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MG2138 Marketing Channel and Logistics Des Doran
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procurement. information about the product was not accurate. Also analysed in this report is how Dell have managed there logistics throughout the entire process of satisfying orders from getting components from suppliers to creating full finished goods for customers. weaknesses. technology development. further research showed Dell have had customer service issues. A major issues identified was Dell pricing a computer system incorrectly. behind leaders Hewlett-Packard. in particular. The Dell input transformation output model included. A SWOT analysis has identified clear strengths. Dell have a sophisticated network in which they sell directly to customers and as of late. i . they have adapted and sell through retail outlets such as Tesco. Porters value chain model has been adapted to show how Dell create value for their customers through the use of primary activities like inbound and outbound logistics. opportunities and threat’s that Dell have. Dell has recently improved their market share and lie 2nd in the global PC supplier market. Managing logistical activities such as pre and post level customer service. human resources management and the Dell infrastructure. demand forecasting etc throughout the process has enabled Dell to get products to customers at the right time.com) and there buying habits etc. Dell make full use of software’s such as database software’s. operations. After analysing Dell’s supply chain management through the logistics management model and input transformation output model. ProClarity which also maintains information on suppliers/customers and finally the premier page on the Dell website also allows Dell to monitor the activities of customers browsing (on Dell. Dell refused to meet orders thus potentially losing customers and reducing their quality reputation. price. this was largely due to poorly managed logistics. and quality. marketing/sales and after sales support with secondary activities there to support the primary activities. Secondary activities include. shows how Dell have made use of high quality supplies in order to assemble high quality products for their customers. thus price ended up incorrect all the way through to the customers. traffic monitoring. An analysis of how Dell maintain positive relationship with customers and suppliers has been identified.Executive Summary The report analyses Dell Corporation’s supply chain management.
Table of Contents Executive Summary Introduction into Dell and its Market Position Global PC Supplier Market share Perceptual Market Positioning Map Four V’s of Operations Management at Dell Marketing Channels of distribution Performance Objectives SWOT Analysis Dell Marketing Channel and Logistics Structure and Analysis Input-Transformation-Output Model Logistic Management Model Analysis of Logistical Activities o Customer Service o Demand Forecasting o Traffic and Transportation Marketing Channel/Logistics impact on customer service. relationships and value creation Marketing Channels and Logistics impact on customer service Customer and Supplier Relationship Management Analysis Value Creation (Porter’s Value Chain) Conclusion and Recommendation Appendices and References i 1 2 3 4-5 5-6 6 7 8 8-10 10 11 12 13 .
4%. when dominating the market. Dell offer products ranging from ready-built computer systems to custom built systems as well as offering individual hardware components such as hard-drives. Figure 1: Global PC Supplier Market Share Source: iSuppli Market Research Report 1|Page . prices reflected this as a high specification computer could cost up to £800. effective flow and storage of goods. to other businesses and also supplies to government’s around the world. Hewlett-Packard dominate the market with a secure 18.8% (figure 1). Dell were the market leaders but quick changing consumer demands has cost the firm. In combination with effective logistics management which is defined by Long. services and related information from point of origin to point of consumption in order to meet customer requirements’. printers etc. D (2003) as ‘the part of the supply chain process that plans. prices are down to £500. but now with competition so fierce. operating in such a fast-paced environment where consumer habits and attitudes change on a frequent basis. Global PC Supplier Market share In recent times. monitors. implements. Dell moved into 2nd in the market with a market share in the 2nd quarter of 2010 of 12. In 2010. Multinational IT firm Dell are computer system and software providers.Introduction into Dell and its Market Position What is marketing and logistics? Marketing is the process of Dell creating ‘value for customers and build strong customer relationships in order to capture value from customers in return’ (Kotler et al. Dell operates on a worldwide scale and supplies to consumers. 2008). with Acer into third with 12.1%. and controls the efficient. customers will get there products when and where they want it and at the right cost.
