Supply Chain Management: DELL - Term Paper Example

? [Teacher’s Supply Chain Management: DELL A. History and background of the organization, also including the types of products and product lines manufactured and industry in which the organization operates. In 1999 Dell was known to be one of the USA’s number one best PC selling companies and number two globally. Starting with only a 100 computers as a personal company of a student called Michael Dell; it has now turned into a company of over 35,000 employees with 25,000 million dollar sales in the year 2000. In 2005, Dell became world’s third most favorite company in an industry where IBM and HP are regarded as its biggest competitors (Manataki, 2007). Over the years Dell has slowly enhanced its portfolio and included products with the likes of servers, workstations, printers, and PDAs, as well as flat-screen TVs and digital cameras as products and product lines respectively. In 2003, the company changed its name to Dell Inc. from the name of Dell Computer Corporation to support the statement of evolution from a mere computer manufacturing firm to the one that provides many technology-related services (Manataki, 2007). In Dell’s success, its strategic choices have been one of the major factors that highlight its supply chain as the basic reason to shine. Over the years, its supply chain has been examined and many have tried to incorporate the same model but of no avail. This means, that Dell holds a unique tool that has its own way of operating that cannot be copied easily. The basic elements of the model are the direct sales model called the direct model, and the build-to-order strategy (Manataki, 2007). B. An overview of the organization’s supply chain management efforts, including the organizational issues involved with the supply chain such as the organizational structure, the placement of supply chain management within that structure, and supply management’s relationship with other departments in the organization. As far as the organization’s supply chain management efforts and its issues are concerned, Dell experienced three basic variables to solve. Where at one end, Dell has continuously refined its portfolio with the direct model, providing two billion online customer visits, the supply chain design for the ever changing global environment handed the worry of multiple global customer groups, the global supply networks, multichannel sale, the product commoditization, and the changing markets on the other end (Davis, 2010). High cost of the supply chain was one of the biggest worries that were reduced to a low cost one. The focus has always been primarily on the efficiency with a CTO capability. This effort meant an overall toning down of the product design and the planning process along with the configuration management as well (Davis, 2010). Over the years, these efforts have sort of evolved through a slow process that can be highlighted through the organizational issues and the relationships it holds in the following lines. The entire supply chain adopted a customer-centric view of value, and has invested in several resources to obtain an analysis of its profitability, the insight in the market and business intelligence, summed up as identifying customer values. Dell then charted out its strengths and understood the external environment by analyzing its competitors, new entrants, and emerging requirements of the market to eventually designing the supply chain portfolio (Davis, 2010). [See Appendix figure 1] Of course the organizational structure and the relation of the supply chain with the rest of the department were always considered by Dell. This requires extensive cross functional collaborations by the company. With the transforming supply chain IT had to change, the finance department had to work on a CTS methodology where a full integration of product design with supply chain and go-to-market plans with sales and marketing were set according to the changing patterns in demand. [See Appendix for a detailed engagement] (Davis, 2010). C. An overview of the new product development process within the organization, including the supply management’s role in that development, the process involved in how the current products are reviewed for either further production or removal from production, and how the organization manages for quality in products. The new product development process has also changed that was set initially by Dell. The pitfalls of low quality and other issues were solved in the review phase. The team has a daily contact between major team members. The phase review manages to point out the basic reviews to be conducted on the product, as well as the need for quality that is conducted every three months. Other than that, the assessment of market and technical risk as well as the funding for the next project are approved (Thomke). The NPD process can be explained in detail in the following lines. 1. Profile Phase: This is like establishing a guide of product features summed up in three to four pages. This is done with the help of the product development team. 2. Planning Phase: In this phase, a business case is developed that is under the critical eye of the executives who check the assumptions and the financial impact it would have. 3. Implementation Phase: The prototypes are developed in this phase that are built and tested as well as the development of instruction manuals and service plans. At the end of this phase, orders are placed for tooling and financial commitments are finalized. 4. Qualification Phase: Prototypes are distributed to key customers and feedback is attained. In this phase training for the sales force is attained to ensure quality in execution. The product development team built production prototypes of the proposed product. 5. Launch Phase: The entire process is tested to ensure quality from buying experience, opening the packed finished product to running various software applications. Shipments are made towards the end of the launch phase. 