Dell Supply Chain AnalysisGroup 11:Xiangyuan Ji; Nasim Ghanizadeh; Shunan Qiu; Masoumeh Ghazinejad; Somayeh HeidariMentor: Heidi C. DreyerSep-09-2012Outlines•What’s direct model?•Dell’s position in PC market;–Dell’s competitive strategies;–Implied demand uncertainty analysis;•Dell’s supply chain capabilities;–Facilities;–Inventories;–Transportations;–Information;–Sourcing;–Pricing;–Responsive supply chain;•Strategic fit;•Limitations;•Challenge and proposals for emerging markets;Several supply chain models in push/pull viewWhat’s Direct Model?Build-to order (Direct Model)Make to stock(HC, Lenovo)Pushproduction Pull productionDell’s Position in PC market Competitive Strategy:Dell chooses the customers whoprioritize Service level: high customization, etcVariety: high product variety Quality: reasonable quality Price: reasonable priceLead time: approximately one weekImplied Demand UncertaintyImpact of customer needs on implied demand uncertaintyConclusion:The competitive strategy in meet high variety and service level contribute to Dell’s high implied demand uncertainty.Dell SC Capabilities1.Facilities2.Inventory3.Transportationrmation5.Sourcing6.Pricing7.CustomerserviceFacilities•Location:Regional approach, suppliers’facilities built next to door•Capacity:Lowest raw material shipping time,perform intended functions,littleexcess capacity will be moreefficient per unit;high-utilizationfacility difficult to respond todemand fluctuations，customercould conveniently send orders viainternet and telephone.Summary: Dell’s facilities strategy reduce inbound shipping time, and the logistics cost, and increase service level.Inventories•Safety Inventory:on-site inventories to copy with the next few hours of orders•Seasonal Inventory:•Level of Product Availability(time):High Level and just-in-time Delivery4 days across the entire operationSummary: Dell’s low inventories strategy minimizes inventory and overstock, therefore it could meet customer high variety by quickly transferring to latest products.Transportation•Leave it to the Suppliers•Design of Transportation Network:Air Networks mostly in Asian Market: Shanghai, Taiwan,Singapore, Hong Kong•Choice of Transportation Mode:Summary: Dell’s transportation strategy could minimize the production lead time, and also could provide high service level by shipping products directly to customers’ home.Information•Push Versus Pull•Coordination and Information Sharing•Forecasting and Aggregate Planning: how to make and to what extent to rely on•Enabling Technologies:EDI, Internet, Extranet, B2BiSummary: Shared Information strategies could realize supply continuity. Thereby it could meet the high customization and product availability.Sourcing•In-house or Outsource•Supplier Selection:50 suppliers•Procurement:Consolidated supply, 80% of procurementsto ensure low transaction costsSummary: Stringent supplier selection criterion could increase product availability, and reduce supply uncertainty.Pricing& Customer Service•Pricing–Eliminating the by distributors and retails as well as the added value;–Pricing is not Dell’s main strategy, but Dell provides a reasonable price with good quality.•Customer Service–Customer orders conveniently via phone and internet;–Shipping the products to customers’ home;–Service Center is dedicated in Dell’s brands.Summary: Dell’s strategies in pricing and customer service could provide products with high service level and reasonable price.Responsive Supply Chain .........Supply chain responsiveness includes a supply chain's ability to do the following (Chopra & Meindl, 2010):•Respond to wide ranges of quantities demanded•Meet short lead times•Handle a large variety of products•Build highly innovative products•Meet a high service level•Handle supply uncertaintyConclusion: Dell realize a supply chain with high variety , service level , and flexible to hand supply uncertainty , Dell supply chain is high responsive.Why it works well 1.Facilities2.Inventory3.Transportationrmation5.Sourcing6.Pricing7.Customer service Service level: high customization, etcVariety: high varietyQuality: Reasonable qualityPrice: Reasonable priceLead time: approximately one week Strategic FitHigh implied Uncertainty VS. Responsive SCWhy it works wellStrategic Fit--Intercompany Interfunctional Scope•Dell SC considered different functions inside the company;•Dell SC considered different stages;•The intercompany interfunctional scope could obtain the maximize profitability .Limitations of Direct Model•Time:–Relative long lead time for customers(one week);•Cost:–Suppliers’ next to door facilities increase suppliers’ cost;–High delivery cost, especially for rural areas;•Service Level:–Complex and time-consuming after sale service;–Low inventories may impact in production continuity;–Lack of first hand experience before buying;•Variety–Limited diversity due to Dell’s commitment to Intel;•Innovation–Less innovative, relying on suppliers’ intellectual property.Challenges in Emerging Markets•Printers and TVs markets–Difficulties to make outsourcing printers work seamlessly with dell’s products;–Less innovative;–Competitors start to sell online;•New geographic markets–More expensive than other competitors in low-end products;–Customers dislike to buy on the phone or internet;–Expensive cost in delivery, service and support in rural areas;–Limited diversity and higher cost due to Dell’s commitment to Intel;–inability to serve all market needs due to limited vendors;–Requirement for better information and communication technology.•Printers and TVs markets–More innovative;–More TVs displaying in public places to raise customer awareness;–More development in high-end products;•New geographic markets–More product availability and diversity in low price products; –Long term cooperation with dedicated logistic companies or huge wholesalers to reduce the delivery cost (e.g. Amazon);–More localized channels to place and pay orders;–Setup franchisee to provide customer service and support.Proposals for DellThe End. 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