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Supply Chain Management 
Practices
Who is Dell ? 
Docket 
What is its current position ? 
What practices made them to 
be in that position ?
• Started by Michael Dell (19 at that time) in his dorm 
room at the University of Texas in 1984 with $1000. 
• Company headquartered in Round Rock, Texas, 
U.S.A. 
• Its revenue is around US$ 63.07 billion in 2012. 
• In 2001, became the No. 1 computer systems 
company in the world. 
• At present (2013), it is the third largest PC vendor in 
the world after HP and Lenovo. 
Inception
Dell has grown by both increasing its customer base and 
through acquisitions since its inception; notable mergers and 
acquisitions including Alienware (2006) and Perot Systems 
(2009). 
NOTABLE ACQUISITIONS 
2006 – Alienware 
2009 - Perot Systems 
2010 - KACE Networks 
2010 - SaaS 
2012 - Sonic Wall 
2012 - Wyse 
Acquisitions
Product Lines 
Dell offers a total of 1.6 million different 
possible product configurations for all its 
product lines 
Desktop computers 
Notebook computers 
Network servers 
Workstations 
Storage products
Current Position 
#3
What practices made 
them to be 
successful and 
exemplary ?
Component 
Manuf. 
Traditional Model 
PC 
Manufactu 
rer 
Product Product 
Distributor 
/Reseller 
Order 
Forecast 
Component 
Components 
MicroAge, 
CompuCom 
Corporate 
customer 
Build to Stock
Component 
manufacturer 
Direct Model 
DELL Comp 
Corp 
Distributor 
Final 
customer 
Components 
Product 
Order 
Customer 
Order>> 
<<Product 
Dell Supplier
Direct Model 
It OUTSOURCED all components but performed assembly. 
It ELIMINATED RETAILERS and shipped directly from its 
factories to end customers. 
It took CUSTOMIZED ORDERS for hardware and software over 
the phone or via the Internet. 
It designed an INTEGRATED SUPPLY CHAIN linking Dell’s 
suppliers very closely to its assembly factories and order-intake 
system 
No intermediaries - No warehousing - No physical store
What it means for 
customers(users) 
• PROS 
Perceived customization 
Convenience 
No sales pressure 
No price 
comparisons/objections 
• CONS 
No immediate delivery 
No touch and feel 
Direct Model 
• What it means for (corporate) 
customers 
• PROS 
Premier pages: approved 
configurations only 
Reduces procurement cost 
Reduced over shipment 
costs 
E-support 
• CONS 
No immediate delivery
What it means for Dell 
PROS 
Lower inventory and little product obsolescence 
New technology to market faster 
Quick feedback on problems 
Ability to manage product shortage and demand by 
advertising and pricing 
Dell gets paid early 
Lower component cost than indirect competitors 
Creates real switching barriers for large customers 
Customer database>>customer information, lowers cost of 
follow up services and support 
CONS 
may not appeal to all segments
INVENTORY MODEL
DIRECT MODEL 
KEY TO SUCESSES 
BUILD-TO-ORDER MODEL 
INVENTORY MANAGEMENT is primarily about specifying the 
size and placement of stocked goods. 
1. Just-in time inventory management - 3 days. 
2. Focus on speed of inventory delivery process. 
“8 days of inventory competitors 40 days, if Intel comes out 
with a new chip, I am going to get that to the market 32 
days sooner” 
- MICHAEL DELL
Build to Order 
 In contrast to others who produce –to stock, dell first 
receives the order and the money and only then starts to 
build, using that money to purchase from supplier 
 Therefore there is customization of products for each and 
every customer. 
 While other companies had to guess, DELL knew exactly 
what its customers wanted before manufacturing the 
product 
 Others had to maintain inventory as there existed 
middlemen, so to support reseller and retail channels.
Supplier 
Manufacturing 
Supplier Logistics Centers 
(SLC) 
Warehouse 
Factory / Merge 
Center 
Material 
Transfer 
To compensate for long lead times & buffer against demand variability, 
Dell requires its suppliers to keep inventory on hand in the revolvers. 
Supplier Logistics Centres (SLCs) are small warehouses located within a 
few miles of Dell’s assembly plants. 
Each of the SLC is shared by several suppliers who pay rents for using 
their revolver. 
Dell doesn't own the inventory in its revolvers; this inventory is owned 
by suppliers & charged to Dell indirectly through component pricing.
Supplier Logistics Centers 
Dell has a special Vendor-Managed-Inventory (VMI) 
arrangement with its suppliers 
Suppliers decide how much inventory to order & when to 
order while Dell sets target inventory levels & records 
suppliers’ deviations from the targets. 
Dell withdraws inventory from the SLC’s as needed -- on 
average every two hours. 
It uses a quarterly supplier scorecard to evaluate how well 
each supplier does in maintaining this target inventory in the 
SLC.
Supplier Logistics Centers 
Customer 
(SLCs) Dell Factory 
Local Suppliers 
Suppliers 
Delivery 
Supplier Owned Dell Owned
ValueChain.dell.com 
 Value Chain is intended to extend Dell’s successful direct-sales 
approach back into the supply chain 
 The goal of it is increasing the speed and quality of the 
information flow between Dell and its supply base 
 The portal, valuechain.dell.com acts a secure extranet for 
Dell suppliers to collaborate in managing the supply chain 
 Dell envisions using this site to exchange with suppliers 
current data, forecasted data, new product ideas, and 
other dynamic information
“The direct model has 
been a revolution, 
but 
it’s not a religion.” 
