Dell Internet Value Chain

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Transcript of Dell Internet Value Chain

Supply Chain Management

A Presentation on our VALUE CHAINVed Prakash Tiwari

Dell at a Glance Founded by Michael Dell in 1984. Globally 2nd in computer hardware design, manufacturing and distribution with a market share of around 16%.(HP is 1st with 19%) 1987 --first computer systems company to offer next-day, on-site product service .

Dell at a GlanceGreater than $50 Million sales per day through the internet with yearly revenue of $55.908 Billion with employee base of 78,000. Ventured in areas of storage products, workstation systems, online technical support, appliance servers, network switches, standards-based point-of-sale offering for retail customers, recycling . Shipped more than 10 million systems in a single quarter (Q4, FY06)

HOW DO THEY DO ITDells success is a combination of Direct Sales Build To Order Supplier Integration

Dells Direct Model

Direct relationship, most efficient path Low cost and best value Built to order Customized systems Superior, tailored service and support Highest quality and most relevant technology

Dells Value Chain

Dells Value Chain Direct sales and Build-to-order model: Close relationship with customers and suppliers First-hand and pure customer feedback High volumes of customer informationExceptional and Excellent Supply Chain

Huge amount of customer information


Dells Value Chain Internet: Dell brings products to market faster than its competitors Dell established a unique e-commerce model by embracing the Internet in its supply chain. Customization and quick response Attract large business customers Reduce Bullwhip Effect Collecting the payments

Dells Value Chain Dell brings products to market faster than its competitors Direct sales via Internet v/s previously assembled PCs ready for purchase PCs have life cycles of only a few months Thus, Dell enjoys early-to-market advantage.

Dells Value Chain Customization and quick response Dell uses the Internet to sell its products Virtually unlimited variety of PC configurations.

Buyers can click through Dell and assemble a computer system piece by piece, based on their budgets and needs

Dells Value Chain Attract large business customers To facilitate B2B sales, the Dell site offers each corporate customer an individualized interface called Premier page While Dells consumer sales are highly visible, its business sales are a much bigger revenue source

Dells Value Chain Reduce Bullwhip Effect Dell constracts special Web pages for suppliers, allowing them to view orders for components they produce. This allows suppliers to plan based on customer demand

Dells Value Chain Collecting the payments Because of direct sales, Dell can collect payments in averagely 5 days after they are sold. However, Dell continues to pay their suppliers according to the traditional billing schedules. Low level of inventory and negative working capital helps Dell increase its performance.

Dells Value Chain What is the main disadvantage of Dell selling PCs over the Internet? High Shipping Costs Economies of Scale

Dells Value Chain How does Dell compete with a retailer who already has a stock?

Price Advantage Differentiation advantage

Dells Production Process


CRM CRM-SCM integration strives to satisfy and promptly deliver products to customers, ensuring availability of the product and maintaining profitability of the manufacturer.

CRM Ensure better customer service is offered. Implement technology in a phased fashion Extend the connection from the customer to the supplier

Ensure better customer service is offered. Dell has become an industry leader in service and reliability. Dell has used CRM to its advantage. This has instilled trust into their customers.

Implement technology in a phased fashion It set-up mock environments to develop, test, and support the i2 systems in patches without disrupting the live version. Dell was able to bring on one piece of the i2 system at a time. Dell ensured that each stage of the process performed will and allowed for future growth before rolling out the entire system. This minimized the risk, while at the same time increasing efficiency.

Extend the connection from the customer to the supplier Dell was able to extend its build-to-order model from suppliers to the customer while continuing to maximize operational efficiency and customer satisfaction. Customers were able to save money while being able to purchase a customized machine because Dell passed on the savings, which resulted from efficient inventory management, no excess inventory or inventory shortages. It was able to share, in real-time, information with suppliers about customer demands and buying patterns.

RFID at DeLL Tracking code and Computer assembly instructions are added to the tray. This determines the specific line to which the tray should go to. At every stage of the assembly, the tags are read by the antenna for specific instructions. Once assembled and tested, production information is inserted into the tags and sent to a shipping station. At the shipping station, the RFID tag transfers data to the control PC.

This control PC uses this information to print the appropriate label.

Benefits Of RFID Production stops have reduced dramatically. Labor can be allocated repetitive activities. by minimizing

Returns due to wrong shipping of products have been minimized.

Sustainability at Dell Dell is known throughout the world as a leader in supply chain management and just- in time manufacturing.

Relying heavily on a vendor managed nventory model and eliminated inventory cost while maintaining a JIT manufacturing strategy.Dell was the First company in the information technology industry to establish a product-recycling goal in 2004 Dell committed to reduce greenhouse gas emissions from its global activities by 40% by 2015, with 2008 fiscal year as the baseline year.

Dell has launched its first products completely free of PVC and BFRs with the GSeries monitors (G2210 and G2410) in 2009.

ConclusionDell has one of the best SCM in the world.

90% supplies ordered online using supplier and Dell (B2B).

integrated websites of

95% of suppliers situated very close to assembly plant hence coordination is easier. Dells factories have only 7 hrs worth of inventory for most items whereas industry wise it is around 10 days.

15 suppliers provide almost 85% of all supplies. Dell gets paid by customers and then pays to its suppliers.