as consumer expenses are increasing due to VAT rises and inflation.Figure 2: Dell Perceptual Market Positioning Map High Quality Dell HP Acer Low Price Toshiba High Price Low Quality Above. When economies are not doing well. HP and Acer offer high quality but at a lower price and as a result market share has decreased for Dell but competitors have improved. consumer attitude towards saving money is increasing and this conflicts with Dell’s approach in the market to sell at high prices. inflation/VAT rises force Dell to raise their selling prices in order to cover the increase in price for their supplies for the computer models. 2|Page . For many years Dell sell at a high quality products at high prices. shows where in my opinion. I believe Dell is in the market today. this could be because of the following problems in the UK: The UK economy is recovering.
they have a reasonably low variety of products. ‘Today Dell connects with more than 5. Customers are unaware of the manufacturing process or distribution system for their order. but there hardware components such as hard disk drives. variety of products offered to customers. seasonal demand does vary due to Christmas offers. servers. ‘back to school’ offers for students throughout summer and for public service companies upgrading their systems.4 million customers every day — on the phone. keyboard/mouse’s etc. Especially during summer as teenagers get ready to go back to school in September and schools begin to upgrade their systems. the variation of demand in the market and also the visibility of the firm to its customers (Stack et al. Low Variation in Demand High Demand is not so much high on a regular basis. customers can view their order when they take the order through the website or if they go and directly purchase from the retail outlets Dell sells their computer models to. 2004). in person. As they do not deal with foods/drinks. Low Visibility High Much of what Dell do is all ‘behind the scenes’. monitors.com and. 3|Page . banking etc. on Dell. increasingly. Low Variety High Dell are not known for the wide range of products. through social networking sites’ (Dell.. or housing. servers etc. Low Volume High Dell deal with large numbers of orders for not only their computer models.com). however they do have a number of technological products such as hard disk drives.Figure 3: Four V’s of Operations Management at Dell The four V’s of operation management helps to show how Dell operate in their market based on the volume of orders they deal with.
thus costs do increase as not every computer is suited to customers. its sales via phone and the internet have begun to shift as more consumers prefer to visit retail stores to try out new gadgets and features’ (Kurtz.Direct Channel Suppliers (Other components) Suppliers (Intel) (Microchips) Suppliers (Maxtor) (Hard Drives) Manufacturing Site Fulfilment Centre Customers The chart above shows how I believe Dell’s distribution channel is. Tesco. they have high quality suppliers such as Intel who produce micro-chips for the systems and Maxtor to create hard drives etc. and now sell their products via retail outlets such as Wal Mart. Curry’s etc. as a result. PC World. in doing so they need to get the best quality hardware and software. as a result stock can be wasted.Getting the product made and sent out to customers is a lot quicker because as soon as orders become finished goods. This method of distribution have benefited Dell much over the years.Dell Marketing Channels of distribution Figure 4: Distribution Channel 1. Dell are competing with competitors to manufacture computer systems. Dell save money as they only spend money when they know they will be making returns. below shows a few ways that this direct channel has made Dell better: Cost saving. This is all shipped to the main Dell manufacturing site where microchips. Speed. Figure 5: Distribution Channel 2. they are sent out to customers straight away and not stored for a long time. then transferred to a fulfilment centre where it is 4|Page . these of course are not custom made orders for specific customers. hard-drives. 2008). D. The direct channel which gets components from suppliers such as Intel/Maxtor.Dell has a ‘build to order’ strategy where they only get components from suppliers when orders have been made.Inclusion of retailers Suppliers (Other components) Suppliers (Intel) (Microchips) Suppliers (Maxtor) (Hard Drives) Manufacturing Site Fulfilment Centre Retail Outlets Customers ‘Although Dell is still one of the world’s largest pc manufacturers. Figure 5 shows how Dell have changed their direct method to customers. are all assembled at the manufacturing site which then transfers finished goods to a fulfilment centre. which holds stock for a small out of time before being delivered to consumers. monitors etc for the system are assembled. it’s been one that has been used since Dell began their operations in the PC supplier market..
