L10 - Self Study - Dell's Value Chain

8/3/2019 L10 - Self Study - Dell's Value Chain

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Dells Value ChainSupply Chain Management


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History

Founded by Michael Dell in 1984

The single concept: Selling computer

systems directly to customers Designed and built the first computer

system of its own design in 1985

Was one of the first computer companies to

send a technician to homes to servicepersonal computers in 1985

Dells Value Chain


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History

Introduced the 316LT, the companys firstnotebook computer in 1989

Joined the top-five computer system makersworldwide in 1993

Earning appr. $1 million per day 7 monthsafter the launch of dell.com in 1996

Introduced E-Support, an online tool toprovide technical support to customers in1999

Dells Value Chain


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History

For the first time, Dell achieves No. 1

ranking in global market share in 2001

Dells Value Chain


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Dells Value Chain


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How has Dell used its direct sales and build-to-order model to develop an exceptionalsupply chain?

Dells Value ChainClose relationship with customers and

suppliersFirst-hand and pure customer feedback

High volumes of customer information

Huge amountof customerinformation

Exceptionaland ExcellentSupply Chain

ANALYSE


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These relationships with customers andsuppliers allow us to know what we must be ableto supply in real time and then very quickly and

precisely meet that demand while maintaining lowinventory. says Dave Schneider, continuousimprovement engineering manager of Dell.

Dells Value Chain


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How has Dell exploited the advantage of the

Internet to improve performance? Dell established a unique e-commerce model by

embracing the Internet in its supply chain.

Dell brings products to market faster than its competitors

Customization and quick response

Attract large business customers

Reduce Bullwhip Effect

Collecting the payments

Dells Value Chain


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Dell brings products to market faster thanits competitors

Dell uses direct sales via Internet, whereas Traditional PC

manufacturers previously assemble PCs ready for purchase atretail stores.

PCs have life cycles of only a few months

Thus, Dell enjoys early-to-market advantage.

Dells Value Chain


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Dells Value Chain

Customization and quick response Dell

uses the Internet to sell its products

offers a virtually unlimited variety of PCconfigurations.

Buyers can click through Dell and assemble acomputer system piece by piece, based on theirbudgets and needs


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Dells Value Chain

Attract large business customers

To facilitate B2B sales, the Dell site offers each corporate

customer an individualized interface called Premier page purchasing managers log on and order using an interface

customized for their company's needs

While Dells consumer sales are highly visible, its business

sales are a much bigger revenue source

About 15 percent of our total revenue is consumer business

and the rest is B2B says Bob Kaufman, Media Relations

manager of Dell.


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Reduce Bullwhip Effect

Dell constracts special Web pages for suppliers,allowing them to view orders for components theyproduce.

This allows suppliers to plan based on customerdemand

Dells Value Chain


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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 suppliersaccording to the traditional billing schedules.

Low level of inventory and negative working capitalhelps Dell increase its performance.

Dells Value Chain


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What is the main disadvantage of Dell sellingPCs over the Internet?

High Shipping Costs

Economies of Scale

Dells Value Chain


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Dell company cant enjoy EoS (Economies of Scale)in shipping because it sends individual PCs tocustomers from its factories.

Competitors sell through distributors and middlemen

ship their products with EoS using large truck shipments towarehouses and retailers

The transportation cost of a PC relative to its priceis generally between 2-3%.

Dells Value Chain


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How does Dell compete with a retailer whoalready has a stock? (Continued)

Advantages of Direct Sales system over Brickand Mortar system

Price Advantage

Differentiation advantage

Dells Value Chain


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How does Dell compete with a retailer who already has

a stock? (Continued) Price Advantage of Dell

Increase in Dells profit margin Elimination of retailer and distributer margins

Decrease in Inventory Costs 5 days inventory vs. 30-45-90 days inventory

Decrease in costs of materials

Negative Working Capital Suppliers financing Dells growth

Better Forecasts due to better sales information/feedback

Cheaper Prices

Dells Value Chain


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How does Dell compete with a retailer who

already has a stock? (Continued)

Differentiation Advantage of Dell

Feedbacks and Evaluation

Dells Value Chain


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How does Dells supply chain deal with the

bullwhip effect? (Continued)

Bullwhip Effect

The phenomenon in which order variability is amplified as itmoves up the supply chain from end-consumers throughdistribution and manufacturing to raw material suppliers.

