Operations Management

Caselet 1
A. Analyze how Just-In-Time (JIT) model helped Dell to achieve impressive
results.

Ans: Dell is the only company within its industry that effectively utilizes JIT. Dell
has warehouse space at their manufacturing facilities in which suppliers keep parts
directly on-site which is the quintessential JIT layout.

In addition, Dell is constantly working to achieve JIT inventories of only four days
and in doing so are constantly uncovering and solving supply chain problems.
Owing to JIT, firstly, Dell eliminated the middlemen– the resellers, who were part
of the traditional distribution model. As such, Dell not only passed the savings to
the customers in the form of lower costs, but was also able to understand customer
needs first hand and adapt faster to market changes than its competitors.

1. Dell built computers directly for customers, not for inventory.

2. Dell practiced JIT manufacturing, where trucks with vendor parts pulled up
to one side of the plant, and unloaded directly into bins used for building
customer orders.

Dell’s strategy helped

minimize delays between
purchase and delivery.
Therefore Dell has a
Dell’s strategy helped minimize delays between purchase and delivery. Therefore
Dell has a general policy of manufacturing its products close to its customers
which give them obvious advantage. This also allows for implementing a more
realistic and reliable “just-in-time” (JIT) manufacturing approach, which
minimizes inventory costs. Low inventory is one of the core Success factors of the
Dell business model. The locations facilitated an effective use of JIT concept to
Dell thus is successful in achieving many advantages, such as.

a. Lower holding costs helps, fund that were tied up in inventories be used for
expansion and improvements of the firm.
b. Throughput time is reduced, resulting in greater potential output and quicker
response to customers.
c. Defect rates are reduced, resulting in less waste and greater customer
satisfaction.
Another advantage of Dell’s location is that it improves Cash Flow, because
inventory is

B. Explain the various issues that may arise due to non-availability of parts in
manufacturing process despite the adoption of JIT model by Dell.

Ans: Limitations of a company such as Dell implementing JIT manufacturing Just

as JIT manufacturing has many strong points, there are some weaknesses as well.
The Just-in-Time system may not suit every business, thorough research needed to
be done by Dell to ensure such inventory management would work in the way they
wanted it to, before they executed it. This would have been a very long process as
they would have needed to weigh up the risks it could have on their business. In
addition to this it is difficult and very expensive to introduce as there is possible
large initial set up costs, which may put some businesses off. This did not put Dell
off as they knew the long term benefits would mean that they would become more
profitable if they introduce this method. They also found that it would allow them
to gain continuous improvement within their business practices in the future, which
could allow them to become the superior computer manufacturer over the Hewlett
Packard Company who currently has the top spot in the industry. It is also true that
JIT processes can become vulnerable to market demand fluctuations and
unforeseen production interruptions. Again Dell had to look in depth into the
buying patterns of their customer base, before investing in JIT systems within their
firm.

Dell faces over dependency on one product, leaving aside the extensive
customization of that product. If the firm has centralized operation, more different
products can be manufactured in one location. When the plants are dispersed,
the number of different product that can be manufactured in a given location,
potential of gaining economies of scale, will be less.

There can be issues related to repatriation of profits with regard to some domestic
policies of those locations and exchange rate fluctuating risks associated even
if there are no legal constraints.

Possible failures to effectively scan the international environment

failure to manage and resource both market and operations expansions can
be another disadvantage.

Although still considered a leader in logistics and low-cost manufacturing, Dell

began to see its market share erode in 2005 because of complaints about poor
customer service, among other factors.

Therefore, common disadvantages of decentralized manufacturing such as

potential communication barriers building up as a result of present
geographical locations such as language, culture and social issues. Intellectual
property issues as explained under China/Malaysia as well as uncertainties on the
political climate in all the locations should not be undermined.
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