6. Acceptance Phase: Customer feedback is collected for about three months after launch. Lessons are learned and gap analysis is made. D. An analysis of how the organization purchases capital equipment and services needed. This should include how the company makes the choice as to when to purchase the equipment and services as well as the process involved in the actual procurement. Considering the actual procurement and how Dell purchases capital requirements, it has been observed that Dell has to keep more than 40,000 employees fully supplied. This is obviously a very time consuming as well as expensive procedure that has been improved with the help of Ariba Buyer™. The procurement process basically uses time as well as labor in which Dell requires each employee to fill a form in the order process. The procedure includes coding by hand, supplier information, element code, and the costs involved. Further, it is made sure that about 10 signatures are attained. The data by the buyers are then fed into the systems that are the legacy purchasing system and the homegrown Access database (B2B Solutions). By streamlining the purchase system, maverick spending was further eliminated and the orders were further standardized. The procurement system was first established to reduce the costs by a target of 60%, however, many other benefits were identified. The advantages were stated as increased quality and huge discounts. The procurement system was thus e-based and operated on 5 basic criterions. The list includes the likes of purchase order, cost center, catalog data, employee data, as well as the accounting code validation. The final system developed thus came to be known as the Dell Internet Requisition Tool (DIREQT). The system developed has thus worked as an advantage by reducing the requisition cycle time of 62 percent. Now, the data is gathered after the supply base is thoroughly analyzed. It is then ensured that the key business for consulting is evaluated as well as other processes, such as maintenance, repair, and operations (MRO). Instituting online auctions and web access to suppliers are some of the future plans of Dell (B2B Solutions). E. An analysis of how and when the organization determines whether to outsource or make a product in house, how and where the organization finds its suppliers, and whether or not the organization looks at the international arena for purchasing. In the beginning, Dell was organized according to the products it held and the regions it was located at. After 2008, the company earned the power of influencing its supplier network through improving its capability, quality performance, and cost. As far as in house or outsourcing is concerned, Dell prefers in house when differentiation is the main value of the customer, and a competitive advantage is preferred. Thus, the customer values play an important role in this decision (Davis, 2010). According to Dell’s new business model, the company’s core activity has been changed to component assembly. In this way, the build to order strategy by Dell turned a notch up as it changed from the idea of developing everything by itself. Thus, known as the build-to-order, the strategy with which the products are made according to the customer requirement is by using its core competencies, like the partnering firms or suppliers and information technologies (Gunasekaran & Ngai, 2005). After the order has been placed, the processes of lean manufacturing and just-in-time production are set in motion that initiates the assembly and soft-wares. As far as the suppliers and arena for purchasing is concerned, Dell’s relationship with its suppliers are considered as one of the basic strengths. The suppliers are selected through the level of expertise and experience along with the ability to provide quality they hold (Vedpuriswar, 2004). The performances of the suppliers are evaluated continuously against the standards set with meetings held every quarter to review and feedback on performance (Fugate & Mentzer, 2004). Dell also compares each supplier with its other competitors through the use of a balanced score card for cost, quality, and frequency of supply. Dell also provides the suppliers with training to improve their performance as a reward. F. Explain how the organization deals with contract issues, including legal issues, resolving contract disputes, and international contracts. At Dell, each operational department and processes contain contracts to deal with the legal issues, contract issues, as well as international contracts. The company uses Business Performance Contracts (BPCs) that are formal as well as flexible in nature. These are thus known as operational agreements that manage to point out the performance standards that are to be met by the individuals. These contracts thus highlight those action plans that are the most important in nature. In order to implement the BPCs, four points are ensured by Dell (SCM). Collaboration Value engineering Outsourcing Out of the box experience (OBE) For international contracts, it also ensured that the BPC is shared with the entire supply chain, and then necessary operating agreements are made. In this way, the focus of the organization is aligned with the performance management by reducing disputes (SCM). G. Analyze the production and inventory control measures within the organization, including scheduling, demand systems, inventory functions and analysis. Dell maintains a vendor-managed-inventory (VMI) collaborated with the suppliers. Basically, in this system, Dell manages the levels of target inventories, and in case the suppliers waver from their targets. Suppliers are in fact responsible for stating how much inventory is to be ordered and when it should be done. A scorecard is used to make sure how well the levels have been maintained and an inventory target of a total of 10 days is chosen by Dell itself. The inventory is taken on an average of 2 hours by the company from the revolvers. Evidently, there are chances that the product is multi sourced and the parts come from different suppliers, then the pull strategy is used to draw components. Before turning to another supplier, Dell has the strategy of withdrawing for a few days from the supplier (Kapuscinski, Zhang, Carbonneau, Moore & Reeves, 2005). In order to ensure that sound orders are made for purchasing by the