By

DELL: FORD GROUP 1

Amrit(05)
Pratiksha (22)
Sandeep (30)
Sneha (33)
Tandrima (37)
 Comparison of Buying Experiences

Buying car Buying Dell

online laptop
●
Personal in nature. Needed to be ●
Generic in nature
touched ●
Low involvement for second or
●
High involvement at all stages of
third buy
buy
●
Restricted Customization
●
Extreme Customization
●
Safety & reliability concerns
●
No safety & reliability concerns

Nature of Product: Primary reason for differences

What is virtual integration and what benefits Dell
derives from virtual integration? How important are
these advantages in the auto business?
• Virtual integration is a new form of value chain management.

• Under such a system, the links of the value chain are brought
together by informal arrangements among suppliers and
customers.

• Shipments of the components that the firm needs can be

easily arranged through the Internet or a networked
computer system.

• The same type of arrangement allows the firm to fully serve

their customers in ordering, services, or any other needs.
 A way of capturing the advantage of vertical integration
without actually vertically integrating
• Vertical integration solves production problems related
to communications, coordination, and control but at a
cost of the increased overhead needed to arrange
production organization

• Virtual integration therefore is the ability to achieve the

advantage of vertical integration without incurring the
overhead.
 Communication and coordination
• Business partners treated as insiders of the company.
 Control
• The prospect of improved control over the actions of suppliers
is another important rationale for virtual integration.

• Un-integrated partners can exert power over each other as

transactions unfold over time
Real time responsiveness and inventory management
• Real-time updating of order status and the ability to check
order status regardless of where the order is in the fulfillment
process provided Dell with differentiating capabilities.
• Inventory velocity

Forecasting
• Dell’s direct relationship with customers are key to
forecasting.
• Dell has easy access to data useful for forecasting; most of the
data are already in Dell’s systems
• In case of Ford, the dealers own most of the direct data about
customer demand.
• Ford has a very base of individual customer unlike Dell that
has a relatively small number of institutional customers
 Direct model in case of Auto Industry
• Many components such as tyres, windscreen wipers, and
electrical components are sourced from large suppliers and
are same for all companies. These products are well suited to
a closer integration of supply - virtual integration.

• Difficult in case of model specific component.

• Being powerful and large company make it difficult to develop

virtual integration.
Compare the enterprise models of Dell & Ford. Do you think the financial
performances the two firms are linked to their enterprise models?
 Similarities Differences
●
Customers frequently steered to PCs
with high availability to balance
●
Suppliers own inventory until it
supply and demand is used in production
●
Suppliers maintain nearby ship
●
Demand forecasting is critical—
points; delivery time 15 minutes to 1 changes are shared immediately
hour within Dell and with supply base
●
External logistics supplier used to ●
Demand pull throughout value
manage inbound supply chain
chain—“information for
●
Focused on strategic partnerships:
suppliers down from 200 to 47
inventory” substitution
 Financials
• Only assembly facilities in case of Dell reducing cost of
manufacturing set ups.

• Inventory confined to suppliers in case of Dell reducing

inventory cost

• No dealers cut down dealer’s margin

• Employees less in no. in case of Dell leading due to save on

expenses.
What do you think is the ideal use of internet in the auto-business vis-à-vis
its use in PC industry (you may focus on marketing & distribution,
production & purchasing, after sales service, new product development)?

 Ford must think about its relationships with suppliers,

dealers and customers.

 As supply chain systems staff members study the Dell

model in particular, they come to appreciate that “virtual
integration” must include design not only of the supply
chain but also of fulfillment, forecasting, purchasing, and a
variety of other functions that had long been considered
separately within the Ford hierarchy.

 Needs to change how it is historically operated internally

and how it has interacted with important partner
constituencies (including dealers)
• Focus on digital advertisement
• Online marketing surveys aimed at customers.
• Online customer feedback centre.
• Customer interactive forum
• Enabling MIS.
What historical legacies and operational issues do
you think will affect Ford’s ability to move to a Built-
to-order model?
• Ford is 100 yrs old Founded 1903, Dell on the other
hand was founded 15 years ago

• Product variety
– Necessitates the management of large number of
individual component inventories
– Production capacity for individual components get
set long in advance and cannot be changed quickly
– Process Complexity
• A large number of suppliers
• 3 tiers of suppliers
• Business was usually over the phone and fax
• Ford a $150billion company enjoy a tremendous
leverage over its suppliers
– Annual component price decrease and open book
– Powerful independent dealer network

– Unionized labor force

– Incompatible systems
• Ford credit – DEC
• Parts and service – IBM
• Suppliers and dealers – Variety of systems
What practical challenges must Ford address as it tries to establish internet
linkages with its supply base and its customers?

• Difficulties in establishing business to business linkages

• Difficult to determine feasible and appropriate redesign of the process
• Ford supplier network had many more layers and many more companies
as compared to Dell
• New globe approach needed technology be used to overcome
geographical constraints on information flow
• Lack of technology and technological sophistication that prevail in the
supply chain, especially at lower tiers
• To create consistency in technology standards and processes in supplier
network
• At Dell, purchasing activities reported into product development
organisation but at Ford, purchasing organizationally independent of
product development
Customer responsiveness initiatives that Ford took
to position the company favorably for success
• Reduce the customer order to product delivery time to
15 days
• Forecasting of customer demand from the dealers
• Having regional mixing centers that optimize scheduled
deliveries of finished vehicles
• Creating an experience for the customer in the
showrooms that would make him come back frequently
• Superior selling service and more service outlets
• Launched a public internet site by mid-1995
 Recommendations
• If Ford is to successfully emulate Dell then they are
best able to do this in areas where they have
similarities.
• The most notable congruency is in the area of supply
of generic components. Here Ford should continue its
process of building strategic relationships.
• Where components are of a more specialised nature
then Ford should examine the relationships to
ascertain whether bringing suppliers closer to the
company will offer benefits to both parties.
• Ford should work on its' internal culture. Integration of
supply chains on the scale practiced by Dell can only occur
in an environment where information flows freely to all
points of the supply network.
• As outlined in the case documents; Ford maintains a high
degree of separation of the purchasing departments from
marketing and production. Ford will not be able to
provide focus up and downstream unless they themselves
are committed to an open culture where logistics
information is a part of the life blood of the company.
• The relationship with customers is more difficult. The
dealer network will probably be averse to Ford moving
towards direct sales, as it will threaten their livelihood.
They can reap some of the benefits by introducing a
web based ordering service for cars, allowing clients to
specify the car that they want and then matching the
requirement to the cars already in stock through out
the network. If a client prefers they could order a
vehicle built to order and supplied to a local dealer.
This will enable Ford to become closer to the needs of
clients, seeing accurately what they want rather than
what they buy because it is available.
• This compromise will give the company some benefits:
– Information about customer wishes.
– Opportunity to reduce both dealer stocks and Fords' stocks
by avoiding duplication.
– Delaying the final form of the product by increasing the
range of dealer fitted items will enable Ford to simplify
manufacture, whilst offering a greater degree of 'real
customisation' to clients.
– Delay of final form will increase dealer revenues, buying
their enthusiasm and consent for the next stages of
coordination.
THANKS