DELL has a supply chain focused on building computers to order and selling directly to customers. This allows them to keep very low inventory levels of only 6 days and cut costs. DELL also integrates planning and execution across the supply chain through information sharing. They forecast demand carefully using historical data, market trends, and competitor information. While this direct model and build-to-order strategy was effective, recent drops in DELL's stock price show the need to strengthen customer service and consider larger business partners.

1. Supply Chain of DELL
15-Sep-14
To understand and study supply chain of DELL
Supply chain management of DELL
Yogesh(10) / Abhinav(9) / Pramod (8)
Student- PGDM Exec
BATCH 2013-14
Under the guidance of
Prof Rajesh Pandey
K.J.SOMAIYA INSTITUTE OF MANAGEMENT STUDIES& RESEARCH

2. Table of Content
1. Introduction ……………………………………………………………………..2
2. Supply chain of DELL...............………………...................................................3
3. Supply Chain Activities Involved in Managerial Levels …………………….….4
4. The Role of Supply Chain in Maximizing Profit in DELL……………...………6
5. Supply Chain Integration Strategies ……………………………………………..8
6. Demand Management ………..………………………..…………………………9
7. The value chain of DELL…………………………………………………….…11
8.Recommendations………………………………………………………………...12
9. References…………………………………………………………………..........12

3. Introduction
Supply Chain Management is a business practice that has been employed in order to give an effective
service to customers and to make the business sustainable by considering all the aspects from the
suppliers to the consumers. Supply Chain integrates all these features such as manufacturer, supplier,
transport, wholesalers, retailers, customers and all other elements which link the above. Its main
objective is to fulfill customer demands by adding value to the products and services.
DELL is a computer technology corporation that develops sells, repairs and supports, computers and
computer related products. DELL has realized that supply chain is becoming more and more
important for the success of today’s business world and they work accordingly to keep a competitive
advantage in the market.
Here in this study, the supply chain processes that are utilized by DELL will be taken into
consideration which is known to be one of the best in the world. DELL s supply chain will be heavily
analyzed in the areas of supply chain integration strategies and demand management aspects. Supply
Chain of DELL TL 2050: Supply Chain Management Page 3

4. Supply Chain of DELL
DELL has a different business model than its competitors, which can be identified as “direct model”.
In this model DELL sells its PC s directly to customers without using a retail channel.
Therefore it creates a direct relationship with each individual customer which they have segmented
into groups to make it easier to approach. Mainly there are three customer segments which can be
illustrated as large organizations, small and medium businesses, and personal consumers.
The other aspect that makes DELLs supply chain unique is the Build-to-order strategy. According to
this once the order is placed by the customer, all the configuration details are sent to the
manufacturing floor and then the assembly of the PC begins. Once the computer is built and all the
software’s are downloaded it will be shipped to the customer by using 3PL.
Because of these aspects DELL has the competitive advantage over others because of several
reasons. The level of inventory costs is really low since the case of faster responses to demand
changes. It is also visible that customer pays for an order before DELL pays its suppliers for the
products components.
Thus the most interesting part of DELL and its supply chain is relationship they maintain between
the customers which of course lays foundation for the existence of the business.

5. Supply Chain Activities Involved in Managerial Levels
For the supply chain to be strategically effective it has to be implemented in all the levels in the
organization. Therefore in all the three levels of DELL; strategic, tactical and operational, supply
chain practices are being made use of.
In the strategic level decisions will be made regarding the whole organization considering the supply
chain. These decisions are critical since it reflects the overall corporate strategy of the company. In
the case of DELL the unconventional idea of using direct sales method has to be come from the
strategic level.
Senior management of DELL is giving the strategic direction when considering the product that the
company should manufacture and offer to their customers. Especially the customer segments are
identified targeting company marketing and advertising. It is the same when it comes to
manufacturing of products strategically decisions are taken to verify the capacity of existing facilities
and other logistics related things. DELL is using 3PL providers and it applies the theory of
manufacturing overseas.
It is needed to analyze and predict the capacity in supply chain therefore measures can be taken to
expand the facilities accordingly. The middle level management team has the responsibility of this.
There is more significance when it comes to the operational level. All the supply chain activities in
DELL are done thoroughly by this cluster.

