Model of Dell...................................................................................... 8
Logistics .................................................................................................................................. 9
Call Centers ............................................................................................................................ 9
Strength & Weakness of Dell’s Supply chain................................................................. 9
Strengths ........................................................................................................................................... 9
Weaknesses.....................................................................................................................................10
Conclusion ........................................................................................................................... 10
References ............................................................................................................................ 11
DELL’s SUPPLY CHAIN MANAGEMENT 3

Introduction
In the present, supply and logistics chain management has emerged as the
most critical issue for the companies. It has been realised by Dell from the start and
therefore by focusing more on its direct sales strategies, logistics & the supply chain
management- it appears as one of the famous PC companies around the globe. In
Austin Texas, during 4th November 1984, Dell was founded by Mr Michael Dell
during his studies at the University of Texas. Initially, the critical supply chain
strategy adopted by Dell was direct sales, Dell only take orders through phone call
and deliver as per the condition of customers (Farfan, 2018). Later on, during the year
1990 to 1994, they go for the retail channel, but it again returned to its direct sale
model and quickly grew (Farfan, 2018). Due to this in 1999, Dell became the leading
PC Company in the USA and at number two amongst all the PC corporations in the
whole world. The unique and creative supply chain strategy successfully used by
Michael Dell, have played a significant role in the success of Dell (Farfan, 2018).
Competing with giants such as Apple, HP, IBM, it has more than 96000
employers who are working all around the globe (Dell, 2018a). Other than computers,
Dell is also selling PDA'S, Mp3, cameras, HDTVs, scanners and many other
electronic devices made by a range of different manufacturers [Dell, (2010)]. The
popularity of the company is due to its innovative and unique supply and logistics
chain management. When the Dell products reach international markets, it depends on
a number of honest and creative supplier personnel that could deliver or supply
product with the highest value in order to be able that it can exert positive influence
on the customer relationships that can also assist in maximizing its customer
satisfaction, innovation, growth and finally the profit. Few of the Dell suppliers are
the Dataflow Peripherals Ltd, who are supplying individual parts to parade, Nanya
technology corporation, Steel series, Dell, Sonix, Intel, o2 micro, etc. (Dell, 2018b)
The Target Audience
There are four segments in which Dell's target market is divided, large
organisations that include government organisations, home users, big companies,
medium and small businesses. Dell is using direct sales models to satisfy all the
segments of its customers. 70% of the sales by Dell are coming from their larger
customers' organisation (Farfan, 2018).
DELL’s SUPPLY CHAIN MANAGEMENT 4

Performance Objectives of Dell and its Market Position

Dell's performance objectives are based on low price and high quality along
with the fastest speed and due to these, it is getting a significant advantage of cost
saving as compared to its competitors because Dell adopts the Direct Sales Model.
Along with other benefits, due to the Just in Time Inventory Method, Dell doesn't
have to pay to the retailers as it doesn't need to hold its inventory for longer duration
and this will further lead to cost reduction that results in delivering PC at the
reasonable cost, fastest speed and high quality than its other competitors (Dell,
2018c). Along with all these performance objectives of Dell, high dependability is
also a factor; customers are trusting Dell as it is providing core significance to its
clients by permitting them to manufacture their devices and directly sell them as well.
Whereas in the scenario or recent market position, the above mentioned unique
performance objectives are giving Dell popularity in the market; that factor is at lower
cost giving high-quality PC with the fastest speed which is making Dell more
distinctive in the PC markets. Apart from these, unique and efficient supply chain
along with the after sale services of Dell gives it a peculiar market position.
Performance Objectives model
1. Volume – The volume level of Dell is quite high and it also dramatically
repeats the process of manufacturing computers on a routine basis and adopts
systemization and specialisation by using Build-To-Order strategies and Direct
sales model. Therefore, this vast volume aids the corporation to reduce the
per-unit cost as well.
2. Variety – The variety level provided by Dell is low as it is not adding more
types of products due to less investment in R&D field. So, Dell satisfies its
customers through the present product lines rather than introducing a new
range of products that also increases the complexity to manage them.
3. Variation – The variation demand level is stable and low, and Build-To-Order
strategy is followed by the corporation, due to which it is making products as
per demands by the customers, and no lofty product variation in orders is
observed.
4. Visibility – The visibility level in Dell is low as it adopts centralisation and
standardisation at every stage of production and generally, the internal
operation of Dell computers are not exposed to the customers who ordered
DELL’s SUPPLY CHAIN MANAGEMENT 5

