Professional Documents
Culture Documents
• Started by Michael Dell (19 at that time) in his dorm room at the University of
Texas in 1984 with $1000.
• At present (2013), it is the third largest PC vendor in the world after HP and
Lenovo.
• Dell has grown by both increasing its customer base and through acquisitions since
its inception; notable mergers and acquisitions including Alienware (2006) and Perot
Systems (2009).
• Notable Acquisitions: -
▪ 2006 – Alienware
▪ 2009 - Perot Systems
▪ 2010 - KACE Networks
▪ 2010 - SaaS
▪ 2012 - Sonic Wall
▪ 2012 - Wyse
PRODUCT LINE SUPPLIERS
• Desktop computers • MICROSOFT - for Windows
• Notebook computers • INTEL - for micro processors
• Network servers • NVIDIA - for Graphic chips
• Workstations • SONY - for monitors
• Storage products
• Dell offers a total of 1.6 million
different possible product
configurations for all its product lines
SUPPLIERS REVOLVERS
Plants build,
Customer places Sends the order test & package
an Order 2-3 to assembly the product
Dell
(By phone or days plant
processes (about eight
through the Internet (any one in Austin,
the order hours)
on www.dell.com) or any other)
Dell typically
ship all orders
Configuration (no later than five
evaluations Financial
days after receipt)
evaluation
(checking the feasibility
of a specific technical (credit
configuration) checking)
CUSTOMERS
Dell’s success is a combination of:
• Direct Sales.
• Inventory Management
• Supplier Integration
• Pull Mechanism: It did not have to wait for resellers to clear out their own
inventories before it could push new models into the marketplace (typically operated
with 60-70 days stock)
MicroAge,
CompuCom
Components
Product
Components
Component DELL Comp Final
manufacturer Corp customer
Order
Distributor
• Dell Computer’s direct model departed from the industry’s historical rules on several
fronts:
➢ The company outsourced all components but performed assembly.
➢It eliminated retailers and shipped directly from its factories to end customers.
➢It took customized orders for hardware and software over the phone or via the
Internet.
➢It designed an integrated supply chain linking Dell’s suppliers very closely to
its assembly factories and order-intake system
Always
Disdain
listen to
inventory
Customers
Never Sell
Indirect
INVENTORY MODEL
• BUILD-TO-ORDER MODEL
• DIRECT TO SELL
• To compensate for long lead times & buffer against demand variability, Dell
requires its suppliers to keep inventory on hand in the revolvers.
• Revolvers or supplier logistics centers (SLCs) are small warehouses located within
a few miles of Dell’s assembly plants.
• Each of the revolvers is shared by several suppliers who pay rents for using their
revolver.
• Dell does not own the inventory in its revolvers; this inventory is owned by
suppliers & charged to Dell indirectly through component pricing.
• Dell has a special vendor-managed-inventory (VMI) arrangement with its suppliers
• Suppliers decide how much inventory to order & when to order while Dell sets target
inventory levels & records suppliers’ deviations from the targets.
• Dell withdraws inventory from the revolvers as needed -- on average every two hours.
• It uses a quarterly supplier scorecard to evaluate how well each supplier does in
maintaining this target inventory in the revolver.
3 days of inventory - Inventory turns of 122 per year
Suppliers
Revolvers
(SLCs) Dell Factory Delivery
Local Suppliers
Customer
Supplier Owned Dell Owned
• Value Chain is intended to extend Dell’s successful direct-sales approach back into
the supply chain
• The goal of it is increasing the speed and quality of the information flow between
Dell and its supply base
• Dell envisions using this site to exchange with suppliers current data, forecasted
data, new product ideas, and other dynamic information
SELECTION
i. Quality
ii. Price
iii. Delivery
iv. Response to feedback.
EVALUATION - to measure performance uses suppliers score
• Cost
• Delivery
• Availability of technology
• Velocity of inventory
• Ways in which they did business with dell over the internet.
• Returns grew disproportionately as the carrying costs and obsolete stock is
avoided.
