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1. Supply Chain Management
Practices

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

6. Current Position
#3

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

13. INVENTORY MODEL

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

22. PUSH or PULL
?

23. PUSH PULL
70% - 80% 20% - 30%
Fixed B.O.M
Pre Manufacturing
Semi Fixed B.O.M
Customer Dictates
18 Weeks
Push-Pull

24. Thank you