6. The Role of Supply Chain in Maximizing Profit in DELL
DELL is able to sustain a competitive advantage over competitors in the computer industry because
of an extremely efficient supply chain/distribution system. Also DELL has been able to acquire
superior profits in the industry since they are a knowledgeable in areas of information,
communication, e-commerce, e-business, and internet and web technologies.
DELL implements a Just-In-Time (JIT) inventory system which operates on only six days of
inventory. Because of this inventory system Dell has been able to obtain higher profit margins.
Inventory and labor are the highest liabilities that are there in a business firm. Since DELLs
inventory is only a 6 day cycle, they have been able to cut down costs on warehousing, hiring people
to track and maintain inventory , and thus avoid using out dated technology .

7. As depicted in the diagrams the technique is surprisingly simple but it is best competitive tool in
increasing profit.
One other thing which makes this supply chain really competitive is the fact that DELL’s customers
can only order computers through DELL itself which results in a profoundly bond with the customers
. This makes them retain their market share in the business.
DELL is also having strategic alliances with other companies to have their products sold on DELL’s
direct selling distribution channel.
All these elements in their supply chain make them the best in the business.

8. Supply Chain Integration Strategies
Better integration of planning and execution has become one of the dominant themes in supply chain.
DELL has given a special place for the supply chain integration as described previously. The heart of
Dell's success is its integrated supply chain, which has enabled rapid product design, fabrication, and
assembly, as well as direct shipment to customers. Inventories have been dramatically reduced
through extensive sharing of information, a prudent choice given the risk of technological
obsolescence and reductions in the cost of materials that can exceed 50 percent. Even with reduced
inventories, Dell's strategic use of information has made possible a dramatic reduction in the elapsed
time from order to delivery, giving Dell a significant competitive advantage.
Accordingly those integration strategies described previously are there in DELL. As a whole in the
virtual integration strategy of them these characteristics are involved in.
 Use of rapid seamless communication
 A clear definition of what DELL does best
 Selection of partners who are best in their respective fields
 Use of a minimum number of suppliers
 Using internet as a strategy to eliminate boundaries between companies and promote effective
integration
 Less emphasis on guarding intellectual assets and more emphasis on using assets rapidly before
they become out of order

9. DELL has benefitted immensely by using a highly integrated supply chain which results in having
advantages of vertical integration while simultaneously benefiting from the investments, innovation,
efficiencies, and specialization of highly focused suppliers.
Demand Management
DELL has a special set of analysts who forecasts the demand in every single level of production. At
all these levels accuracy of the forecasts are very important.
DELL is using a collaborative business strategy and a process model as shown in the diagram.
There are 4 key task areas according to this model
Strategy & Planning : Establish ground rules for the collaborative relationship. Determine product
mix and placement and develop events plan for the future.
Demand & Supply Management : Project consumer demand and as well as order and shipment
requirement. Supply Chain of DELL TL 2050: Supply Chain Management Page 9

10. Execution: Place orders, prepare and deliver shipments, receive and stock products on retail shelves,
record sales transactions and payments Analysis: Monitor planning and execution activities for
exception conditions. Aggregate results and calculate key performance metrics, share insights and
adjust plans for continuous improved results Apart from this there is this “Demand Sensing Initiative
“by DELL.
In this initiative these key factors are considered
Historical Sales
List price
Promotions
Competitor promotions
Inventory position
Market trends
Therefore their demand analyses are mostly accurate which results in them getting the edge in the
business. Supply Chain of DELL TL 2050: Supply Chain Management Page 10

11. The value chain of DELL
According to this value chain plays a vital role in their demand analysis which can’t be considered as
true as always since there are visible occasions when their share prices go down drastically in the
recent past.

12. Recommendations
Even though it is said to be that their relationship is “DEEP” with customers in the Sri Lankan
context it’s quite visible that the service is not the greatest among all. In fact DELL is losing its
market share with the rising of other PC producers which is quite evident in recent share prices of
DELL.
Having a direct relationship with the customer is a good strategy but considering big customers who
are going to be retailers in that context can be a threat to this supply chain. Since somehow it’s
representing DELL and the customer service that is done by them can have an adverse impact on
them. Therefore rather than going for short term profits consideration of these aspects would make
them thrive in the industry.
References
Thesis – University of Edinburg
www.dell.com
Surviving Supply Chain Integration: Strategies for Small Manufactures ( 2000 )