DELL

Internal and External Supply Chain of Dell A supply chain is that network of organisations that are involved, through upstream and downstream linkages, in the different processes and activities that produce value in the form of products and services in the hands of the ultimate customer or consumer (Slack et al, 2007). Dell Corporation sells customised computer systems by taking order and by phone. It can deliver the latest technology computer systems with the configuration exactly how customer wants at very speedy process (Slack et al, 2007). Dell doesnt own manufacturing plant of computer parts instead they have suppliers for different component (Kumar & Craig, 2007). Using Technology and information Dell has blur the traditional boundaries of each section in supply chain among suppliers, manufacturers and customers (Margretta, 1998). These components are then assembled at Dell facility to make computer systems. Dells internal and external supply chain is a classic and unique supply chain example within the industry.

(Margretta, 1998) They have a closed loop supply chain system which assists in building a good relation with suppliers, building the system according to component availability and customer requirement (process) and delivering it to customers. This closeness helps dell to quickly understand what customer want, changes in the marketplace and build systems to fulfil market/customer need. The understanding of customers and suppliers is been useful for dell to avoid the obsolete inventory which is not required and adopt latest components before competitor (Kumar & Craig, 2007). The close supply chain also helps Dell resolving the issue of short product life cycle which is a major concern in IT industry. Dell keeps computer system components uncommitted from suppliers as much as possible so it can have only components according to customer requirement and also maintain economy of scale (Kapuscinski et al., 2004). To achieve this, Dells suppliers have small warehouses worldwide close to its assembly facilities where they have 2 weeks worth inventory available for dell. The rent of

these warehouses are shared with dell which pays supplier indirectly through systems components price although dell doesnt have the actually possession of it (Kumar & Craig, 2007). This indirect payment is costing dell but warehouses close to its facility without any inventories commitment gives extra benefit to it which is much more compare to what they are paying. Inventories for dell are also managed by supplier while Dell focuses its efforts on the assembly of the product rather than on inventory. When order is received from customers, i2 technology system downloads online orders for customise systems after every 2 hours to factory planner notifying Dells suppliers about its requirement (Mccrea, 2009). These systematic orders to suppliers are prioritise base on the availability of those stocks and when systems are built at dell plant then they are send through UPS to deliver customer/retail stores (Kumar & Craig, 2007). Dell is very much dependent on supplier at the initial stage of supply chain as it dont manufacture component and when ordered system is ready it rely on UPS which is responsible for delivery as soon as possible. They can change their order to suppliers according to new trend and requirement which gives them greater flexibility by responding to the new market trend. It is because of this high importance that Dell gives to its internal and external supply chain and the innovation they have created to maximize the efficiency which adds value to supply chain. Different techniques are combines by Dell in its supply chain to gain competitive advantage. Postponement and Modular design are two techniques that made dell successful in mass customisation (Kumar & Craig, 2007). In postponement, Dell has the build-to-order strategy in which it doesnt begin to assemble the system until an order is not received and the customers payment is cleared. This strategy can make the product delay as long as possible and allows the assembler to make changes till the last minute. Modularity technique by dell breaks the complex supply chain system into smaller portions which can be managed independently (Kumar & Craig, 2007). Dell with the flexible supply chain is been effective in managing demand specially when inventory of component runs low and customers have full option to customise their order. Every time dell is short of inventory they run a promotion which offers substitute component making sure that customer are stick with them and arent diverted to other competitor (Kumar & Craig, 2007). Vendor Managed Inventory in dells supply chain isnt managed by Dell itself but its managed by individual suppliers and they deliver components which are required at assemble facility. For such inventory management, dell shares information with the supplier, which supplies to other competitor as well and could be used/leaked out to competitors (Kumar & Craig, 2007).