Michael Dell in April, 2007
Direct 
sell 
Retail 
stores 
Hybrid 
business 
model 
Wal-Mart 
Gomez Electrical, China 
Dell extended its international retail strategy - Russia
PUSH or PULL 
?
PUSH PULL 
70% - 80% 20% - 30% 
Fixed B.O.M 
Pre Manufacturing 
Semi Fixed B.O.M 
Customer Dictates 
18 Weeks 
Push-Pull
Thank you

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Dell Suppy Chain Management

  • 2. Who is Dell ? Docket What is its current position ? What practices made them to be in that position ?
  • 3. • Started by Michael Dell (19 at that time) in his dorm room at the University of Texas in 1984 with $1000. • Company headquartered in Round Rock, Texas, U.S.A. • Its revenue is around US$ 63.07 billion in 2012. • In 2001, became the No. 1 computer systems company in the world. • At present (2013), it is the third largest PC vendor in the world after HP and Lenovo. Inception
  • 4. Dell has grown by both increasing its customer base and through acquisitions since its inception; notable mergers and acquisitions including Alienware (2006) and Perot Systems (2009). NOTABLE ACQUISITIONS 2006 – Alienware 2009 - Perot Systems 2010 - KACE Networks 2010 - SaaS 2012 - Sonic Wall 2012 - Wyse Acquisitions
  • 5. Product Lines Dell offers a total of 1.6 million different possible product configurations for all its product lines Desktop computers Notebook computers Network servers Workstations Storage products
  • 7. What practices made them to be successful and exemplary ?
  • 8. Component Manuf. Traditional Model PC Manufactu rer Product Product Distributor /Reseller Order Forecast Component Components MicroAge, CompuCom Corporate customer Build to Stock
  • 9. Component manufacturer Direct Model DELL Comp Corp Distributor Final customer Components Product Order Customer Order>> <<Product Dell Supplier
  • 10. Direct Model It OUTSOURCED all components but performed assembly. It ELIMINATED RETAILERS and shipped directly from its factories to end customers. It took CUSTOMIZED ORDERS for hardware and software over the phone or via the Internet. It designed an INTEGRATED SUPPLY CHAIN linking Dell’s suppliers very closely to its assembly factories and order-intake system No intermediaries - No warehousing - No physical store
  • 11. What it means for customers(users) • PROS Perceived customization Convenience No sales pressure No price comparisons/objections • CONS No immediate delivery No touch and feel Direct Model • What it means for (corporate) customers • PROS Premier pages: approved configurations only Reduces procurement cost Reduced over shipment costs E-support • CONS No immediate delivery
  • 12. What it means for Dell PROS Lower inventory and little product obsolescence New technology to market faster Quick feedback on problems Ability to manage product shortage and demand by advertising and pricing Dell gets paid early Lower component cost than indirect competitors Creates real switching barriers for large customers Customer database>>customer information, lowers cost of follow up services and support CONS may not appeal to all segments
  • 14. DIRECT MODEL KEY TO SUCESSES BUILD-TO-ORDER MODEL INVENTORY MANAGEMENT is primarily about specifying the size and placement of stocked goods. 1. Just-in time inventory management - 3 days. 2. Focus on speed of inventory delivery process. “8 days of inventory competitors 40 days, if Intel comes out with a new chip, I am going to get that to the market 32 days sooner” - MICHAEL DELL
  • 15. Build to Order  In contrast to others who produce –to stock, dell first receives the order and the money and only then starts to build, using that money to purchase from supplier  Therefore there is customization of products for each and every customer.  While other companies had to guess, DELL knew exactly what its customers wanted before manufacturing the product  Others had to maintain inventory as there existed middlemen, so to support reseller and retail channels.
  • 16. Supplier Manufacturing Supplier Logistics Centers (SLC) Warehouse Factory / Merge Center Material Transfer To compensate for long lead times & buffer against demand variability, Dell requires its suppliers to keep inventory on hand in the revolvers. Supplier Logistics Centres (SLCs) are small warehouses located within a few miles of Dell’s assembly plants. Each of the SLC is shared by several suppliers who pay rents for using their revolver. Dell doesn't own the inventory in its revolvers; this inventory is owned by suppliers & charged to Dell indirectly through component pricing.
  • 17. Supplier Logistics Centers Dell has a special Vendor-Managed-Inventory (VMI) arrangement with its suppliers Suppliers decide how much inventory to order & when to order while Dell sets target inventory levels & records suppliers’ deviations from the targets. Dell withdraws inventory from the SLC’s as needed -- on average every two hours. It uses a quarterly supplier scorecard to evaluate how well each supplier does in maintaining this target inventory in the SLC.
  • 18. Supplier Logistics Centers Customer (SLCs) Dell Factory Local Suppliers Suppliers Delivery Supplier Owned Dell Owned
  • 19. ValueChain.dell.com  Value Chain is intended to extend Dell’s successful direct-sales approach back into the supply chain  The goal of it is increasing the speed and quality of the information flow between Dell and its supply base  The portal, valuechain.dell.com acts a secure extranet for Dell suppliers to collaborate in managing the supply chain  Dell envisions using this site to exchange with suppliers current data, forecasted data, new product ideas, and other dynamic information
  • 20. “The direct model has been a revolution, but it’s not a religion.” Michael Dell in April, 2007
  • 21. Direct sell Retail stores Hybrid business model Wal-Mart Gomez Electrical, China Dell extended its international retail strategy - Russia
  • 23. PUSH PULL 70% - 80% 20% - 30% Fixed B.O.M Pre Manufacturing Semi Fixed B.O.M Customer Dictates 18 Weeks Push-Pull