• Reduces handling cost. Common factors that drive up holding costs include
opportunity costs, increased rent required for the space of the inventory,
higher premiums to insure the inventory, and cost of obsolete goods.
• Service became a feature of Dell's strategy in 1986
• Contracted with local service providers to handle customer requests for repairs
HP-
1 Dell 13.3 16.2 Dell 15.0 Dell 16.4 Dell 16.8
Compaq
4 IBM 6.4 NEC 3.4 Fujitsu 3.8 Fujitsu 3.8 Acer 4.6
Toshib
5 NEC 3.8 Toshiba 3.2 2.9 Acer 3.4 Fujitsu 3.8
a
Other
58.1 56.0 58.9 56.4 53.3
s
Global PC Market Share by Units, Percent. 2006-2011.
2 HP 15.9 Dell 14.3 Dell 14.3 Acer 13.0 Dell 12.9 Lenovo 13.0
3 Lenovo 7.0 Acer 8.9 Acer 11.1 Dell 12.2 Acer 12.0 Dell 12.1
4 Acer 5.8 Lenovo 7.4 Lenovo 7.2 Lenovo 8.1 Lenovo 9.7 Acer 11.2
5 Toshiba 3.8 Toshiba 4.0 Toshiba 4.5 Toshiba 5.1 Toshiba 5.4 ASUS 5.9
▪ Buying habit
“The direct model has been a revolution, but it’s not a religion.”
- Michael Dell in April, 2007 memo to employee -
▪ In Jun 2007, Dell offered two PC models through Wal-Mart stores sell Inspiron
notebook computers through Wal-Mart’s Sam’s Club outlets.
▪ In Oct 2007 Dell sold its PC through, China’s largest electronics retailer fifty
Gomez Electrical Appliances stores
▪ Later Dell also extended its international retail strategy by opening its first retail
store in Russia
Strength: Weakness:
1. Direct Model Approach, it provides Dell a 1.Market share growth is slow due to
way to interact to customers directly competition; Fake products/ imitations affect
2. Customization of products sales
3. Reliability, Service and Support 2. Overdependence on Suppliers.
4. Latest Technology 3. Lack of Dell Stores, can be an issue for some
customers.
Opportunity: Threats:
1. With increase in e-commerce the online retail 1. With the increase in innovation in the market
stores of Dell provide them better framework to the computer systems are becoming outdated, so
tap new business Dell should constantly come out with new
2. The Direct approach Model of Dell would products
help them there existing to sell the other IT 2. People need the quality products at low price
products, so new product development which was Dell strength due to it’s customize
opportunity is for Dell solution, but now its competitors are coming up
3. Tablet and Smart phone Market. with products in same price range
• It’s bad news for a PC manufacturer (Particularly if it don’t also produce tablets or
mobile phones.) A new study predicts that the rise in sales of tablets and cell phones
will directly, and negatively, affect the sales of PCs, which have already been
steadily slowing down.
• Many people attribute the decline of PC sales to various factors, like the growing
popularity of smartphones and tablets.
• Last year, tablet sales totalled around 116 million units; this year it’s expected to
jump up to 197 million, a nearly 70 percent increase. The reason for the increase is
largely due to decreasing prices, love of the cloud, and addiction to apps. On the
other end of the spectrum, while PCs sold 341 million units last year, anticipated
sales will drop to 315 million this year.
• DELL, literally has no market share in tablet and smartphone segment. It solely
depends on Laptops and Desktops in consumer market for its revenue.
• Due to decline in PC sales, Dell Profits plunged by 47% in 2012.
• The much hyped Windows 8 didn’t play any part in increasing the PC sales.
• Dell in $24 Billion Deal to Go Private in 2013 (biggest by far since the days of the
recession)
• Microsoft helped with up to $3 billion loan as part of the financing. (This is not the
first time for Microsoft. In 1997, It rescued Apple with a $150 million investment
from Bankruptcy)
• Reason - Dell's in the midst of a complex restructuring, realigning its focus to
become more of a full-featured, enterprise-oriented company. (By going private, it
has NO stress from share holders to generate profits)