ASSIGNMENT 1

WORLD CLASS MANUFACTURING

Submitted by

AJITH JAMES
ALWYN GEORGE
(2018-2020)
To

DR. JOSE JOY THOPPAN

(Department of MBA)

Saintgits Institute of Management

Kottukulam Hills, Pathamuttom P.O, Kottayam 686532
September 2019
Company profile

Dell is a US multinational computer technology company that develops, sells, repairs, and
supports computers and related products and services. Named after its founder, Michael Dell,
the company is one of the largest technological corporations in the world, employing more
than 145,000 people in the U.S. and around the world

Dell sells personal computers (PCs), servers, data storage devices, network switches,
software, computer peripherals, HDTVs, cameras, printers, MP3 players, and electronics built
by other manufacturers. The company is well known for its innovations in supply chain
management and electronic commerce, particularly its direct-sales model and its "build-to-
order" or "configure to order" approach to manufacturing—delivering individual PCs
configured to customer specifications. Dell was a pure hardware vendor for much of its
existence, but with the acquisition in 2009 of Perot Systems, Dell entered the market for IT
services. The company has since made additional acquisitions in storage and networking
systems, with the aim of expanding their portfolio from offering computers only to delivering
complete solutions[buzzword] for enterprise customers.

Dell was listed at number 51 in the Fortune 500 list, until 2014. After going private in 2013,
the newly confidential nature of its financial information prevents the company from being
ranked by Fortune. In 2015, it was the third largest PC vendor in the world after Lenovo and
HP. Dell is the largest shipper of PC monitors worldwide.Dell is the sixth largest company in
Texas by total revenue, according to Fortune magazine.[10] It is the second largest non-oil
company in Texas – behind AT&T – and the largest company in the Greater Austin area.[11]
It was a publicly traded company (NASDAQ: DELL), as well as a component of the
NASDAQ-100 and S&P 500, until it was taken private in a leveraged buyout which closed on
October 30, 2013.

In 2015, Dell acquired the enterprise technology firm EMC Corporation; following the
completion of the purchase, Dell and EMC became divisions of Dell Technologies.Notorious
for its lean inventory and just-in-time manufacturing methods, Dell recently announced that it
would be altering its operating model as part of a three year $2 billion cost-cutting initiative.
While the made-to-order PC vendor spent the past 28 years benefitting from scaling low
operating margins, it sees close competitors pursuing higher margin opportunities in
enterprise computing and has decided to follow suit.
Although Dell may have spearheaded the lean manufacturing initiative in the personal
computing realm, methodologies that worked decades ago will always need to be updated.
LNS Research believes that Dell’s shift in strategy is part of a larger concern of
manufacturers today: aligning strategic objectives with both internal resources and changing
markets.

Redefining Manufacturing Processes

With the initial idea of offering cost-effective, made-to-order PCs, Dell has traditionally been
known as a pioneer in lean manufacturing. The use of JIT and leveraging strong supplier
networks allowed the company to operate on a direct-to-consumer model. Because it could
produce with incredibly low inventory costs, this created a competitive advantage. However,
today, the technology market is more dynamic and consolidated than ever, and product
demand along with the business models of high tech companies are changing rapidly.

Recently, HP made a similar cost-cutting and strategy shift announcement. It seems that Dell
is trying to keep pace by moving toward a service-based business model, focusing on clients
such as large enterprises and governments. With the approach of now being a service
provider, in addition to selling personal computers, Dell's client-base changes to internal
services and large IT organizations. This means that those highly configurable manufacturing
processes that enabled direct-to-consumer sales don’t make as much sense anymore.

Like other lean manufacturers, such as Toyota, the company has expanded the concepts of
lean to its supply chain. The bulk of Dell computer components are now kept in
supermarket-like supply houses within a few minutes of the manufacturing site. It is the
responsibility of Dell’s suppliers to keep these stocked. This system evidently requires a
certain extent of coordination, achieved through the use of Kanbans, which are not only used
internally to replenish the assembly shop floor but they also notify Dell’s suppliers as stocks
are depleted. One of the best features of this system for Dell and its shareholders is that Dell
doesn’t pay for parts until they leave the supermarket. Therefore, Dell doesn’t have money
tied up in computers waiting to be sold or invested in components waiting to be made into
computers. According to an article in the Business Weekly this system can translate into a
6% profit advantage since, unlike its competitors Dell does not have any stock languishing on
dealer shelves for two months. Besides the obvious financial advantages in ordering
components that tend to fall rapidly in price quickly, only when they are needed, advantages
in quality also result since Dell’s parts are sixty days newer than those in an IBM or Compaq
computer sold at the same time.

In a continuous push to eliminate ‘Muda’ Dell has come up with various ideas that are good
examples of the lean philosophy. It has stopped accepting deliveries of video displays for
personal computers (PCs). Instead when a machine is ready to be shipped, Dell sends an e-
mail message to a shipping company. The shipper is responsible for pulling a computer
monitor from supplier stocks and ensuring that monitor and computer are delivered to the
customer together. This resulted in a saving of $30 per display. In order to integrate the Dell
manufacturing setup into an unbroken supply chain, Dell reduced the two hundred suppliers it
dealt with to less than fifty. This helps consolidate business relationships as well as allowing
for a more holistic evaluation of supplier quality. Finally, Dell has eliminated the middleman
by selling directly to the end users of its products via the web.

Thus, the company doesn’t have money tied up in computers waiting to be sold because it
doesn’t make one until an order is booked. Parts aren’t shipped until the computers that need
them are ordered, and parts aren’t purchased until they are shipped. As a result, virtually no
funds are tied up in parts. Dell gets paid 24 hours from the time an order is taken, which is
about 12 hours before the customer takes delivery. There is absolutely no waste of time,
money or resources in its processes but still the company strives to evaluate itself in a
constant effort to improve its systems as competitors fight to catch up with them.

Dell has also used Just in Time principles to make its manufacturing process a success. They
leverage their suppliers use JIT. Dell is about quickly assembling the part which are sourced
from their suppliers and delivering to customers. They force their suppliers to carry inventory
and Dell stays lean on inventory. Short lead times are provided to customers and thereby
shorter lead times are demanded from their suppliers. Quick assembling and quick shipping is
the USP of Dell. They have been able to do successfully implement JIT because of variety of
reasons. It has had a Dependable supplier base. They have been able to meet Dell’s
demanding lead time requirements. Also it has a seamless system that allows Dell to transport
its system requirements. The systems are very efficient as they arrive in time to help Dell
fulfill its lead times. Somehow Dell has been able to fore the suppliers to carry inventory and
this willingness of suppliers to carry inventory on hand allows Dell to have low costs on
inventory.
Because of JIT it has been able to successfully reduce the inventory related costs. In 1993 it
followed a practice of carrying over 10 weeks of inventory. Since 2001 it carries 1 week of
inventory. This saves it majority of costs now. Inventory costs are even higher in computer
industry as rate of depreciation is very high. By this rate Dell used to lose roughly 10% of the
value of inventory per year. After implementing JIT it loses roughly 1%. By this calculation
dell has been able to save 9% costs in inventory management.