Dell is very much dependent on UPS logistics which is the last section in its supply chain. Dell itself only has the assembly plant and is very much rely on single suppliers for few components and also on single company (UPS) for logistics service. Increase of shipment cost will increase cost of dell products and price competition has increased. As they arent very much involved in R&D facility and online customisation facility which gives competitive edge to dell is already been adopted by competitor. They dont have any physical location where customers can walk in and interact with them. Dell lacks at High end with high margin and has no competition with others at this end (Kumar & Craig, 2007) Dell Operational Strategy: Operational strategy is requires decisions for short term and focuses on day-to-day activities perform in the operation (Ganeshan & Harrison, 1995). As mentioned before Dell doesnt have manufacturing facility rather it has assembly plants where components are assembled to produce computer systems. Dell been an assembler, has a strategy to get close to customer and supplier and establish good relation with them. To achieve this objective their day-to-day working depends on the order they get from customers. Inventories required for that order are managed by suppliers (Margretta, 1998). Dell dont know what they are going to assemble unless customer ask them with customise configuration. Dell was the first one with a business model of selling systems directly to customer rather than following the conventional model of selling through the retail stores. Selling direct to customers increases the expectations of quality, technology and competitive pricing as customer is dealing directly with the company. All of dell facilities around the world follow the same procedure of supply chain which are consists of best practices. Each computer system Dell produces begins when customer places an order. Suppliers have warehouses close to assemble plant, responsible for grouping all the parts that are required for the system. With the help of web based Choiceboard technology, customer place direct order through this system that allows them to design their own product and from the list of options (Bharati & Chaudhury, 2004). This order is then downloaded through manufacturing scheduling system at Customer Order Pull section from where it is scheduled in sequence and request is generated for inventory required for every 2 hours which is then delivered by the suppliers. Since dell facility doesnt have warehouses so the inventory which is delivered are rolled out as soon as possible in the form of system. This inventory consists of hardware as well as software required for the system. Dells supplier have

11 days inventory as compare to competitor with 80 days which means if there is any new technology available then dell will adopt it 69 days before its competitor (Margretta, 1998). Along with that keeping huge quantity of inventory can also be a massive risk because if the cost of inventory goes down to 50% because of new technology or any other reason, 90 days inventory costs a lot as compare to 11 days inventory (Margretta, 1998). The speed of inventory is another key factors that dell watches very closely. They reduce time of delivery by buying the accessories from company like Sony where chances of default pieces are very low and accessory like monitor are picked by Airborne Express or UPS from Sony factory according to corresponding number of monitors while Dell itself is busy in assembly.

Challenges to Operational Strategy Dell been the assembler only emphasis on assemble procedure by getting inventory from different suppliers. Disruption of material in supply chain is not predictable and rare but often occurs and can be quite damaging to run the process of assembly smoothly. We can find examples of disruption like in February 1997 fire at a parts factory owned by Japanese manufacturer, a key supplier for Toyota, the auto giant was forced to temporarily shut down production at most of its Japanese Plants (Chopra & Sodhi, 2004). As Dells operational strategy of no own warehouse, minimum inventory at supplier, single supplier for multiple inventory and limited inventory for just 11 days can face the same problem like Toyota did and that could delay order or even force dell to stop production. To avoid from such risk, dell should have their own manufacturing facility as well where parts are manufactured or it shouldnt very much rely on single supplier. Increase in transportation cost will increase the cost of inventory as dell heavily dependents on inventories from other suppliers. Dell doesnt manage inventory warehouse but suppliers managed for them. Any problem occurring at suppliers end system which has linkage with dell could disturb smooth supply chain. Suppliers have information about dell and that could also be get hold by competitor and dell can lose the competitive edge which it benefits from. Information sharing should be limited and Dell should have a system that forward some relevant information or limited information regarding inventory requirement to the supplier.

Dell sells major part of its product direct to customer through website, online and on phone. They dont have physical retail stores where systems order could be taken. Any problem in their web based system ordering system or difficulty at order scheduler planner at their assembly facility could halt their order taking system. To avoid such problem they should have alternative way of taking order and should have facilities at retail stores where customers can have guidance from sales representative which will be very useful for people who are not that aware of systems configurations. Dell has outsourced its customer service facility and customer can have it only on phone and through email to CS department. CS on phone usually faces problem like database system down or disturbance in phone line which is another weaknesses that dell could face. And if any problems in CS occur customers have no other option to contact dell. Some customer may not feel comfortable talking on the phone. Dell should have CS department where customer can walk in and talk with representative and these offices should be present all around the globe.

Singapore Demographic: Singapore has a population of 4,657,542 with the age structure 0-14 years: 14.4% (male 348,382/female 324,050), 15-64 years: 76.7% (male 1,737,972/female 1,833,415), 65 years and over: 8.9% (male 184,393/female 229,330) and it comes at 117th on the world population list. (Central Intelligence Agency, 2010 Online) Infrastructure Singapore inherited a superior infrastructure and has well-developed transport network of roads and railway track. This small state has a network of 3122 Km of highways and with excellent public transport system in the form of mass transit. Telecommunication services in Singapore remain under state control and excellent mobile phone facility and launched 3G in Feb 2005. Its seaport is believed to be one of the worlds busiest ports and largest commercial shipping registers in the world. There are nine airports and the largest is Changi Airport which handled 23.8 million passengers in 1998 alone making Singapore one of the major airports in the region (Central Intelligence Agency, 2010 Online).

