DELL

It’s Operation and How It Makes Work

By: Dian Inda Sari 2008

COMPANY HISTORY

1984At the age of 19 with $ 1,000 in start up capital Micheal Dell founded Dell Computer

with simple vision and business concept – that Personal computer could built to order and sold directly to customer.He believed that:

1. Bypassing distributors and retail dealers eliminated the markups of reseller.2. Building to order greatly reduced the costs and risks associated with

carrying large stock of parts, components and finished goods. 1985Dell build and design the first computer system 1988Dell had raised $ 30 Million in it’s IPO. At this time his capital is $ 85 Million. 1998Dell had a 12% share of PC market in US and became one of market leader in

computer business with Compaq and IBM until now.

Company Tour

Overview

Focus

Leadership

Result

Global

We Make Computing Easy. Like it should be

Our Direct Connection

Why We’re the Industry Leader – Our Product & Service

We Know Enterprise Computing Firsthand

We’re Close to Customers Around the World

OPERATIONS AND STRATEGY - 1 Build-to-Order Manufacturing and

Mass Customization

Dell built its computers, workstations and servers to order, none were produced for inventory. Dell customers could order custom built server and workstation based on their needs of their applications.

This sell-direct strategy meant that Dell had no in-house stock of finished goods inventories and that unlike competitor using traditional value of chain model, it didn’t have to wait for resellers to clear out their own inventories before it could push new models into market place.

Dell Assembly Plants – Austin - Texas, Ireland and Penang Malaysia.

OPERATIONS AND STRATEGY - 2 Traditional PC’s Industry Value Chain (Utilized by Compaq, IBM, HP and Most

Other)

Build-to-Order/Direct Sales Value Chain (Employed by: Dell, Gateway, Micron Electronics)

Manufactured ofPC’s Component

BySuppliers

Assembly of PC byPC Makers (toFill order fromSuppliers and

Keep distributionChannel stock)

Manufactured ofPC’s Component

BySuppliers

PurchaseBy

PC Users

Service andsupport activitiesProvided to PC

Users by reseller(or some PC

Makers – IBM toPC users)

Sales and Marketing

Activities of Reseller to selfInventories ofPC’s on hand

Service andSupport activitiesProvided to PCUsers eithers byPC Makers (viaTelephone, fax,

Email) ect.

PurchaseBy

PC users

Customized Assembly of PC’sBy PC Makers asOrders from PC Buyers come in

OPERATIONS AND STRATEGY - 3 Partnerships with Supplier

Dell believed it made much better sense for Dell Computer to partner with reputable suppliers of PC parts and components rather than to integrate backward and get into parts and component manufacturing on its own.

The advantages:1. Using name-brand component enhanced the quality and

performance of Dell PC’s.2. Getting the volume of components it needed the overall

market supply.3. It feasible to have some of supplier engineers assigned to

Dell product design team and for them to be treated as part of Dell.

4. Dell’s long-run commitment to its suppliers laid the basis for just-in-time delivery suppliers product to Dell assembly in Texas, Ireland, Penang.

OPERATIONS AND STRATEGY - 4 Committed to Just-in-Time Inventory

Practices

Dell's just-in-time inventory emphasis yielded major cost advantages and shortened the time it took for Dell to get new generations of its computer models into the marketplace. New advances were coming so fast in certain computer parts and components (particularly microprocessors, disk drives, and modems) that any given item in inventory was obsolete in a matter of months, sometimes quicker.

Having a couple of months of component inventories meant getting caught in the transition from one generation of components to the next. Moreover, there were rapid-fire reductions in the prices of components—most recently, component prices had been falling as much as 50 percent annually (an average of 1 percent a week).

OPERATIONS AND STRATEGY - 5 Direct Selling

Selling direct to customers gave Dell firsthand intelligence about customer preferences and needs, as well as immediate feedback on design problems and quality glitches.

Management believed Dell's ability to respond quickly gave it a significant advantage over rivals, particularly over PC makers in Asia, that made large production runs and sold standardized products through retail channels. Dell saw its direct sales approach as a totally customer-driven system that allowed quick transitions to new generations of components and PC models.

OPERATIONS AND STRATEGY - 6 Virtual Integration and Information

Sharing

Dell was using technology and information-sharing with both supply partners and customers to blur the traditional arm's-length boundaries in the supplier- manufacturer-customer value chain that characterized Dell's earlier business model and other direct-sell competitors. Michael Dell referred to this feature of Dell's strategy as "virtual integration."16 On-line communications technology made it easy for Dell to communicate inventory levels and replenishment needs to vendors daily or even hourly.

A number of Dell's corporate accounts were large enough to justify dedicated on-site teams of Dell employees. Customers usually welcomed such teams, preferring to focus their time and energy on the core business rather than being distracted by PC purchasing and servicing issues.

Dell gave its large customers access to Dell's own on-line internal technical support tools, allowing them to go to www.dell.com, enter some information about their system, and gain immediate access to the same database and problem-solving information that Dell's support personnel used to assist call-in customers. This tool was particularly useful to the internal help-desk groups at large companies.

OPERATIONS AND STRATEGY - 7 Demand Forecasting

Management believed that accurate sales forecasts were key to keeping costs down and minimizing inventories, given the complexity and diversity of the company's product line. Because Dell worked diligently to maintain a close relationship with its large corporate and institutional customers, and because it sold direct to small customers via telephone and the Internet, it was possible for the company to keep a finger on the pulse of demand—what was selling and what was not.

Moreover, the company's market segmentation strategy paved the way for in-depth understanding of its customers' evolving requirements and expectations. Having credible real-time information about what customers were actually buying and having first hand knowledge of large customers' buying intentions gave Dell strong capability to forecast demand.

OPERATIONS AND STRATEGY - 8 Research and Development

The company talked to its customers frequently about "relevant technology," listening carefully to customers' needs and problems and endeavoring to identify the most cost-effective solutions.

Dell had about 1,600 engineers working on product development and spent about $250 million annually to improve users' experience with its products—including incorporating the latest and best technologies, making its products easy to use, and devising ways to keep costs down. The company's R&D unit also studied and implemented ways to control quality and to streamline the assembly process.

OPERATIONS AND STRATEGY - 9

1. ListenWe gather requirements directly through tens of thousands of customer interaction daily,

organized events, and customer panels. Partnerships with a wide variety of key industry software, hardware and component suppliers give us a uniquely broad perspective on the computing landscape.

2. Solve Many Innovations begin in-house, led by global team of top engineers, product designers and

technical experts. Others begin as a team effort with Dell’s strategic partners. The mission is to deliver innovative and cost-effective solutions that meet today’s real live customer challenges and work seamlessly in existing environments and with other product.

3. ImpactDell is uniquely positioned to impact industry trends. We maintain strong internal development

capabilities. We partner, rather than compete, with top industry technology suppliers and original development manufacturers. We steer enabling industry standards and technologies through industry groups and strategic partners. In this way, Dell Spurs innovation and delivers value to customers.

Listen Solve Impact

Library

www.dell.com www.mhe.com Other related sources of Dell Company.

The End

Medan, 17 August 2008