Supply Chain Management

Dells Value Chain


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How does Dells supply chain deal with the bullwhip

effect? (Continued)

Materials costs account for about 74% of Dells revenues

Around $21 Billion is spent on material every year

0.1% Decrease in Material Costs

Making Supply Chain Management very critical for Dell

Dells Value Chain


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How does Dells supply chain deal with the bullwhip

effect? (Continued)

Sharing Data with suppliers Flexibility

Investment

Privileged Suppliers

Long time relationship with suppliers Helping suppliers become more like Dell

Dells Value Chain


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Conclusion

Mission High Customization (Mostly based mission on High Customization)

Fast Response

Lowest Cost (Highest Value)

Fast response and cost considerations are not as high as customizationconsiderations.

Benefits Early to Market

Payment Advantage

Customization Option

Expert Supply Chain Management

Dells Value Chain


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References

http://corp.bankofamerica.com/public

http://courses.washington.edu/smartman/DellStumble.htm

http://www.ecommerce-guide.com/news/news/article.php/2013731

http://www.oracle.com/newsletters/information-indepth/lean-supply-chain/jun-

07/dell-supply-chain.html www.isye.gatech.edu/~jvandeva/Classes/6203/BullWhip.ppt

Dells Value Chain
http://corp.bankofamerica.com/publichttp://courses.washington.edu/smartman/DellStumble.htmhttp://www.ecommerce-guide.com/news/news/article.php/2013731http://www.oracle.com/newsletters/information-indepth/lean-supply-chain/jun-07/dell-supply-chain.htmlhttp://www.oracle.com/newsletters/information-indepth/lean-supply-chain/jun-07/dell-supply-chain.htmlhttp://www.isye.gatech.edu/~jvandeva/Classes/6203/BullWhip.ppthttp://www.isye.gatech.edu/~jvandeva/Classes/6203/BullWhip.ppthttp://www.oracle.com/newsletters/information-indepth/lean-supply-chain/jun-07/dell-supply-chain.htmlhttp://www.oracle.com/newsletters/information-indepth/lean-supply-chain/jun-07/dell-supply-chain.htmlhttp://www.oracle.com/newsletters/information-indepth/lean-supply-chain/jun-07/dell-supply-chain.htmlhttp://www.oracle.com/newsletters/information-indepth/lean-supply-chain/jun-07/dell-supply-chain.htmlhttp://www.oracle.com/newsletters/information-indepth/lean-supply-chain/jun-07/dell-supply-chain.htmlhttp://www.oracle.com/newsletters/information-indepth/lean-supply-chain/jun-07/dell-supply-chain.htmlhttp://www.oracle.com/newsletters/information-indepth/lean-supply-chain/jun-07/dell-supply-chain.htmlhttp://www.oracle.com/newsletters/information-indepth/lean-supply-chain/jun-07/dell-supply-chain.htmlhttp://www.oracle.com/newsletters/information-indepth/lean-supply-chain/jun-07/dell-supply-chain.htmlhttp://www.oracle.com/newsletters/information-indepth/lean-supply-chain/jun-07/dell-supply-chain.htmlhttp://www.oracle.com/newsletters/information-indepth/lean-supply-chain/jun-07/dell-supply-chain.htmlhttp://www.oracle.com/newsletters/information-indepth/lean-supply-chain/jun-07/dell-supply-chain.htmlhttp://www.oracle.com/newsletters/information-indepth/lean-supply-chain/jun-07/dell-supply-chain.htmlhttp://www.ecommerce-guide.com/news/news/article.php/2013731http://www.ecommerce-guide.com/news/news/article.php/2013731http://www.ecommerce-guide.com/news/news/article.php/2013731http://courses.washington.edu/smartman/DellStumble.htmhttp://corp.bankofamerica.com/public


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THANK YOU

Dells Value Chain


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L10 - Self Study - Dell's Value Chain

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