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Supply Chain Excellence

© Dell Inc. - 2003

Dell’s Product Portfolio PowerVault & PowerConnect Switches Dell|EMC Storage PowerEdge Servers Software & Peripherals Precision Workstations Latitude OptiPlex Notebooks Desktops © Dell Inc.2003 2 Supply Chain Management . .

Tennessee. Brazil  Limerick. Malaysia ~41. . USA Americas APAC  Eldorado do Sul.800 employees worldwide  Xiamen.) © Dell Inc. USA 19% 70% EMEA 11%  Nashville. Dell Facts Customer Base (Revenues) Revenue by Product • Desktops = 51% ~80% • Enterprise = 21% Corporate & • Notebooks = 28% Institutional ~20% Consumer Revenue by Region Global Manufacturing  Austin.4B (last 4 qtrs. Ireland  Penang. China Revenue $38.2003 3 Supply Chain Management . Texas.

. Direct Model Suppliers Customers • Continuity of Supply • Best Customer Experience • Product Quality • E-business • Low Cost Efficiency & • Price for Collaboration Highest Quality Performance • Technology Leaders • Partnering/Virtual • Customization • Low-cost Integration • Reliability.2003 4 Supply Chain Management . Service Manufacturers and Support • Latest Technology © Dell Inc.

© Dell Inc. . The Power of Virtual Integration Technology Services EMC² BLUECURRENT Customer SOLUTION Software E-Business • Dell acts as the single point of accountability while focusing on our core competency – custom-configured computing solutions.2003 5 Supply Chain Management . • Seamless integration with best-in-class partners leverages their core competencies for the benefit of Dell’s customers.

2003 6 Supply Chain Management . Inventory Management Experience 100 90 80 Days Sales Inventory 70 60 50 40 30 20 15 X 10 5 0 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 Q103 © Dell Inc. .

Quality Cost Delivery Worldwide Procurement Regional Materials Shared responsibility Separating contracting from commerce © Dell Inc.2003 7 Supply Chain Management . Procurement Responsibilities…. .

. Continuity of Supply Intense Focus through: • Separate internal organizations • Supported by unique processes and systems • Looking at a different parts of the inbound supply chain • Dealing with different people at the supplier n egy in g tio r at an n ecu St Pl Ex Time Horizon: Beyond lead-time 3 days to order lead-time 0 to 3 days Org (people): Worldwide Procurement (6X) Regional Materials (4X) Factory (X) Supplier Interface: Executive Operations SLC Low inventory does not equal Supply Issues But it does equal operational efficiencies… © Dell Inc.2003 8 Supply Chain Management .

Quickly Make Product after Sale = Cost Advantage Mfr Buys Components Mfr Assembles Product Distributor Gets Cost of Components Cost to Product from Competitors Mfr VAR Gets Product from Distributor Customer Places Mfr Inventory Order Dell Procures Components. . Channel Assembles. & Inventory Ships Dell Cost 8 Weeks 6 Weeks 4 Weeks 3 Weeks Today Ago Ago Ago Ago Time Consistent Customer Immediate Response Lowest Supply Benefits Globally to Customer Needs Cost Consistently © Dell Inc.2003 9 Supply Chain Management .

not Warehouses – only inventory needed for next 2 hours of orders is on site 2) Provides direct signal of Dell customer demand for suppliers 3) Dell’s performance to customer orders is directly linked to our suppliers’ level of support 4) Absolute synchronization between manufacturing and sales keeps the process balanced. Velocity = Direct Demand Feedback “push” “pull” Buy-to-Plan Build-to-Order Material requested to build customer orders Customers Suppliers Dell SLC Manufacturing All material is tied to a customer order – nothing is built without an order. 1) Dell facilities act as Manufacturing Centers.2003 10 Supply Chain Management . . © Dell Inc.

. 90-day FIR commitments  Process Capability  Mutual agreement of  5 Sigma Continuity Service of Supply future performance targets  Corrective Action  Supply Chain Optimization  Global Support  Capacity/Capability  Measure and reward  Failure Analysis  Globalization performance  Quality Metrics  Flexibility © Dell Inc. Quarterly Business Review (QBR) Cost Technology/ Leadership Time To Volume  Senior leadership  Performance to Targets  Product Leadership involvement  Structural Cost Analysis  Roadmap Alignment  Advantaged Pricing  Joint Qualification  Data driven discussion/  Internet Negotiation   RTS Predictability decisions Quality  Warranty Cost  Identify actions/  VLRR.2003 11 Supply Chain Management .

1998. • Formal “belting” process in manufacturing . Report 2. • Master Black Belt focused on supplier BPI beginning 2001. • Company-wide program started in 2000. Measure Tell others. . Analyze Did we improve? • Green Belt Did we save money? What’s the real problem? • Black Belt • Master Black Belt 4.2003 12 Supply Chain Management . BPI Can I explain a problem with data? Certification Levels • Yellow Belt 5. 1. Improve Let’s improve the process! © Dell Inc. Continuous Improvement Business Process Improvement • Initial Six Sigma efforts started in 1994. Control Model 3. • Foundation for Dell’s Winning Culture Initiative. Define • Over $1B saved during life of program … What’s the problem? Who can fix it? What’s the process? 6.

.com • Support.com 16% • Globally available Premier Pages 14% 12% 10% 8% Q1 CY02 Q2 CY 02 Q3 CY 02 Q4 CY 02 © Dell Inc.2003 13 Supply Chain Management .dell. Low Cost Leader Dell consistently provides superior value Operating Expense Over Time (% sales) 28% 26% Dell’s low operational costs mean lower prices for customers: 24% • State-of-the-art supply chain 22% management 20% • Efficient technologies: 18% • Dell.

.2003 14 Supply Chain Management . Dell’s Direct Model = Perpetual Success Industry's most efficient Efficient procurement. Pass cost savings Model with Lowest on to customer Cost Structure manufacturing and distribution process Competitive Pricing Help Drive Supplier Business Drives Lower cost drives Competitive pricing Market Share Increased demand ignites demand © Dell Inc.

2003 15 Supply Chain Management . Dell’s Strategies for Success • Organize around Customers – “Be Direct” • Manage Business Fundamentals – cash\expenses • Stick to Core Competencies – leverage partners • Focus on Velocity – compress time • Continuous Improvement – cultural mandate • Simplify Complexity – “Easy as Dell” • Critical Ingredients = People and Processes Structural advantages – part of Dell’s DNA … © Dell Inc. .

.2003 16 Supply Chain Management .Velocity Matters! Thanks! © Dell Inc. SCM@Dell .