Speed Dell has a direct channel of distribution ensuring quick order fulfilment and good customer satisfaction. Tesco. 5|Page . something which competitors find it difficult to match Dell on. This is how they differentiate themselves from the competition and are always keen to ensure that they perfect the system to ensure customer satisfaction remains high. Dell has a strong delivery service record. these firms will be responsible for selling to customers. Dell also tries to keep with the times and market changes to continue to meet consumer needs. Dell is likely to have sophisticated logistical systems in place such as traffic control to ensure drivers avoid traffic area’s to prevent delayed deliveries. PC World etc. Figure 6: Dell Performance Objectives Cost Speed Dependability Quality Flexibility Flexibility Dell has a built-to-order system which is a key competitive advantage against HP and Acer.stores until sent out to retail outlets such as Wal Mart. Having online support and downloads allows customers with quick access to information and assistance. Selling to retailers increases availability and speed for customers to products. Allowing customers to customize their desired system ensures flexibility. Dependability It’s vital for customers to know where there products are and if it’ll be delivered when and where expected. with track and trace utilities allowing customers to monitor their delivery and be aware of any delays.
thus they are likely to go to HP or Acer. o Competitors have more market and sales knowledge than Dell as they’ve sold to retailers longer. Only 5% of sales revenue is from education. Dell Swot Analysis Figure 7: Swot Analysis of Dell Corporation Strength o o o o o Good relationship with suppliers Dell Direct channel of distribution Build-to-order Finance Strong brand and reputation Weaknesses o Targeting education institutions has been poor. perhaps because supplier costs are reasonably high. Not too many discounts offered by the company on its products. Opportunity o Improve price strategy o Sell more through retailers as customers want to physically see and touch what they buy.Key aspects of improvements Cost High pricing is something customers such as students and businesses are looking to avoid in order to keep expenses low. o Improve relationships with education institutions Threats o UK economic recession o Low customer confidence o Fierce competition in a highly volatile market environment 6|Page . o Can’t physically touch the customised computers until delivered.
paper. hard drives. a magazine of Dell with latest offers. tutorials and help CD’s and documents. 7|Page . hardware components e.) Information (Stock levels. Input Transformation Resources Materials (Bolts. CAD and CAM (Robotic machinery). screwdrivers. Employees to test supplies. any specific custom configurations before delivery e. Managers.larger text etc) Input Transforming Resources Facilities Manufacturing land. shows how I believe Dell use inputs and transform them to outputs to meet customer orders. Bar coding systems. cases. below. traffic information and re-routing software) Customers Clear order requirements.Dell’s Input-Transformation-Output Model Dell makes use of a number of inputs in order to transform them into outputs. Figure 8. Much of the inputs involve resources required to complete the output which for Dell is customer customdesigned computer systems. Staff Technical employees to assemble products. monitors etc. tracking and tracing information on stock.g.g. Administration staff Transformation Process Components are assembled and labelled Health and safety information is printed and attached Tutorials are created and attached Finished goods are tested on quality Output: Finished Goods Fully tested computer system that fully meets the needs and requirements of the customer. Also included. testing equipment. disability. customer order requirements. printed labels.
