1st Assignment Supply Chain Management (IVth trimester)

Submitted By: Hemam Johnson Singh Roll no.141217 Sec (A)

PGDM 22nd Batch

Supply Chain drivers of Dell:

Date: 10/07/2015

1. Facilities
2. Inventory
3. Transportation
4. Information
5. Sourcing
6.Pricing
Role of each driver in maintaining the efficiency & responsiveness of dells supply chain are as
follows:
1. FACILITIES:
Activities such as coordinating with its manufacturing facilities & managing inventory are of
primary concern for dell because they impact the price of the final product to customers. Dell has
a manufacturing arrangement with its key suppliers such as Sony. Thus suppliers employees
work in the dell facilities & work on the planning & product development. Now because of the
close relationship with its suppliers & their reputation for building certain component dell does
not perform quality checks on their components .Thus dell does not maintain any inventory on its
own. It is owned by its suppliers. Moreover when required it instructs to get the components
matched in the delivery process which eliminates the need for dell to have a distribution centre to
perform all these kind of functions.

2. INVENTORY:
The inventory in its facilities is not owned by dell, rather owned by suppliers which indirectly
adds to the components price & finally the final product. Therefore, any reduction in inventory
definitely reduce the product price & finally benefits the customer & definitely the company.
Low inventory also lead to higher product quality because it becomes easy for dell then to
identify any defects in the inventory. The vendor-managed-inventory (VMI) arrangement of Dell
lets its suppliers decide how much inventory they need to order and when to order while Dell
sets target inventory levels and then records deviations from the targets for each supplier. Dell
chose an inventory target of 10 days i.e. it make a plan for 10 days about the inventory targets to
achieve.
To help suppliers in making accurate or nearly accurate ordering decisions, Dell shares its
forecasts with them once per month. They not only focuses on Product-specific trends, but also
reflect the seasonality factor.
For example Christmas is the top time of the year, back-to-school season and country-specific
seasons for foreign purchases (foreign language keyboards are especially influenced) etc. Dell
revive its forecast weekly accounts to the various factors & suppliers receive forecasts monthly.
3. TRANSPORTATION: Dell in some cases has significantly less time to respond to customers
than it takes to transport components from its suppliers to its assembly plants which require 7
days to as much as 30 days to transfer various components to assembly plants. To compensate for
long lead times and buffer against demand variability, Dell requires its suppliers to keep
inventory on hand. Thus small warehouses are located within a few miles of Dells assembly
plants. Each of the warehouses is shared by several suppliers who pay rents for using that. Thus
it store inventory there according to the forecasted demand keeping some level of buffer stock
accordingly & thus reduces its transportation cost by ordering purchases in batches rather than
individual purchase.

4. INFORMATION:
By selling directly to customers dell computers uses e- commerce to communicate with
customers, maintains low cost & customize products according to customers specifications. Dell
computers are driven by the desire to create value for customers.
Through the use of internet, dells customers gain access to the same product, service &
catalogue information as its employees. Tailor made internet sites called premiere pages gives
customers direct access to purchasing & technical information about the specific configuration
they buy from it.
www.dell.com was launched in June 1994 and as soon as it was launched customization become
very easy for dell. Product list is available with price there. Customer can directly purchase by
credit card. Brochure is sent directly through e mail. Complaints are also registered there &
technical support is provided to the customers. Thus customers can order, configure & even
gather technical advice online & get a completely customized product.
The corresponding Web site valuechain.dell.com is an extranet for sharing such information as
points of contact, inventory in the supply chain, supply and demand data, component quality
metrics, and new part transitions. Dell envisions using this site to exchange with suppliers
current data, forecasted data, new product ideas, and other dynamic information that might help
it to optimize the flow of information and materials in the supply chain. Value Chain is a
program intended to extend Dells successful direct-sales approach back into the supply chain
with the goal of increasing the speed and quality of the information flow between Dell and its
supply base.

5. SOURCING:
Dell has a virtual relationship with its suppliers who manufacture components & maintain just in
time for dell which are assembled in its assembly plants. Moreover, for the customers who want
or need more personalized assistance, dell send out one of more than 10,000 service technicians
to their site. However only a small no. are dell employees. Most are contract employees (supply
chain partners). This allows dells employers to focus on activities that create more value for
customers.

6. PRICING DRIVER:
Dell follows comparative Lower price to match the customer's expectation of value for money
(Comparative Pricing) - Low inventory cost & Direct Distribution Depend on suppliers price
(Cost plus Pricing) Customization (Optional feature Pricing) - No price tag effect - Pricing
strategy based on customers needs. Therefore, customization & reduction in price benefits the
customer & definitely the company.

Conclusion:
Dells operation can be described as "High Velocity Mass Customization".
All the drivers of dells supply chain can be attributed to decreased cost & increased customer
service. The result was when retailers who aligned with dells competitors began charging higher
rates for servicing & supporting dell products, customers remained loyal.
Unique product offerings, cost reductions, high responsiveness towards customers demand has
resulted in customer loyalty.

Performance Matrices Dell:

Widely known for its super-efficient supply chain, Dell Computer Corporation successfully uses
a BUILD-TO-ORDER manufacturing program to hold down its inventory to only a five-day
supply while shipping 95 percent of customer orders within eight hours. In an industry where
materials costs are dropping and where technologies are rapidly becoming obsolete, this strategy
gives Dell a key competitive advantage as a low-cost producer. Dell can reap the benefits of
lower material costs almost immediately and reflect that benefit in its consumer product prices.
In addition, it can minimize any excess or obsolete inventory by responding immediately to
softening demand.
With a goal of replacing inventory with information, Dell uses i2 Technologies software to track
its supply chain activities. Monitoring the system constantly, Dell is able to make immediate
changes (within hours) to respond to fluctuations in consumer demand.