Presented by

Abhinandan Sawant

HOW IT ALL STARTED

Started by Michael Dell (19 at that time) in his dorm room at the University of
Texas in 1984 with $1000.
Company headquartered in Round Rock, Texas, U.S.A.
Its revenue is around US$ . billion in 2015-16.
In 2001, became the No. 1 computer systems company in the world.
At present (2015-16), it is the third largest PC vendor in the world after HP and
Lenovo.

ACQUISTIONS
Dell has grown by both increasing its customer base and through acquisitions since
its inception; notable mergers and acquisitions including Alienware (2006) and Perot
Systems (2009).
Notable Acquisitions: 2006 Alienware
2009 - Perot Systems
2010 - KACE Networks
2010 - SaaS
2012 - Sonic Wall
2012 Wyse
& so on

DELL SUPPLIERS AND PRODUCTS

PRODUCT LINE

SUPPLIERS

Desktop computers
Notebook computers
Network servers
Workstations
Storage products
Dell offers a total of 1.6 million
different possible product
configurations for all its product lines

MICROSOFT - for Windows

INTEL - for micro processors
NVIDIA
- for Graphic chips
SONY
- for monitors

SUPPLY CHAIN CHART

REVOLVERS

SUPPLIERS

Customer
places an Order
(By phone or
through the
Internet on
www.dell.com)

Dell
processes
the order

Configuration
evaluations
(checking the
feasibility of a specific
technical
configuration)

2-3
days

Sends the order

to assembly
plant
(any one in Austin,
or any other)

Plants build,
test &
package the
product
(about eight
hours)

Dell typically
ship all orders
Financial
evaluation

(no later than five

days after receipt)

(credit
checking)

CUSTOMERS

HOW DO THEY DO IT?

Dells success is a combination of:
Direct Sales.
Inventory Management
Supplier Integration
Together these allow for maximum effectiveness with
minimum cost.

CORE ELEMENTS OF STRATEGY

Mass customization (end result: Delivers
exactly what the customer wants)
Partnerships with suppliers
Just-in-time components inventories (Quick
Introduction of Latest Technology)
Direct sales
Market segmentation
Customer service
Extensive data and information sharing
with both supply partners and customers.

DELL DIRECT SELLING

New Value Chain: Dell had no in-house stock of finished goods inventories unlike
competitors using the traditional value chain model
Pull Mechanism: It did not have to wait for resellers to clear out their own
inventories before it could push new models into the marketplace (typically operated
with 60-70 days stock)
Personalization: Customers got the satisfaction of having their computers
customized to their particular liking

Traditional build to stock value chain

Compone
nt
Manuf.

Compone
nt

PC
Manufact
urer

Product

Forecas
t

Component
s

Distribut
or
/Reseller

Product

Order

Corporat
e
custome
r

DELL DIRECT MODEL

Component
manufactur
er

Compone
nts

Distributo
r

DELL
Comp
Corp

Produc
t

Order

Final
customer

DELL DIRECT MODEL Continued

Dell Computers direct model departed from the industrys historical rules on
several fronts:
The company outsourced all components but performed assembly.
It eliminated retailers and shipped directly from its factories to end customers.
It took customized orders for hardware and software over the phone or via the
Internet.
It designed an integrated supply chain linking Dells suppliers very closely to
its assembly factories and order-intake system

THREE GOLDEN RULES OF DELL

Always listen to
Disdain
inventory
Never
Sell
Indirect
Customers

INVENTORY MODEL

KEY TO SUCESSES ... MINIMUM INVENTORY

BUILD-TO-ORDER MODEL
DIRECT TO SELL
INVENTORYMANAGEMENT is primarily about specifying the size and
placement of stocked goods.
1. Just-in time inventory management - 3 days.
2. Focus on speed of inventory delivery process.
MICHAEL DELL
8 days of inventory competitors 40 days, if Intel comes out with a new chip,
I am going to get that to the market 32 days sooner