manufacturing site) Human Resources (Highly qualified production team + manager. screwdrivers. how will supplies get to Dell’s manufacturing site? Implementation. Logistics Activities Customer Service Demand Forecasting Material Handling Order Processing Packaging Return goods handling Traffic and transportation Output of Logistics Raw MaterialsPurchase the bolts.g. labels. they will be passed over as finished goods. 2006 Dell Logistics Management Model (Figure 9) Explained Micro-processors from Intel. Finished Goods. In-process InventoryAssemble all required components to form the computer system. costing etc. The logistics management model shows how Dell carries out orders. Once gathered. EDI. transport costs etc. Re-order level. Inputs into Logistics Natural Resources (Manufacturing/Welding equipment. cases to complete orders. for example. van drivers) Financial Resources (Money needed to pay for supplies and employee wages.The final product should be in top condition and ready to be delivered to the customer. they can maintain consumer satisfaction) Source: Fundamentals of Logistics Management. After successfully testing these new Dell models. with management consistently controlling what is happening throughout. E. management at the manufacturing site may purchase raw material for workers including ensuring that there is enough welding equipment. Bar Coding. Dell manufacturing workers will use these raw materials to assemble the hardware components to make up the system and install the required software(s). hard disk drives from Maxtor and much of Dell’s other supplies are key to their computer systems and meeting customer orders. 8|Page . machinery that will be needed to complete the orders. Marketing Orientation (Competitive Advantage) Time and Place utility (Ensures orders are met when and where customers have asked) Gain customer satisfaction (If Dell manage their logistical activity during manufacturing and ensure product is on time. Control.) Information Resources Live tracking information of transporting supplies.Dell Marketing Channel and Logistics Structure and Analysis Figure 9: Dell’s Logistic Management Model Management Actions Planning.Top management need to plan how logistical activity is to be carried out in conjunction with the production. ensure that deliveries arrive on time by ensuring supplies are delivered just in time.Ensure all activities are carried out correctly and run to schedule.Monitor on a consistent basis. bolts.
Activities include: Figure 10: Customer Service Standards Pre-Transaction Elements Customer Service Transaction Elements Post. This saves money for Dell and ensures no stock is wasted however there is a huge reliance on information systems being accurate and available. Highly rated delivery network Live tracking on customer orders Dell Post-Transaction Customer Service Accurate computerised invoice systems to avoid human error in calculation 1 year warranty on ALL products Demand Forecasting Dell have a build-to-order system which means as soon as orders are received through systems. Dell Transactional Customer Service Customers make online orders which reduce human error that telephone sales does. Each component has key information written in user friendly language avoiding confusion. implement and control the order of supplies from suppliers. Key Dell Logistical Activity Logistical activities are vital to ensure consumers are satisfied and the process of getting the order from manufacturing to customer is successful. 2006 Dell Pre-Transaction Customer Service Dell's online website tells customers what hard drives/monitors are available so that they do not order what is not available. Being heavily reliant on information systems. management then begins to plan. management make use of computerised tracking of supplies from suppliers and ensure the correct amount has been received. Dell do not hold any stock in their inventory. 9|Page .These goods are delivered to the fulfilment centre to be stored before being dispatched to customers at the correctly specified time and location.Transaction Elements Source: Adapted from Fundamentals of Logistic Management. they simply order the amount compared to the amount required per order. if systems are down. They will be aware of what is NOT available so that they will not be disappointed. it could cause customer dissatisfaction with orders not fulfilled on time. Different delivery options/accurate delivery times prevent customers having to take days off work.