Cultural The Singaporean culture is mixed culture of Chinese, Malay, Indian, American, British, Indonesian and other Asian countries. The culture is neither eastern nor western and has a uniqueness of Singaporean, and people from all around the world find it easy place to live. English is the first language spoken; Bahasa Melayu is a national Singaporean language. Other then these Tamil and Malay language are also spoken (Huat, 2008). Geographic information Singapore Island is located at South east Asia between Malaysia and Indonesia. The weather is hot, humid and rainy, with two distinct monsoon seasons in North eastern part in December to March and South western part in June to September (Central Intelligence Agency, 2010 Online). Singapore as New Location for Dell Operation Dell should consider Singapore for a new location to start its operation. As it is highly developed and successful market with corruption free environment, stable prices and with better currency exchange rate (ChoonYin, 2005). From Singapore Dell can even export its product using good road network and crucial location of its seaport to other countries. Singapores export are higher than its import and government has provided good facilities for the export process due to such reason its economy heavily depends on the electronic items, IT products and other services, and stays an important part in South East Asia as financial and high-tech hub. Skilled labours are already available due to strong electronic market at low cost (Narasimhan, 2010).

DHL
Internal and External Supply Chain of Dell DHL DHL offers expertise in express, air and ocean freight, overland transport and contract logistics solutions as well as international mail services even to that geographic area where they dont have access with the help of alliance with other courier service. DHL has its own stores for direct interaction with customers and also counters at third party stores for customers. Other than these facilities DHL offers service for commercial level where they pick packages/parcel from clients office. They have contract with companies like Marks & Spencer, St Thomas Hospital (Ireland), Land Rover etc; and are responsible for the movement of local and international mail services for them. Collecting of orders from clients offices and retail stores are planned with careful, minimizing the transport cost and not affecting profit from each order. The

DHL supply chain consist of inbound /storage, manufacturing, distribution centers, retailer distributors, consumers/users and service center.

DHL Supply Chain (DHL,2010 Online)

Management of different aspects in DHL Supply chain is fundamental in ensuring goods arrive on time and in excellent condition. Business model is designed to cover geographical distance such a way that they can easy access to airport, seaport and rail for transport to other destination closer (Sowinski, 2006). DHL inbound logistics usually tailored package including supplier management, inbound transport, storage, vendor management inventory, kitting and sequencing with line-side feed and in-plant logistics. Raw material is unloaded and then sorted, stored, order-processed, pick-packdispatch to vendor hub. When orders processed, they are dispatched as soon as possible so to be affected because of shorter product life cycles (DHL, Online 2010). For DHL, delivering the right products to the right customers at the right time in the most cost-efficient manner is most important to satisfy consumer. National and regional distribution of processed order generally involves road/road-rail transport and deliveries to retailers, wholesalers and other businesses plus end-users. Timely delivery of goods at minimum cost is vital for successful business and to stay in the competition for DHL keeps DHL profitable and successful. Also covering the larger geographical area for service is vital for satisfying majority of the customer demand and for staying alive in the highly competitive business (Datamonitor, 2008). Like other courier service, DHL also faces problem when moving goods internationally specially in countries where custom department is corrupt and red tape are hurdle in delivering service at cheap cost and timely. In

this competitive market, minimum cost is the success and profitable and due to such obstacle DHL cant have that success looses profit DHL Operational Strategy In DHL operation it is very much clear and important as well to have service with speed, quality and customer service of high level for customer satisfaction. Reliability is achieved as customers hand their order to DHL at the start and rest is on DHL to deliver it on final destination. It takes the responsibility throughout the entire supply chain in timely manner. If the same process is hand it over to freight forwarder who have different entities to do different section in supply chain which causes delay and is less reliable. (Sowinski, 2006) The second important aspect in operational strategy is to provide a service to customer with minimum cost. Instead of breaking up different costs involve in the supply chain to deliver order, customer looks for fixed and minimum accumulated cost of multiple invoices. The aspect of speed is important too which is one of the major concern for delivering the order at final destination as fast as possible so to have a positive feedback from customers. Speed is more crucial during peak time like Christmas or any other events when orders are in huge amount and timing is very important(Sowinski, 2006). Customers also look for high degree of flexibility in time, quantity of order and market place they want to send. Customers wants flexibility in terms of tracking/tracing the exact location of their order till it reaches the final destination. The above mentioned aspects gives success and profit to DHL, and allow them to stay in this industry. The day-to-day operational strategy for above mentioned aspects have greater importance as customer isnt interested in listening the issues that were faced during the transition but they will definitely look for speed, cost, durability and flexibility they are getting from the service(Sowinski, 2006). The concept of JIT can also be seen in DHL operation, although the idea of JIT in overnight shipping is very hard to achieve. Every day and night aircraft arrives to bring orders and in case of bad weather or technical problem with aircraft it wouldnt be possible to achieve JIT on every order. The delay of aircraft can cause the entire shipment to be late as employee have to unload, sort and finally reload for vehicles. Staffs arent idle and their jobs are systemising according to shipments and the delay costs DHL money, delay of order and most worrying is to keep customers happy even if delay is not fulfilling customers need (Sowinski, 2006).