INVENTORY MANAGEMENT

INSTRUMENTS FOR INVENTORY

MODEL

Revolver
or SLCs

Build-To-Order
Model

(Supplier
Logistics
Value
Chain Program

Centers)

DELL INVENTORY MANAGEMENT

BUILD TO ORDER
In contrast to others who produce to stock, dell first receives the order and
the money and only then starts to build, using that money to purchase from
supplier
Therefore there is customization of products for each and every customer.
While other companies had to guess, DELL knew exactly what its customers
wanted before manufacturing the product

Others had to maintain inventory as there existed middlemen, so to support

reseller and retail channels.

REVOLVERS
Material
Transfer

Supplier
Manufacturing

Factory / Merge
Center

(SLC)
Warehouse

To compensate for long lead times & buffer against demand variability, Dell
requires its suppliers to keep inventory on hand in the revolvers.

Revolvers or supplier logistics centers (SLCs) are small warehouses located within
a few miles of Dells assembly plants.

Each of the revolvers is shared by several suppliers who pay rents for using their
revolver.

Dell does not own the inventory in its revolvers; this inventory is owned by
suppliers & charged to Dell indirectly through component pricing.

INVENTORY MODEL
Dell has a special vendor-managed-inventory (VMI) arrangement with its suppliers
Suppliers decide how much inventory to order & when to order while Dell sets target
inventory levels & records suppliers deviations from the targets.

Dell withdraws inventory from the revolvers as needed -- on average every two hours.

It uses a quarterly supplier scorecard to evaluate how well each supplier does in
maintaining this target inventory in the revolver.

LEAN INVENTORY MODEL

3 days of inventory - Inventory turns of 122 per year
Suppliers
Revolvers
(SLCs)

Dell Factory

Delivery

Local Suppliers`

Supplier Owned

Dell Owned

Customer

VALUE CHAIN PROGRAM

Value Chain is intended to extend Dells successful direct-sales approach back into
the supply chain
The goal of it is increasing the speed and quality of the information flow between
Dell and its supply base
The portal, valuechain.dell.com acts a secure extranet for Dell suppliers to
collaborate in managing the supply chain
Dell envisions using this site to exchange with suppliers current data, forecasted
data, new product ideas, and other dynamic information

SUPPLIERS SELECTION AND

VALUATION
SELECTION
i. Quality
ii. Price
iii. Delivery
iv. Response to feedback.
EVALUATION - to measure performance uses suppliers score
. Cost
. Delivery
. Availability of technology
. Velocity of inventory
. Ways in which they did business with dell over the internet.

ADVANTAGES OF THIS MODEL

Returns grew disproportionately as the carrying costs and
obsolete stock is avoided.
Saves enormous amounts of money on purchasing components
because the component prices drop by 3 percent per month.
Reduces handling cost. Common factors that drive up holding
costs include opportunity costs, increased rent required for the
space of the inventory, higher premiums to insure the inventory,
and cost of obsolete goods.

CUSTOMER SERVICE
Service became a feature of Dell's strategy in 1986
It provided free on-site service for a year after sale

