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Dell

Supply Chain Management

Semester 2, 2008

Assignment 1



Dell’s ‘made to order’ direct delivery model was considered market leading in terms of efficiency and responsiveness for over twenty years. This was achieved through best in class supply chain management and a relentless drive to remove waste from the process. Since mid 2005 Dell have lost market share by failing to read the trends of PC commoditization, the growth and support costs of the consumer segment, and the difference in buyer behaviors in emerging markets. Dell’s problems were caused by a failure to redesign their supply chain model in response to changing market conditions. Now that Dell has re-aligned products and services to customer needs using a multi-channel strategy, their inherent supply chain management skills could again prove a winning formula.

The two decade dominance by Dell was built around an extremely simple model; take orders directly from customers, cut out the middleman, pass on savings and allow customizations to forge a close relationship with the end customer and build strong relations and information networks with supply chain partners to reduce inventory and waste.

Dell achieved this through a flexible and efficient supply chain management process, building an almost entirely ‘pull’ based system that didn’t supply finished inventory to fill traditional sales channels. This translated into a huge advantage over competitors, given the rapid price deflation of finished product PC’s and component parts. Additionally, as the direct model required customers to pay in advance Dell was effectively achieving a negative cash conversion cycle.

The supply chain strategy was built around agglomeration, collaboration using MIS, and Just in Time processing. Dell’s suppliers and logistics providers were located in close proximity to facilitate rapid supply of exact quantity of component parts and execute finished goods dispatch with minimal ‘dwell’ time. This system was...