Introduction
Supply chain management is a term that is very common in many businesses enterprises. It is a term that has been subjected to a variety of definition but in its simplest form, supply chain management is a management philosophy whereby manufacturers or service providers utilize various integration and partnership efforts with suppliers to reduce the cost and improve quality and delivery timing. Terms such as integrated logistics, supplier integration, integrated purchasing strategy, supply chain management, value chain management, Just-In –Time (JIT) logistics, supply chain synchronization and lean production are some terms that are often mentioned alongside supply chain management. These terms usually represent elements of the management philosophy. The supply chain management process involves all the value- adding activities from raw material extraction, transformation to product delivery to the end user.
Dell Company has one of the best supply chain management philosophies in the electronics market currently. The company has enacted a system that utilizes technology to decrease inventory and products storage and increases efficiency. This is a system that illustrates the latest logistics trend, and this is visibility. By visibility, it means that the company has put in place a system that ensures that inventories are traceable throughout their full logistical operations. Visibility is a key aspect in the supply chain because it provides companies with better information and enables the entire system to be agile.
Dell was formerly an average PC maker, but it took a revolutionary turn in 1994 when it enacted a new supply chain system. Like many manufacturing firms, the company would order raw materials in advance and then proceed to manufacture to inventory. The company then converted its entire operation process to a build-in-order process, eliminated the inventories via a just-in-time system and started selling its producers directly to customers. The customers in question were ones that Dell had strategically selected as its main target. These were corporate relationship customers that had predictable budgeted needs and that wanted a pre-determined model set of product models. In addition, Dell Company also selected customers that had repeat purchasing tendencies, and that had early technology adoption preferences. Both these segments essentially had a predictable purchasing pattern needed to make the Dell initiative work.
The Just in time process has significantly contributed to the success of Dell Company. JIT is achieved by integrating the operations with the suppliers. Through this process, Dell has been able to minimize the supply chain and the inventory.
Dell also has several manufacturing facilities across the world, such as in Limerick, Austin, Penang, Malaysia and Ireland. All the centers utilize the JIT process for in their manufacturing operations. To ensure a smooth and consistent flow of production supplies in all these plants, Dell utilizes a two-tiered strategy that involves different sourcing arrangements, as well as delivery schedules for both commodity and custom parts. When the company receives an order, it phones or faxes the component requirements who pick the parts and which deliver the sorted out parts to the plants for the final assembling process. This process is what essentially frees Dell from having to manage a huge raw materials inventory.
Dell’s supply chain management model enables the company to excel when it comes to demand management. The fact that the company sells directly to clients and the usage of the ‘building product to order” model creates huge opportunities for real time collaboration and synchronization between the manufacturing process and sales. The synchronization allows the company to respond more quickly to customer demand that most of its competitors in the PC manufacturing sector. Dell has an internal culture that fosters internal collaboration, information sharing and empowerment of employees. In addition, this culture also helps Del to leverage its external business partners. This is done by linking supplier’s planning and execution activities with the company’s systems. Del also uses the latest information technology to collect, monitor and share information on the latest trends in supply and demands with its partners. The final piece to the jigsaw is the company’s mission that focuses on fundamental business performance and not just profit margins. Dell cares most about the operation margin since this is what ensures long time profitability.
Dell’s direct sales model has often been cited as the primary reason for the company. Dell views supply chain management as a strategic capability and its effective use leads to the success o the company.
Although Dell’s relationship with its customers is ‘deep: there is still a lot that can be done to improve the company’s overall supply chain model. In countries, there have been claims that the relationship with customers is not that great. This has led to the company losing crucial customers in some countries. Although having a direct relationship with the customer is a great strategy, having some customers going to retailers to make purchase poses a threat to Dell’s supply chain. These consumers may take the retailers behaviour to synonymous with that of Dell and may therefore, be apprehensive towards the purchase of its products. This may have an adverse effect on Dell’s overall profitability. Dell should therefore, fully refine all its supply chain elements to ensure that there is consistency along the entire chain, from production to the final delivery to the consumer. The company should for example do away with big consumers whom it realizes are retailers who present a bad company image.
Conclusion
In conclusion, Dell Inc Supply Chain model is one of the bets there is indeed the current PC market. The use of supply chain integration management strategies, demand management through business collaboration and finally the use of the ‘building product to order” are some of the factors that have rendered Dell’s supply chain model be that successful. The company is currently among the leading PC’s manufacturer in the world. It is testament to the fact a superior supply chain management model in a company can revolutionize its operations and make it a huge profit enterprise. Other firms in this sector should benchmark Dell to come up with similarly successful supply chain management models.
References
Supply Chain | Dell. (2014). Retrieved January 26, 2014, from http://www.dell.com/learn/us/en/19/cr-social-responsibility