Contracted with local service providers to handle customer requests for repairs

On-site service was provided on a next-day basis

Technical support via a toll-free number, fax, and e-mail

Global PC Market Share - 2001-2005

Global PC Market Share by Units, Percent. 2001-2005
Rank

2001

2002

Dell

13.3

Compaq

HPCompaq

2003

2004

2005

16.2

Dell

15.0 Dell

16.4

Dell

16.8

11.1 Dell

15.2

HP

14.3 HP

14.6

HP

14.5

HP

7.2

IBM

6.0

IBM

5.1

IBM

5.5

Lenovo

6.9

IBM

6.4

NEC

3.4

Fujitsu

3.8

Fujitsu

3.8

Acer

4.6

NEC

3.8

Toshiba

3.2

Toshib
a

2.9

Acer

3.4

Fujitsu

3.8

Other
s

58.1

56.0

58.9

56.4

53.3

Global PC Market Share - 2006-2011

Global PC Market Share by Units, Percent. 2006-2011.
Rank

2006

2007

2008

2009

2010

2011

Dell

15.9

HP

18.2 HP

18.4 HP

19.3 HP

17.9 HP

HP

15.9

Dell

14.3 Dell

14.3 Acer

13.0 Dell

12.9 Lenovo 13.0

Lenovo

7.0

Acer

8.9

Acer

11.1 Dell

12.2 Acer

12.0 Dell

Acer

5.8

Lenovo

7.4

Lenovo

7.2 Lenovo

8.1 Lenovo

9.7 Acer

Toshiba

3.8

Toshiba

4.0

Toshiba

4.5 Toshiba

5.1 Toshiba

5.4 ASUS

Other

51.6

47.1

44.5

42.3

42.1

17.2

12.1

11.2

5.9

40.7

Dells motivation for rethinking direct sell

business model
Limitation of direct sell model in emerging market
Buying habit
Not access to internet
Lack of online payment (i.e. credit card)

Continued..
IN THE PAST

TODAY
Customers are willing to
choose from a few

PC customizability was highly

appreciated by customers
Surplus stock lost value quickly
Demand was typically low for
each product variant
Assembly-to-order more

standardized PCs model.

Inventory of standardized
models moves fast
Demand was relatively high for
each standardized model
PC became a popular

effective than selling pre-

commodity, price has dropped

configured PCs in retail stores

significantly
Direct sell model is less
effective in todays more

DELLS HYBRID MODEL

The direct model has been a revolution, but its not a religion.
- Michael Dell in April, 2007 memo to employee In Jun 2007, Dell offered two PC models through Wal-Mart stores sell Inspiron
notebook computers through Wal-Marts Sams Club outlets.
In Oct 2007 Dell sold its PC through, Chinas largest electronics retailer fifty
Gomez Electrical Appliances stores
Later Dell also extended its international retail strategy by opening its first retail
store in Russia

SWOT ANALYSIS
Strength:

Weakness:

1. Direct Model Approach, it provides Dell a

way to interact to customers directly
2. Customization of products
3. Reliability, Service and Support
4. Latest Technology

1.Market share growth is slow due to

competition; Fake products/ imitations affect
sales
2. Overdependence on Suppliers.
3. Lack of Dell Stores, can be an issue for some
customers.

Opportunity:

Threats:

1. With increase in e-commerce the online retail

stores of Dell provide them better framework to
tap new business
2. The Direct approach Model of Dell would
help them there existing to sell the other IT
products, so new product development
opportunity is for Dell
3. Tablet and Smart phone Market.

1. With the increase in innovation in the market

the computer systems are becoming outdated, so
Dell should constantly come out with new
products
2. People need the quality products at low price
which was Dell strength due to its customize
solution, but now its competitors are coming up
with products in same price range

AT PRESENT
Its bad news for a PC manufacturer (Particularly if it dont also produce tablets or
mobile phones.) A new study predicts that the rise in sales of tablets and cell phones
will directly, and negatively, affect the sales of PCs, which have already been
steadily slowing down.
Many people attribute the decline of PC sales to various factors, like the growing
popularity of smartphones and tablets.
Last year, tablet sales totalled around 116 million units; this year its expected to
jump up to 197 million, a nearly 70 percent increase. The reason for the increase is
largely due to decreasing prices, love of the cloud, and addiction to apps. On the
other end of the spectrum, while PCs sold 341 million units last year, anticipated
sales will drop to 315 million this year.

HOW IT EFFECTS DELL

DELL, literally has no market share in tablet and smartphone segment. It solely
depends on Laptops and Desktops in consumer market for its revenue.
Due to decline in PC sales, Dell Profits plunged by 47% in 2015
The much hyped Windows 8
didnt play any part in increasing the PC
sales.

THANK YOU