CUSTOMER DHL OUTBOUND FLIGHT TO CVG

ARRIVES AND IS UNLOADED

PRIMARY

CUSTOMER CUSTOME CUSTOME

FINAL DESTINATION COURIER

OUTBOUN D FLIGHT

RELOADED AT TRTIARY

SECONDA RY

(DHL, Online 2010) Above is a flow chart of DHL process of a package being picked up, sorted, and delivered to the end customer/final destination. In the above flow chart it has shown the activities of DHL and how orders from customers flow from the origin to final destination. This design has allowed DHL to be stay in this very competitive market. Apart from this, DHL also design, manage and operate remote backrooms/offsite consolidation centres for shopping malls and city centres, and also retailers. For these kinds of customers they design strategy to reduce number of vehicles reaching delivery point, and reduce traffic. This strategy also benefits them by increasing sales as more number of orders is achieved. There strategy is to customers have trust on them and feel relaxed when they are dealing with DHL and instead of worrying for their orders and back-room activities they focus on their core competencies (DHL, Online 2010). Challenges in Operational Strategy DHL is been very successful in their strategy of minimising cost, durability, reliability and flexibility. But there has been some issues where DHL need to work in order to improve profitability. Measuring productivity is one issue where at the end of each operation managers and staff discuss about how their operation can be more effective and prevent to repeat any problem which happened during that operation. Issues like cost and expansion of building, closeness to major highways, weather should have been looked before making investment in their warehouses/hubs (Datmonitor, Online 2009). Example of this could be seen in the form of their Hub/Office/Warehouse at Northern Kentucky Airport where planning wasnt well designed before the development of this facility. Crucial jobs like sorting out of primary where knowledge of job is very important, skilled and experienced staff should be assign the job. Resources like staffing should be planned properly and experience and skilled labour is assigned important jobs especially in the peak times of year. This has been major concern for DHL as new and unskilled staff works slow on the system which then delays the shipments to the customer. Japan

Demographic The population of Japan is around 127,078,679 with the age structure 0-14 years: 13.5% (male 8,804,465/female 8,344,800), 15-64 years: 64.3% (male 41,187,425/female 40,533,876), 65 years and over: 22.2% (male 11,964,694/female 16,243,419) and it comes at 10th on the world population list (Central Intelligence Agency, 2010 Online). Infrastructure Japan has an excellent and well maintained infrastructure and has developed network of modern roads consisting of 1,152,207 Km. Japan is famous for its high speed trains and has a very advanced and extensive railway system with the network of 23,670 Km of which more than half is electrified. It has developed modern sea transportation system and it has around 171 airports of which 140 have paved runways. Telecommunication system is very sophisticated and by 1999 there were 30.6 million cellular phone users which have 260% increase in 2 years (Central Intelligence Agency, 2010 Online). Cultural The Japanese culture has evolved greatly, which has the influence of Asia, Europe and North America due to immigration from these continents. Japanese is the first language spoken in Japan and 99% of the population speaks it (Central Intelligence Agency, 2010 Online). Geographical Japan is located in Eastern Asia in the form of island chain between North Pacific Ocean and east of Korean Peninsula. It has four distinct season of weather and climate varies from cool temperate in the north to subtropical in the south. Japan as New Location for DHL Operation Japan is a country of new trends, creativity and a market for testing new products. The cost of logistics and distribution in Japan is high due to costs relating to country entry by seaport and airport fees. The timing of entry is also long due to the short working hours at customs and transportation companies. The Japanese logistics market forecast to have a value of $ 61.1 billion in 2009 which is pretty good when comparing the total size of the country and overall population in it (Datamonitor, 2008 Online). DHL can utilizes land, network of road, sea and air transport of Japan to provide a good logistics and distribution service to and from Japan from all around the world. They can increase sales by targeting areas in Japan that are not well covered by local competitors by providing DHL global access to them and using IT tracking facility, reliability and flexibility of service.

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