Dell Computer Cooperation
Supply chain management (SCM) is the putting together of science and art that goes into progressive improvement on the ways that the company uses to obtain raw materials that are used to make a service or product that is eventually delivered to the customer (Harland, 2000). To understand the procurement and the supply chain management fundamentals, it is essential to put together all the management activities into three categories: operational, tactical and strategic. Some of the strategic activities include the formation of solid relationships with customers and suppliers, and integration of information technology within the supply chain. Solid relationships with the customers and suppliers ensure that mutual trust is developed which ensures that they buy the products of the company knowing that their interests have been put at heart while the products and services were being delivered. The tactical category calls for the need of a company to study competitors and make decisions with regard to delivery and production. When the company studies other competitors they are able to note their shortcomings and improve on them, making them well sought after by the customers of the other companies as they feel that all their needs will be catered for by the rival companies. Daily management of the supply chain which includes the creation of production schedules would fall into the operational category. The creation of effective and efficient schedules always ensures that products are manufactured and delivered on time to the customer. The production schedules are a good way of ensuring that the requests of the customers are always delivered on time for use.
Supply chain management also encompasses management and planning of all activities which entail conversion, procurement, sourcing, and logistics management activities. Another vital aspect includes the need to collaborate and coordinate with the numerous channel partners such as customers, suppliers, third-party providers, and other intermediaries. In essence supply chain management integrates demand and supply management across and within companies. This is an indication how vital the supply chain management is, in the prosperity of the company as it creates the link between the customer and the production company. Through proper use of the fundamentals of the supply chain management effectively and efficiently, it enable a company to become a market leader.
Dell’s Computer Corporation
Dell Computer Corporation over the years since it was founded has experienced extraordinary growth. This growth has been spearheaded by their creative managers who have always had the desire to satisfy all the customer needs. It has been able to see a rise in revenue and profits over a small period of time. An example was in 1997 when it had an 82% profit increase, and 58% revenue, which was all achieved over an equally extraordinary short period of time (Dell Inc., 2007). Much of the success that has been witnessed by the company has been due to the exemplary management principles and visions held by the company. These management principles have always ensured that Dell Computer Cooperation is ahead of its competitors.
Dell’s Secret Weapon
Dell Computer Corporation has been the leader in the direct computer systems company since it was founded in 1984. Dell has been able to carry out their sales directly to their end consumers, by bypassing retailers and distributors unlike other companies. The supply chain of Dell is made up of three stages- the end users, the manufacturer (Dell), and the suppliers. Dell has a direct contact with their customers, and this enables them to analyze requirements, properly identify markets, analyze the profitability of every assignment and realistically create more effective and efficient demand forecasts which are accurate. The build-to-order strategy has been at the core of Dell’s business world and has been the strategy that has afforded Dell to post the every impressive result.
Dell has been able to match the demand and supply of its customers’ orders computer configurations online or over the phone. These computer configurations are created from components which are readily available (Dell, 1999). Dell has always had the strategy of providing low cost, customized, and quality computers which are always delivered on time. This strategy has continually been applied by Dell through better supply chain management, manufacturing operations, and direct sales model. This strategy has enabled Dell to reduce the total cost of the Personal Computer (PC) to the customer as the costs that could be incurred from the intermediaries is eliminated since the orders of the customers are taken directly.The middle men who were part of the traditional model were eliminated. This ensured that Dell passed the savings to the customers, in the form of the lower costs, and also gets to understand customer needs first hand.This strategy saves a lot of time on the processing of orders. Other computer companies normally incur costs in their distribution and sales system. By dealing with customers directly, Dell Computer Corporation obtains some of the clear existing market trends about their product (Kharif, 2005). This has enormously helped Dell to plan for their future besides the benefits in better managing their supply chain. Dell has also been able to adapt to some of the market changes faster than some of their fierce competitors. By directly dealing with their customers, Dell has majorly benefited in the ability to get most of the customer requirements regarding the best Software that can be loaded into their computers. Through the elimination of the requirement of a PC support engineer who can load the software, the customers benefit both in cost and time.