suppliers, Dell ensures that its forecasts are shared with them. The forecasts are made by the LOB that is the marketing line of business of Dell. According to Dell, the demand for home systems rises during Christmas, whereas other products are also forecasted according to the seasonal changes and product specific trends. Other seasons highlighted are back-to-school season, government purchasing, and other country-specific high seasons (Kapuscinski, Zhang, Carbonneau, Moore & Reeves, 2005). Other inventory functions also include the COC checks i.e. the center of competence checks that predicts the availability of parts. These forecasts are made with the Dell’s commodity team which is 6 months long and is updated on regular basis. However, if the forecasts prove to be unfeasible, the respective department revises it, which happens rarely. The suppliers receive such forecasts monthly while the buyer and planner receive them weekly (Kapuscinski, Zhang, Carbonneau, Moore & Reeves, 2005). H. Analyze the relationship between supply, demand, and logistics in terms of the organization. With the supply and demand already defined, it can be analyzed that these three are the basic parts of the supply chain. For the long term excellence of the supply chain, these factors act as the variables to master. The competencies identified to master the relationship between these variables are the deep customer relationships, flexible supply chain, and a culture that constantly changes to better the processes. The relationships have thus worked as an advantage for the Dell’s supply chain. It has been analyzed that, provided the efficient relationship, the level of inventories remains small, and thus the costs related to inventory also decrease. This means, faster response to changes in demand and an easy operation of negative cash conversions. The fact that in this way, Dell knows exactly what the customer wants in what way and how efficiently it can be achieved, cannot be ignored (Kraemer & Deddrick, 2009). I. Draw your own conclusions regarding the quality level of the organization’s overall supply chain management functions and include what you see as the strengths and weaknesses in the system. Keeping in mind the supply chain leadership in the industry, and the evolution it went through, it has been observed that each level uses its own skills and competence. It has been observed that the supply chain has gone through an evolutionary phase using a multi-year plan to support the change. Through the processes used in the supply chain, it has been obvious that Dell has used an outside – in approach in dealing with almost every operation that has basic focus on the customer. The vision and the design phase in the Dell’s supply chain thus seem to focus on market knowledge and end-to-end supply chain design. As for the arena of managing change, it has been analyzed that program management, organizational influence, and system optimization has been ensured through six sigma approach. Evidently, Dell cannot ignore orchestrating the ecosystem where customer needs are always stressed upon as they directly affect the supply chain of Dell. As for the cross-functional participation, it has been analyzed that Dell maintains a strong hold in this area by ensuring that the span of communication remains broad [See Appendix]. The processes are thus, collaborated throughout the organization which works towards further strengthening of the supply chain. Certainly, transparency cannot be ignored in Dell and thus the customer metrics with operational metrics are better balanced. However, one of the basic weaknesses identified is the need for a scorecard that contains clearer accountabilities. There is still a need for Dell to provide better green solutions. This can of course be attained through balancing the logistics’ nodes with cycle times. In this way, the need for lowering the carbon transportation can be achieved. Also, it has been observed that Dell needs an expansion in its catalog base as well as the purchasing options that work by attracting the major customers of Dell to the business to business commerce platform. Dell is also in the need to create web access and payment information to its receipts. The purchasing processes of Dell therefore need more expansion and improvement that will maintain affectivity in the supply chain further. Appendix Figure 1 Source: (Davis, 2010) Figure 2: Source: (Davis, 2010) Figure 3: Source: (Davis, 2010) References: B2B Solutions, Dell Streamlines Indirect Procurement with Ariba Buyer, Power solutions, [Available Online] on 7th April,2012 on: www.dell.com/powersolutions. Davis.M (2010) Case Study for Supply Chain Leaders: Dell's Transformative Journey Through Supply Chain Segmentation, Gartner Research, Gartner Inc. Fugate, B. S., Mentzer, J. T. (2004). "Dell's Supply Chain DNA". Supply Chain Management Review,p20-24. Gunasekaran, A., Ngai, E.W.T. (2005). "Build-to-order Supply Chain Management: a Literature Review and Framework for development". Journal of Operations Management, 23: 423-451. Kapuscinski.R, Zhang.R.Q, Carbonneau.P,Moore.R and Reeves.B (2005) Inventory Decisions in Dell’s Supply Chain, Vol. 34, No. 3, pp. 191–205 Kraemer, K., Deddrick, J. (2009). "Dell Computer: Using E-commerce to Support the Virtual Company", Center for Research on Information Technology and Organizations, Globalization of I.T., (June 1, 2001), paper 236, www.crito.uci.edu/git/publications/pdf/dell_ecom_case_6-13-01.pdf Manataki.A (2007) A Knowledge-Based Analysis and Modelling of Dell’s Supply Chain Strategies, Master of Science, Artificial Intelligence, School of Informatics, University of Edinburgh SCM, Supply Chain Management: An Evolutionary View, Supply Chain Management: Concepts, Techniques And Practices - Enhancing Value Through Collaboration, Chapter 1, World Scientific Publishing Co. Pte. Ltd, [Available Online] on 7th April, 2012 at: http://www.worldscibooks.com/business/6273.html. Thomke.S, Product Development at Dell Computer Corporation, Harvard Business School, Harvard Business School Publishing, Boston Vedpuriswar, AV, (2004). "Business Model Innovation at Dell". ICFAI, Center for Management Research. Read More