Improving the Flexibility of the Desktop PC Supply Chain - Case Study Example

Recommendations Executive summary: Dell is one the world’s largest computer system companies and a leading technology supplier for internet infrastructure. The biggest competitive advantage of Dell is its direct customer focus and relations. Dell has won its customers respect by providing quasi instant services through constant interaction with customers through telephone and internet; moreover this also helps Dell in understanding the unique computing needs that are the drivers of individual and enterprise productivity. It is predicted that growth rates for computer industry would be less then that of previous years, however, Dell would still be able to operate successfully and even enjoy healthy and sustainable profits. But it should be kept in mind that the global economic recession and aggressive pricing wars by competitors would definitely be threats for Dell and would bring about a decline in profit margins. In order to overcome these Dell should not just be the market maker instead now it should aim to be the market taker. And it would be advantageous for Dell to capitalize on its ability of entering and dominating new markets such as Asia/Pacific talked about in the recommendations area below. This should be an easy task for Dell since it was easily able to enter and dominate the low-end server and workstation markets. Also it would help increase Dell’s market share if it was able to pursue a multi-continental expansion of its middle and high end server products and the external storage market. As analyzed in the report below, Dell has a lot of strengths that its competitors lack and if manages to correctly utilize its strengths and the opportunities available to it, then it is guaranteed that Dell would not be just one of the leading computer companies but it would be the number 1 computer company in the world. Introduction: The team at dell consisted of employees from a number of different organizations at Dell. These included: manufacturing/operations, regional procurement, worldwide procurement, cost accounting, supplier quantity engineering, process engineering, production master schedulers, production control, quality, inventory control and logistics. They identified six manufacturing options for managing the work in America. These were: 1. Keep as current. Motherboard-chassis integration performed by 3rd party integrator (3PI) managed by the contract manufacturers. 2. Dell America Operations (DAO) cellular integration enables the Dell factory cells to perform L5 to L10 manufacturing work. 3. Offline integration at the supplier logistics center (SLC). Keep the current L6 to L10 manufacturing process unchanged; handle motherboard-chassis integration work at an SLC. 4. Offline integration at Dell-leased building. Keep the current L6 to L10 manufacturing process unchanged; handle motherboard-chassis integration work at a separate building leased by Dell. 5. 3rd party integrator managed directly by Dell. 6. L6 from equipment manufacturers’ Mexico plants. Many CMs have manufacturing facilities in which they produce for their other customers. Dell can potentially negotiate with the CM’s to dedicate a portion of the CM’s manufacturing capacity to support Dell’s business. In order to quantify the managing cost and complexity of each of the six manufacturing options, the BPI team decided that it would survey the various departments impacted at Dell. The team decided on the categories of the survey based on the attributes and business processes that would be impacted by the change of manufacturing method. This survey was sent to the content expert of each the respective affected department. These experts were regarded to be the best source of information regarding the impact of each manufacturing option on their department because they were the ones who were involved in the day-to-day processes and planning. Current situation: On the basis of results tabulated below, it can be seen that option 1 has the highest manufacturing cost and a mediocre complexity score. However, option 3A got the lowest complexity score; this was because Dell believed that SLC would only require Dell to install new equipment at the SLC since its own factory associates would assemble the motherboards into L5 chassis in an SLC. Thus, this would result in a low capital expenditure and would also not impact the existing manufacturing process in the Dell factory. However, it can be noticed in the tabulation below that complexity score of 3A is only one point less then option 4 and two points less then option 3B. It can be observed that option 5 has the highest complexity score this was because coordination and complete revamp of business process of managing the L6 chassis from Mexico would be required by Dell’s bi-regional procurement organization located in Austin, Texas and in Shanghai, China. The point to be kept in mind is that at the time this case study was made, all the L6 chasses used to only come from the Chinese factories of the contract manufacturers. Another reason for the high complexity score was the lack of robust transportation and customs infrastructure in Mexico. The cost per box i.e. the highest manufacturing cost is being incurred for option 1 of motherboard-chassis assembly in a CM managed 3PI. The reason for this high cost is the process complexity involved since there are many changing hands handling the inventory from one part of the process to the next. The following was the result: Option 1 Option2 (original) Option 2 (revised) Option 3A Option 3B Option 4 Option 5 Worldwide procurement 10 1 1 1 1 5 10 Regional procurement 8 5 5 5 5 5 10 Master scheduler 5 5 5 5 5 5 5 Production control 5 10 10 7 7 7 5 Operations 1 10 10 5 5 1 1 DAO quality 5 10 10 5 5 1 1 Processing engineering 1 10 10 5 5 1 1 Supplier quality engineering (regional) 10 1 1 1 1 5 7 Supplier quality engineering (global) 1 1 1 1 1 1 10 Cost accounting 5 1 1 10 10 10 1 Inventory control 1 5 5 5 7 10 1 Logistics 5 1 1 5 