them, it only takes the order and provides customers the expected delivery
time.
Dell’s Key Marketing Channels
Dell's marketing channels comprise only its customers and suppliers, and there
no intermediaries such as retailers and wholesalers. This would lead to deliver the
order to the client at high speed. The distribution channel of Dell begins with its
suppliers who supply it all the essential parts required to build PCs. After the process
of making PCs, they are sent directly to the customer's door. Dell uses small channels
for products distribution as it wants to minimise the cost, time, and complexity, all
these factors increase if more intermediaries are in use(Blanchard, 2012).
Distribution Channels of Dell and Logistics Flow
According to research, the most basic and critical element for the success of
Dell is 3 main or key supply chain strategies, i.e., Supplier Integration, Build-To-
Order, and Direct Sales Model.
Dell’s Direct Sales Model
The verity is referred by Direct Sales Model that no wholesalers and retailers
are used for PC selling rather it takes direct orders from the customers via its
established website and sells products to the customers directly as per their demands.
This model permits the organisations to contact the consumers directly and know
about their requirements instantly. With the help of this supply chain strategy, Dell
can develop a direct relationship with its customers, and also know what benefits they
are looking from Dell computers (Coca, 2017). Through this model, Dell can even
understand that who was its last customers, what were their choices and what they
purchased. This data assists Dell to add additional services and products according to
the preferences of customers and help it to bring customers more close to them (Coca,
2017).
It requires that no additional cost and time are needed as PCs are delivered
directly to the customers. Additional cost and time are only required if the PCs are
provided to customers via retailers. This unique strategy of Dell turns out to be its
marketing strategy and also gives information about product development. Dell
upgrades the direct relationship to the Virtual Integration. So through using
information technology, its customers now become its partners. For this, Dell
organized its platinum councils in the regional meetings where its enormous amount
of customers will come, share their experience with sales-people, technicians, and
DELL’s SUPPLY CHAIN MANAGEMENT 6

Dell's executives, discuss their requirements and expectation from technology which
assist corporation to have a competitive benefit on other companies which are not
offering similar services (Gilmore, 2011).
Build-To-Order
The Supply chain strategy of Dell is Build-To-Order strategy that focuses on
manufacturing computers only at times when consumers will order it. As given,
customers will place orders first from the website of Dell according to their needs,
then the information regarding configurations as per the requirement of customers are
sent to the manufacturing floor where the assembly of products will begin (Gilmore,
2011).
If the supply chain strategy of Dell is compared with other companies
manufacturing PC, then Dell had many advantages. Firstly, the inventory level is
minimal, that leads to low cost to store and maintain them, while conversely, other pc
companies need to pay an additional fee to manage their inventory. Secondly, a quick
response can be given to changes in demand in case if some latest processor or
software comes, then Dell won't wait to get rid of first stock to manufacture a new one
(Gilmore, 2011). Dell will then inform its customers that if they want to have this new
component so that it will produce only that much quantity which is exactly required
by the customer. Apart from this, by making use of build-to-order strategy, Dell gains
the benefit of just in time production of inventory which further helps it in locating
the defective parts and replace them quickly before more faulty parts appear in stock
(Gilmore, 2011).
Suppliers Integration
Dell has suppliers from around the globe which comprise countries such as the
US, India, and China, etc. Few big Dell suppliers are Sanyo, Sony, Motorola,
Samsung etc., and all these suppliers are supplying the components as per the code of
conduct defined by Dell. The relation of Dell and its suppliers' companies also
facilitates its two key supply chain strategies (Manataki, 2007). It has taken its
suppliers as an internal and important component of its success. The selected
suppliers of Dell had capability, experience, and expertise to deliver the value-added
parts and the supplier's performance is estimated through pre-agreed measures
(Manataki, 2007).
The primary objectives of the Dell company is to reduce the stock or
inventory and increase the speed, so it can demand materials from its suppliers at high
DELL’s SUPPLY CHAIN MANAGEMENT 7