including Whirlpool and Overclockers Australia. How has logistics failed to satisfy customer service standards? Information Sources are important when Dell deal with a direct distribution channel like they operate. to getting products from the fulfilment centre to customer delivery locations. Marketing Channel/Logistics impact on customer service. consumers being aware. air etc in order to ensure customer orders are met on time as expected. this foul play which may in truth have been a simple computer error. Information such as road traffic and re-routing capabilities are important for truck drivers as stopping in traffic for hours will delay orders and reduce customer satisfaction. 2008). Management at Dell are likely to constantly be planning the best mode of transport e. Dell have perhaps lost many customers. they rely on traffic software and updates to find the best route to getting products from suppliers like Intel and Maxtor. information sources to customers’ needs to be as accurate as can be. ship (to get products from suppliers). this is bound to have a negative impact on customers who may now perceive Dell to be undependable and untrustworthy. Dell did. knowing it could pull out at any time and claim the offer was an error’ (Sydney Morning Herald. and PC user forums. 2008). Customers were clearly unhappy and all due to poor package labelling and advertising. it was reported Dell had labelled its new Vostro 220ST computer system incorrectly. Due to this one price error. With news publicised over the Internet. ‘Bargain hunter websites. it can be perceived by customers that ‘Dell deliberately advertised at an impossibly low price as a marketing ploy. relationships and value creation Marketing Channels and Logistical impact on customer service In 2008.g. They plan and implement transport strategies and maintain firm control over progress of delivery trucks to ensure customers will be nothing but satisfied at the end of the delivery. including correct prices. begin purchasing at a clear knock down price. 2008). Dell later refused orders as they ‘did not send customers a notice accepting the orders and therefore no contract was created. send customers an automated response acknowledging the orders’ (Sydney Morning Herald. lit up on Friday with word that Dell was offering a $799 Vostro 220ST computer on its website for $240’ (Sydney Morning Herald. however.Traffic and Transportation A key advantage of Dell’s distribution channel is its speed. has caused customer service standards to drop. 10 | P a g e . such as OzBargain.
Dell’s Online Transparent system: Premier Pages Custom created pages made by Dell on their website to collect purchase data and shopping information of customers whilst browsing and making orders. The database allows Dell to 'determine effective and efficient ways to target and segment the customers'. which Dell then use to fulfil customer orders. this in combination with sales by region allows Dell to 'measure trends and successes. 2006 11 | P a g e .Dell SRM and CRM Supplier and customer relationship management is a term used to describe the management of the flow of raw materials to the end product. A. history and trade relationships'. their interests. customer sales. ProClarity Software The software allows in depth 'demographic information about customers. Figure 11: Ways Dell manages the relationship with their customers Customer Relationship Management Database Software Used to record customer information.' Source: Klinker. thus improve profitability. Below shows how I believe Dell makes use of web focused methods to manage supplier and customer relationships. and products. Dell has developed a strong relationship with its suppliers and customers in order to have computer components available for customer orders on time. S. & Mahfouz. Terrel. R.
screws/bolts. Dell makes sales and find out customer views. Firm Infrastructure o Ensure finance. Marketing/Sales o Once product(s) are sent to customers.g. E. legal. strong research and development department to aid value chain system. o Stored until required on production assembly line Operations o Assemble all components to form finished goods (see figure 8) Outbound Logistics o Finished goods stored at fulfilment centre for a short time before sent to customers directly/or to retail outlets. production. All orders are sent with a Dell magazine to advertise latest offers. HR Management o Recruiting and training staff and managers to maintain different areas of business e. o Machinery. o Website allows customer sales o Customers can fully customise orders After Sales Support o Online support o telephone support o repairs o warranty Support Activities Procurement o Purchase high quality components from suppliers only when an order has been made to avoid wasting stock.Figure 12: Dell customer value creation (Porters value chain) Primary Activities Inbound Logistics o Purchase high quality components from suppliers. IT departments work to optimal performance ensuring customer needs are met and live/accurate information is available. 2001 12 | P a g e . marketing. Source: Porter M. PC case etc for production Technology Development o Use of SRM/CRM software’s to meet customer needs.
Conclusion In conclusion. Dell have a direct distribution channel which starts with an order. traffic control. Dell have got a lean production and distribution system with a quick and efficient distribution channel and in combination with well managed logistical activities. The system enables Dell to reduce stock wastages as they only begin ordering components for computers when orders and payments have been made. this reduces the cost and need of stock being stored in warehouses. machinery. enables Dell to satisfy customers as orders arrive in good time and in good condition. 13 | P a g e . traffic re-routing software etc. they have built a strong reputation within the PC suppliers market. computer components. All this in combination with good customer service. Dell’s sophisticated logistics system which involves high-quality employees. tracking parcels. and information resources such as bar codes. robotics. order being manufactured and then delivered to the customer. demand forecasting and good packaging.
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