5 5 10 Total 57 60 60 55 57 56 62 Cost per box $10.07 $7 $7.9 $7.54 $7.7 $7.61 $7 Dell Mission Statement: Dell's mission is to be the most successful computer company in the world and to deliver the best customer experience in market. In doing so, Dell tries to meet customer expectations of: Highest quality Leading technology Competitive pricing Individual and company accountability Best-in-class service and support Flexible customization capability Superior corporate citizenship Financial stability (Dell) Keeping in mind its misssion statement I feel that option 3A would be best suited for Dell since it has the lowest complexity score and a mediocre manufacturing cost. Also as per its mission statement Dell would be able to achieve competitive pricing and financial stability without any compromise on the quality and service it wishes to provide its customers with. SWOT ANALYSIS: Strengths: The following are the strengths of Dell: It is the largest PC maker in the world. It has been the market leader for the last few years and is still increasing its market share. It uses a direct sales approach Its built to order feature has made it very popular amongst customers and is the main reason for customer satisfaction It has excellent relations with reputable suppliers of name-brand components and parts Has a great reputation and image It has total command of the supply chain Weaknesses: These are the weaknesses of Dell: It does not have the service breadth and product line like IBM and Hewlett Packard do In certain locations, the direct sales method is not ideal In-House repair capability is missing Opportunities: The opportunities are as follows: Customers are aware of their needs One stop shopping and value convenience for customers Both the printers and servers market can be tapped Threats: These are the threats being faced: Financial crisis across the globe i.e. recession Tough competition specially from brands such as HP and IBM Aggressive pricing wars The ever changing demands of consumers The advancement in technology RECOMMENDATIONS: Even though the current available statistics show that Dell is doing pretty well in the markets of personal computer however, we can not neglect the fact that in certain areas Dell is facing tough competition especially from IBM and HP. In the printer market HP is doing exceptionally well because of its merger with Compaq. Although Dell too has started to sell printers however their strategy isn’t too good while on the other hand HP seems to be having a huge success and being able to earn huge revenues. What Dell is doing is that it purchases printers from Lexmark and then re-brands it as Dell; however, it would be much more appropriate if Dell merged with Lexmark to make itself stronger in the printer market. Also in the Asia/Pacific market, the market leader is Lenovo which has also acquired IBM’s division and would give a tough competition to Dell. Thus in order to capture the market Dell should start some distribution centers in those regions. Moreover they should also develop R & D in order to compete with IBM in the server market. Also it would be beneficial for Dell to implement the following 7 principles of supply chain management: Principle 1: Segment customers based on the service needs of distinct groups and adapt the supply chain to serve these segments profitably. Principle 2: Customize the logistics network to the service requirements and profitability of customer segments. Principle 3: Listen to market signals and align demand planning accordingly across the supply chain, ensuring consistent forecasts and optimal resource allocation. Principle 4: Differentiate product closer to the customer and speed conversion across the supply chain. Principle 5: Manage sources of supply strategically to reduce the total cost of owning materials and services. Principle 6: Develop a supply chain-wide technology strategy that supports multiple levels of decision making and gives a clear view of the flow of products, services, and information. Principle 7: Adopt channel-spanning performance measures to gauge collective success in reaching the end-user effectively and efficiently. (David L. Anderson, Frank F. Britt, and Donavon J. Favre, 2007) Conclusion: No other IT hardware vendor has been able to reach Dell’s record in terms of the customer satisfaction, guarantee, reliability, flexibility or adaptability. It is Dell who has set the standard for excellence across a number of challenging areas of the customer satisfaction experience. Customers have always been satisfied with Dell’s quality and services, their demands have always been met and their problems listened to and their high hopes have never been let down by Dell even during the time period when Dell had to face some cumbersome challenges. And it is through this dedication and proper servicing that Dell has been able to win the respect of its customers and offer them a more satisfying customer experience. The customer experience with Dell clearly transcends a perception of the vendor as a price or value leader alone. Through its efficient operations of making commitments with regards to product delivery and availability, a consistent working relationship and availability of replacement or spare parts, Dell became the number 1 service provider in the whole industry. Unlike its many competitors, Dell has never suffered from inconsistencies with regards to product quality. However, in order to maintain its position Dell will need to maintain its promise for continued leadership in meeting customer satisfaction expectations. (Technology Business Research Inc) References: David L. Anderson, Frank F. Britt, and Donavon J. Favre -- Supply Chain Management Review, 4/1/2007 Dell’s official website http://www.dell.com/ http://www.scribd.com/doc/18029523/Dell-Case-2005 Marketing Teacher Ltd 2000 – 2010 http://marketingteacher.com/SWOT/dell_swot.htm Technology Business Research Inc. Setting the Standard for Customer Satisfaction: An Analysis of Dell’s Track Record and Approach Read More