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Supply Chain Controllers-Dell

ISCA - Instituto Superior de Contabilidade e Administrao


Universidade de Aveiro
Kousaridas Apostolos (kousarid@ua.pt)

Abstract:
This document describes the efficient supply chain management of the DELL
company. DELL was able to assess what's going on in the business. They designed the
supply chain to match customer requirements and they stabilized the situation to make
sure it work and it will continue working.

Introduction:
DELL is a computer technology corporation that develops sells, repairs and supports,
computers and computer related products. DELL has realized that supply chain is
becoming more and more important for the success of todays business world and
they work accordingly to keep a competitive advantage in the market.
Drivers of Supply Chain: The major drivers of Supply chain performance consists of
three logistical drivers & three cross-functional drivers.
Logistical drivers: Facilities Inventory Transportation
Cross-functional drivers: Information Sourcing Pricing
Companys supply chain achieve the balance between responsiveness & efficiency
that best meets the needs of the company competitive strategy.

1. FACILITIES:
Activities such as coordinating with its manufacturing facilities & managing
inventory are of primary concern for dell because they impact the price of the final
product to customers. Dell has a manufacturing arrangement with its key suppliers
such as Sony. Thus suppliers employees work in the dell facilities & work on the
planning & product development. Now because of the close relationship with its
suppliers & their reputation for building certain component dell does not perform
quality checks on their components .Thus dell does not maintain any inventory on its
own. It is owned by its suppliers. Moreover when required it instructs to get the

components matched in the delivery process which eliminates the need for dell to
have a distribution centre to perform all these kind of functions.
2. INVENTORY:
The inventory in its facilities is not owned by dell, rather owned by suppliers which
indirectly adds to the components price & finally the final product. Therefore, any
reduction in inventory definitely reduce the product price & finally benefits the
customer & definitely the company. Low inventory also lead to higher product quality
because it becomes easy for dell then to identify any defects in the inventory. The
vendor-managed-inventory (VMI) arrangement of Dell lets its suppliers decide how
much inventory they need to order and when to order while Dell sets target inventory
levels and then records deviations from the targets for each supplier. Dell chose an
inventory target of 10 days i.e. it make a plan for 10 days about the inventory targets
to achieve.
To help suppliers in making accurate or nearly accurate ordering decisions, Dell
shares its forecasts with them once per month. They not only focuses on Productspecific trends, but also reflect the seasonality factor.
For example Christmas is the top time of the year, back-to-school season and countryspecific seasons for foreign purchases (foreign language keyboards are especially
influenced) etc. Dell revive its forecast weekly accounts to the various factors &
suppliers receive forecasts monthly.
3. TRANSPORTATION: Dell in some cases has significantly less time to respond to
customers than it takes to transport components from its suppliers to its assembly
plants which require 7 days to as much as 30 days to transfer various components to
assembly plants. To compensate for long lead times and buffer against demand
variability, Dell requires its suppliers to keep inventory on hand. Thus small
warehouses are located within a few miles of Dells assembly plants. Each of the
warehouses is shared by several suppliers who pay rents for using that. Thus it store
inventory there according to the forecasted demand keeping some level of buffer
stock accordingly & thus reduces its transportation cost by ordering purchases in
batches rather than individual purchase.

4. INFORMATION:
By selling directly to customers dell computers uses e- commerce to communicate
with customers, maintains low cost & customize products according to customers
specifications. Dell computers are driven by the desire to create value for customers.
Through the use of internet, dells customers gain access to the same product, service
& catalogue information as its employees. Tailor made internet sites called premiere
pages gives customers direct access to purchasing & technical information about the
specific configuration they buy from it.
www.dell.com was launched in June 1994 and as soon as it was launched
customization become very easy for dell. Product list is available with price there.
Customer can directly purchase by credit card. Brochure is sent directly through e
mail. Complaints are also registered there & technical support is provided to the
customers. Thus customers can order, configure & even gather technical advice online
& get a completely customized product.
The corresponding Web site valuechain.dell.com is an extranet for sharing such
information as points of contact, inventory in the supply chain, supply and demand
data, component quality metrics, and new part transitions. Dell envisions using this
site to exchange with suppliers current data, forecasted data, new product ideas, and
other dynamic information that might help it to optimize the flow of information and
materials in the supply chain. Value Chain is a program intended to extend Dells
successful direct-sales approach back into the supply chain with the goal of increasing
the speed and quality of the information flow between Dell and its supply base.

5. SOURCING:
Dell has a virtual relationship with its suppliers who manufacture components &
maintain just in time for dell which are assembled in its assembly plants. Moreover,
for the customers who want or need more personalized assistance, dell send out one of
more than 10,000 service technicians to their site. However only a small number are
dell employees. Most are contract employees (supply chain partners). This allows
dells employers to focus on activities that create more value for customers.
6. PRICING DRIVER:

Dell follows comparative Lower price to match the customer's expectation of value
for money (Comparative Pricing) - Low inventory cost & Direct Distribution
Depend on suppliers price (Cost plus Pricing) Customization (Optional feature
Pricing) - No price tag effect - Pricing strategy based on customers needs. Therefore,
customization & reduction in price benefits the customer & definitely the company.

Conclusion:
Dells operation can be described as "High Velocity Mass Customization".
All the drivers of dells supply chain can be attributed to decreased cost & increased
customer service. The result was when retailers who aligned with dells competitors
began charging higher rates for servicing & supporting dell products, customers
remained loyal.
Unique product offerings, cost reductions, high responsiveness towards customers
demand has resulted in customer loyalty.

References:
http://www.dell.com/learn/us/en/uscorp1/cr-social-responsibility?s=corp
Supply Chain Integration: Strategies for Small Manufactures ( 2000 )TL 2050:
Supply Chain Management