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Dell Supply Chain Management

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Dell & Supply Chain Management

Executive Summary

Constantly changing technology directly impacts Dell's success and future. Although Dell is an extremely successful company, there are areas of improvement and enhancement that should be considered. After a thorough analysis of Dell's IT tools, business model, IT infrastructure and competitive advantage, we have developed seven key suggestions. By implementing these recommendations, Dell can keep its high ranking in the competitive computer industry by increasing customer satisfaction, competitive advantage and superior value chain, without changing its principal operations to achieve these goals.

Our recommendations allow Dell to enhance their supply chain management system, increase customer service, gain market share, and increase revenue.

1. Consider selectively adding other vendors to its supply chain management system.

2. Initiate a program to use "Customer Surveys" to gain market share.

3. Invest more in their Research and Development to develop new products and services.

4. Consider offering online data back-up capabilities.

5. Implement a program to reduce errors in their direct Internet ordering system and create a "Clearance" area on its website for systems produced in error.

6. Enhance Dell's customer support services.

7. Increase their company recognition through a national advertising campaign.

Focus of the Proposal

Dell Computer is a leader in the e-commerce computer hardware market. It is an established brand that leads personal computer manufacturers both in U.S. sales and overall online sales. Its trademark method of selling products to customers, corporate and individual consumers, emanates from the Dell Direct model, a Web-enabled infrastructure that allows customers to customize their PCs and order other products they need or desire. This virtual integration structure eliminates the need to manufacture everything, and instead uses the power of the Internet to share and exchange information with suppliers and vendors to build a truly superior supply chain that keeps inventory turnover low and costs to a minimum.

The primary method Dell uses in order to achieve and sustain their competitive advantage is a unique, direct to customer business model. The model is known as Dell Direct, referring to their relations with their customers as being "direct." This model helps Dell focus on price for performance, customization, service and support, latest technology and superior shareholder value. Additionally, Dell is able to distinguish itself from its competitors with its customized on- demand manufacturing. With this customization, Dell is able to offer customers more value for their money by eliminating intermediaries in their procurement, manufacturing and distribution processes.

Dell's primary resources include the most up-to-date technology and IT tools that allow it to successfully move along their superior supply chain and achieve the value they strive for. Dell's value chain allows Dell and its suppliers to exchange information and interact with each other. The Internet, Dell's key IT factor in its success, results in lower costs to customers than other retailers because customers tell Dell exactly what they want and Dell creates products for the consumer without experiencing wasteful resources in production.

Overall, it is evident that Dell's competitive advantage lies in its Direct model success. Through Dell's IT performance, which combines its resources, its relationship with suppliers and its consumer communication capabilities, Dell has developed one big advantage over its competitors.

Research and Analysis

Analysis of Dell's Competitive Advantage:

Dell is officially the No. 1 computer systems company in the world. Dell is able to sustain a competitive advantage over competitors in the computer industry because of an extremely efficient supply chain/distribution system. Dell is able to achieve superior profits in the industry because they are a knowledgeable user of information, communication, e-commerce, e-business, internet, and web technologies.

Michael Dell states that Dell is so successful because of "Knowledge Management". Mr. Dell defines that term by saying "physical assets are being replaced by intellectual assets." This relates to Dell's inventory system. Dell implements a Just-In-Time inventory system which operates on only 6 days of inventory. Dell is able to achieve greater profit margins and increased profits because of their inventory system. Inventory and labor are the highest liabilities of a firm. Since Dell only operates with 6 days worth of inventory, they are able to cut costs on warehousing, hiring people to track and maintain inventory, and avoid holding on to obsolete technology. This allows Dell to free up cash flow to invest in other value adding activities.

Dell uses a JIT inventory system because Dell's customers can only order computers directly through Dell itself. Dell uses their website to take customer's orders. Dell focuses on direct sales, cutting out other distribution channels entirely. This allows for a deeper relationship with the customers whereby Dell can offer their customer's better service, savings, convenience, and efficiency. A customer can order their own custom computer, have it built by Dell in three days and have it delivered to the customer's doorstep within one week.

Dell's use of the internet has revolutionized the company. Dell makes their website extremely consumer friendly to offer an easy order process to the customers. Dell has also created their "Premier Page". This page was made for Dell's larger accounts including corporations, the Government, and educational institutions (ie Syracuse University). This webpage includes dynamic price upgrades, easier navigability, and a greater range of available upgrades/options. Customer relationship management software keeps close tabs on the types of computers that customers are buying (Pizinger).

Not only does Dell use the internet to make the customer ordering process easier. They also use the internet to build better



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