With this strategy, Dell has been able to properly utilize the available resources that they have. This means that the Dell does not waste resources building computer systems that may not reach their customers. Staffing positions who have to move inventory have been done away with as computers are built directly for the customers and not for inventory.Thus staff around the world is not required to move inventory, or time spent on tracking and managing inventory, and reworking of computer systems which eventually become obsolete before they can be purchased. The just-in-time manufacturing practiced by Dell has a system where trucks carrying vendor parts are placed on one part of the plant, and directly unloaded into bins which are then used to build customer orders (Larsan, 2004). These parts would then become the property of Dell Computer when they were unloaded. The information systems of the company have also been all tied up. This has enabled the routing of orders progressively to the next business process thus eliminating backlogs, waits, and losses which may be experienced by a less automated system.
Challenges Faced and How They Have Been Solved
Initially Dell Computer Corporation divided its customers into three categories: personal customers, large businesses, and small to medium businesses. Each business group was then supported in ways which was consistent to their requirements. The large businesses consisted of dedicated sales persons who could manage the various orders (Smart Computing, 2007). Medium and small business shared the sales staff that had to ensure the requirements of the businesses were met. On individual basis the customers who had interest in Dell’s products obtained telephone numbers which they could use to contact the sales people or the sales system through the internet.The famous Dell distribution system was supported by the underlying customer accounts. The inside sales force received calls from the toll-free phone numbers which were used by customers who were seeking information about the products and wanted to place orders.
In the Dell offices, these sales people sat at the computer and provided service to the customers who called in. the inside sales people initiated the entire build to order process as soon as there was an entry of an order. Customers who had corporate accounts could also order from the sales people. Each of the large accounts had sales field people who took charge of the various relationships of the clients. This dedicated team was based in Austin, Texas. Dell was eventually able to eliminate intermediaries and other middle men by making it possible for customers to call in directly and place orders. This strategy by Dell to enable customers to call directly and order a computer which arrives within a week has continued to be the cornerstone of the business.
In 1996 the direct order model was expanded to the internet by Dell Computer Corporation. This medium quickly became legendary. The on-line sales program during the first quarter of 1997 generated $1 million sales per day. During the second quarter it did $2 million sales per day and all this continued progressively (Park, 2006). This growth of sales was largely attributed to the ability of the customers to directly contact the Dell Company directly. The order status system was also put in place which could ensure that the customers were able to track their orders by using the Dell process. The configurator assisted the customers in coming up with the exact product that they required, and its pricing.
Dell Computer Corporation has been best known for the pioneering of the direct marketing channel which has continually been used for the distributing and selling of the personal computer systems. This strategy for manufacturing a custom computer system has provided Dell with a series of advantages over its competition. Some of the advantages include: no dealer cost, low inventory costs, and current technology in each manufactured system. Conventional wisdom requires that customers have inventories and middle men who can guide them in choosing the products, however Dell has made it possible for customers to pick whatever features they desire, and this can be made available to them (Saunders, 2000). Dell were able to see that Personal Computers would become a commodity and thus saw need of the sales people to explain the working of the systems.
All this resulted in a win/win situation for all: Dell and its customers. Supported by the concrete alliances with suppliers who deliver in small loads the factory inventory was at most three days. Moreover it became frequent than the traditional manufacturing systems. As the computer systems were directly shipped to customers, the downstream inventory became zero. The traditional supply chains held upto 30 days of inventory of systems for the dealers and 60 days inventory of parts. The new stream ensured that there was no one who sat on more than 7 days of inventory.