speed. Let's say, rather than assuming that Dell needs 10,000 items within two weeks
to this warehouse; it will mean that by tomorrow 7 am, Dell needs 10,000 items at the
warehouse. Another fact is, Dell holds no inventory for more than six days (Ruzicka,
2017). To manage the high volume and velocity of a list, it is required that suppliers
will retain their stock close to the warehouse of Dell, or build their production unit
around Dell. At few plants, Vendor Inventory System is followed by the company
which means that the supplied parts from the supplier are kept only in trucks and are
distributed as per requirement and supplier has to put an eye on inventory till the time
it is entirely taken off by the company. Most of the Asian suppliers who are
supplying floppy drivers, CD Rom drives, hard disk drives, cable connectors, are
doing it from various places to the manufacturing centre or hub (Ruzicka, 2017). On
other hands, a significant proportion of its suppliers supplying motherboard fabricates
the parts around the Dell plant, e,g., SCI and Solectron located at Guadalajara in
Mexico are providing to Dell's US plants (Ruzicka, 2017).
Dell has common trust and close connections with all suppliers so it can shift
over main data. Furthermore, Dell distributes information with all of its suppliers
through Information Technology and internet, a website is established by Dell known
as valuechain.dell.com that is operating extranets amongst Dell and the suppliers.
With the help of this website, the suppliers of Dell can get all data related to the
inventory stages in the supply chain, require data, i.e., if a part is defective, then they
check it via this chain and then replace it. Apart from all this, it can also gather
information related to the transitions of the new part. Therefore, through this system,
Dell will share the production and demand information with its suppliers and can also
avoid the bullwhip effect (Manataki, 2007)
Dell’s Manufacturing Plants and its Transformation Process
The manufacturing plants of Dell are recognised by region, so it will develop
max two plants for serving its specific regional markets. For the time being, the
manufacturing plants of Dell are in Tenessee, Nashville, Texas, and Austin that are
helping the North American markets. The plant in Eldorado also helps the market of
the North America and Brazil do Sul, Brazil (Kraemer, Dedrick and Yamashiro,
2000). While the Penang plant serves the demands of Malaysia and other Asian
Pacific regions. The plant in Xiamen, China help Limerick, China, and Japan. The
plants of Dell in region Ireland serve the Markets of Middle East, Africa, & Europe.
DELL’s SUPPLY CHAIN MANAGEMENT 8

The manufacturing of Austin out of all other plants is these factories produce the
biggest one, all the hardware products of Dell (Manataki, 2007).
Transformation Process of Computers
Usually, Dell's computers transformation process is divided into seven further
divisions, Order selection by the customer, kitting, building, Installing software, Final
testing and then Labeling, Packing in Boxes, and finally Shipping. And to effectively
operate all these divisions, Dell is using technology and human resources (Kraemer,
Dedrick and Yamashiro, 2000)
Transformation Process Model of Dell
1. Order Section by Customer: In this part, there will be electrical
transformation of customer's order to the order management system of Dell,
and from there they are moved to the scheduling system of Dell via their
Factory Planner Maintenance Online software, a place where PC orders are
arranged as per schedule of production after every two hours and this section
will work as main area of the manufacturing centres of Dell (Dell, 2018d). In
this section, the servers will serialise every part and do order tracking until it is
manufactured.
2. Kitting: Several components require creating orders that are supplied by the
suppliers are sent to this particular division and after that shifted to the build
division.
3. Build: Now in this particular division, the parts are assembled as per
customer's requirements, and machine-readable and also human-readable
barcodes gets attached thus it can be utilised all through the machine's life. It
also works as a foundation for the quality system (Dell, 2018d).
4. Software installation in PC: After doing the fitting of parts, the given orders
are then transferred to the division of software installation when various kind
of software is being downloaded as per customers need.
5. Final Testing & Dell Labeling: After completing the software installation,
the PC is sent for final testing & then towards the section of the labelling. Here
the Dell labelling is done along with other quality checks.
6. Boxing And Shipping: After doing the quality checks, the PCs are then
moved toward the boxing division and then towards the shipping centre. Here
further items like printers and monitors are taken from the merge centres of
DELL’s SUPPLY CHAIN MANAGEMENT 9

Dell to complete the orders and unite them into single shipment which is then
sent to the customers.
Dell's additional operations comprise call centres, logistics, data centres, and
marketing.
Logistics
For materials, the inbound logistics of Dells required to fabricate the PCS, are
handled mostly by the suppliers of the logistics companies as also based on the code
of the conduct of the company; a capable and innovative logistics company must be
used by the suppliers who can supply the components safely and within given time. In
the outbound logistics, it has a range of best logistics and transportation companies
such as Schneider, UPS, SAIA, ODFL, FEDEX, CEVA, and DHL which will ship the
correct order to the exact customer within the delivery date given by the Dell and this
process as a whole will help in increasing the satisfaction of customers (Coca, 2017).
Call Centers
Dell makes use of call centres extensively for sales purpose and also for
providing technical support. Mostly the regional staff is recruited for the call centres
so there will be no language and telecommunication barriers. Few regional call
centres are:
● Amsterdam centre for those clients who are in Middle and Central Countries
(Dell, 2018d)
● Nash and Round Rock well for the US
● Bangalore, India for Asia-pacific
● Bra knell to handle the UK customers
● Marketing, Support, and Sales
Strength & Weakness of Dell’s Supply chain
Strengths
● The 3 strategies of supply chain used by dell are its primary strength; this aids
the company to decrease its expenses by keeping less inventory, minimising
the number of the mediators in the channel of distribution, assists the
consumers to customise personal PCs as per their need.
● A competent process of manufacturing and distribution is boasted by Dell
which will provide their customers a powerful systems at a very competitive
price (Phillips, 2015).
DELL’s SUPPLY CHAIN MANAGEMENT 10