Key Structures and Lessons of the Supply Chain Management of Dell
The foundation of creating value is the ability of a company to know the customer. Meeting the expectations of the customer expectations is no longer good enough. To delight the customer is not even good enough. This is an indication of the need to continually understand the customer so that it can guarantee progressive change (Smart Computing, 2007). This has ensured that Dell constantly adds value. Dell Computer Corporation can now design new services and products which have new pricing schemes which ensure that the customer expectations are met and exceeded. Dell has been able to achieve this through the creative use of people as well as the information systems. The information systems, manipulate, store, attract, and report crucial information on customers.
This information is then used to respond immediately to some of the rapid market changes such as changes in customer preferences and changes from competitors. The customer experience initiative has also been able to create a more intimate customer experience. Dell managers continually evaluate the market share within the customer as compared to the statistics obtained from the various industries. This resulted in increasing Dell’s position with every customer (Kharif, 2005). This can be considered a success as premier accounts such as Boeing, GE, and GM continue to find value from Dell in the constituency and predictability of Dell’s assured delivery date and quality. Customers also find value in Dell’s lower total cost.
Resorting to virtual ways of operation from physical creates numerous barriers to entry. When a company operates in a virtual environment, switching costs and barriers of entry are created. The non-physical world creates massive competitive advantages, enormous switching costs and huge barriers of entry. The fundamental infrastructure of the virtual world consists of connectivity, intangibles (knowledge), and speed (time) (Harland, 2000). Since these objects can be manipulated easily, unlike the physical counterparts it increase the advantages. When time is compressed it brings value to all of the stakeholders which create barriers of entry. The virtual connection with the suppliers and customers creates the competitive advantage which is hard task to duplicate. Virtual connectivity and integration ensures that customers invest in the technical and organization connections with the infrastructure of Dell IT. When a customer wants to switch from Dell it entails decoupling from Dell’s IT infrastructure it becomes very costly. This indicates that the savings gained from another competitor will be much less. Virtual integration provides customers with the tight coordination and benefits which are alike to that achieved through physical acquisition.
The growth of Dell Computers has been in a fast paced environment which is makes it a difficult task to bring on people fast enough. The hiring process should then involve a training and education process which will ensure that individuals get the required knowledge to work in a Dell environment and become productive. However, integration of a large number of individuals within a short period of time, results in problems of alignment and empowerment at the same time (Larsan, 2004). Most of the traditional companies take the initiative of empowering employees who are trusted, trained, and can make appropriate decisions for the company. Dell has always concentrated in empowering individuals from the start so that it can continue to advance rapidly. Dell thus continues to teach most of their employees the traditions, values, and goals of the business. Dell has then achieved the alignment of most of the employees who had not had the chance of training in the Dell way.
For continued velocity it is necessary that a company carries out continuous reinvention. During the growth of a company it reaches a point where every goal and strategy is outdated. Dell Corporation has therefore taken the initiative of identifyingprobable goals and new strategies early so that they can reinvent themselves and move in a new direction. When Dell moved into the online service over the internet it was a way of reinvention. The Dell Direct Model allows its customers systems which enable them to tap into Dell’s support and services directly. The Dell reinvention has also continued through viewing of their business operations as one of distribution and integration, rather than plainly as a hardware manufacturer. The competitive environment has thus continued to shift as most of the PC manufacturers target Dell as their primary competitor (Park, 2004). This is an indication that by gaining the knowledge on their customers a business has the potential of reinvention.
Considerations for Dell in the21st Century
Consumers are also becoming more prices sensitive and demanding. This calls for the need of the next generation products to be consistent and relevant with the numerous trends affecting the computer industry today. Dell Computer Corporation should then excel in making products which fits the current market trends. This will ensure that Dell continues to remain as a top leader in the industry of today and tomorrow. Great ideas should also be continually incorporated into the structures of the company. It common knowledge on what great ideas can result in. success at Dell was achieved from the great ideas of Michael Dell. Dell is a leader both in market strategy and innovation. Through its leadership in the industry it has achieved enormous success.
References
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