● Using the new information technology for the supply chain of dell is primary
strength of company, for example, the dell's developed extranets assist it to
communicate in a better way with a suppliers quickly and adequately. The
demand is only posted on the extranets, and several suppliers will supply the
parts by checking those demands at extranets (Phillips, 2015).
Weaknesses
● If its three supply chain strategy assists it in minimising cost, then, on the
other hand, it also increases maintenance cost due to the need of more specific
technology, workers than can operate that technology.
● The direct model by Dell create issues for those customers who are home
users, as many customers are not able to customise the PC easily as per their
specifications, it may be time a long time to finish it and secondly they can't
contact any retailer if there is an issue (Lewis, 2013).
Conclusion
Dell is amongst the industries of secondary sector which do not manufacture
the PC components, they just all the elements required by the customers and sell
them. The Direct Sales strategy of Dell helped them to execute the product as per the
needs of customers, build-to-order further helps in trimming additional stock or
inventory, and the Just-in-time stock will aid in improving the relationship with
suppliers.
Dell is present in markets of different regions and countries, but have
manufacturing plants in favoured locations in Texas, South America, Middle East
Countries, Asia, Europe, Africa, etc. Additionally, it also develops customer value
through offering price incentives in case of ordering components & PCs in bundles
and also provides after-sale services such as IT centres and call centres located around
the globe that assist customers for various queries and technical problems. This thing
will ultimately enhance the relationship with the audience in targeted locations.
Therefore, if Dell continually follows this particular supply chain technique,
then sooner it will become the top organisation in the PC market.
DELL’s SUPPLY CHAIN MANAGEMENT 11

References
Blanchard, D. (2012). Supply Chain and Logistics: Dell Taps into Innovation to
Reach Emerging Markets. Retrieved from
https://www.industryweek.com/supply-chain/supply-chain-and-logistics-dell-
taps-innovation-reach-emerging-markets
Coca, N. (2017). How Dell Is Leading the Pack on Supply Chain Diversity. Retrieved
from
https://www.sustainablebrands.com/news_and_views/supply_chain/nithin_coca/h
ow_dell_leading_pack_supply_chain_diversity
Dell. (2018a). About Dell. Retrieved from
https://www.dell.com/learn/us/en/uscorp1/corp-comm?~ck=mn
Dell. (2018b). Who We Are? Retrieved from
https://corporate.delltechnologies.com/en-us/about-us/who-we-are.htm
Dell. (2018c). Supply Chain. Retrieved from
https://www.dell.com/learn/us/en/uscorp1/cr-social-responsibility
Dell. (2018d). Dell’s supply chain transformation. Retrieved from
http://www.gattornaalignment.com/documents/DellSCA.pdf
Farfan, B. (2018). Learn the Mission and History of Dell Computers. Retrieved from
https://www.thebalancesmb.com/dell-computer-company-profile-2892813
Gilmore, D. (2011). The Lessons from Dell's Supply Chain Transformation. Retrieved
from http://www.scdigest.com/assets/FirstThoughts/11-03-18.php?cid=4330
Kraemer, K. L., Dedrick, J., & Yamashiro, S. (2000). Refining and extending the
business model with information technology: Dell Computer Corporation. The
Information Society, 16(1), 5-21.
Lawton, T. C., & Michaels, K. P. (2001). Advancing to the virtual value chain:
Learning from the Dell model. Irish Journal of Management, 22(1), 91.
Lewis, N. (2013). Is Dell a Supply Chain Leader Anymore? Retrieved from
https://www.ebnonline.com/author.asp?section_id=1059&doc_id=259078
Manataki, A. (2007). A Knowledge-Based Analysis and Modelling of Dell’s Supply
Chain Strategies. Unpublished masters dissertation, School of Informatics,
University of Edinburgh, UK.
Phillips, E. E. (2015). Dell’s EMC Purchase Marks Shift From Consumer Supply
Chain. The Wall Street Journal. Retrieved from
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https://www.wsj.com/articles/dells-emc-purchase-marks-shift-from-consumer-
supply-chain-1444677467
Ruzicka, N. (2017). How To Meet Challenges In The Digital Supply Chain. Forbes.
Retrieved from https://www.forbes.com/sites/delltechnologies/2017/12/25/how-
to-meet-challenges-in-the-digital-supply-chain/#266becf8767f