Dells Value ChainSupply Chain ManagementMert CanlEngin BaliCan Aytekin
History Founded by Michael Dell in 1984The single concept: Selling computer systems directly to customersDesigned and built the first computer system of its own design in 1985Was one of the first computer companies to send a technician to homes to service personal computers in 1985Dells Value Chain
History Introduced the 316LT, the companys first notebook computer in 1989 Joined the top-five computer system makers worldwide in 1993 Earning appr. $1 million per day 7 months after the launch of dell.com in 1996 Introduced E-Support, an online tool to provide technical support to customers in 1999
Dells Value Chain
History For the first time, Dell achieves No. 1 ranking in global market share in 2001Dells Value Chain
Dells Value Chain
How has Dell used its direct sales and build-to-order model to develop an exceptional supply chain?Dells Value ChainClose relationship with customers and suppliers First-hand and pure customer feedbackHigh volumes of customer informationHuge amount of customer informationExceptional and Excellent Supply ChainANALYSE
These relationships with customers and suppliers allow us to know what we must be able to supply in real time and then very quickly and precisely meet that demand while maintaining low inventory. says Dave Schneider, continuous improvement engineering manager of Dell. Dells Value Chain
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
Dell brings products to market faster than its competitors
Dell uses direct sales via Internet, whereas Traditional PC manufacturers previously assemble PCs ready for purchase at retail stores.
PCs have life cycles of only a few months
Thus, Dell enjoys early-to-market advantage.
Dells Value Chain
Dells Value Chain
Customization and quick responseDelluses the Internet to sell its productsoffers a virtually unlimited variety of PC configurations.
Buyers can click through Dell and assemble a computer system piece by piece, based on their budgets and needs
Dells Value ChainAttract large business customers
To facilitate B2B sales, the Dell site offers each corporate customer an individualized interface called Premier pagepurchasing managers log on and order using an interface customized for their company's needsWhile 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.
Reduce Bullwhip Effect
Dell constracts special Web pages for suppliers, allowing them to view orders for components they produce.
This allows suppliers to plan based on customer demand
Dells Value Chain
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 suppliers according to the traditional billing schedules.
Low level of inventory and negative working capital helps Dell increase its performance. Dells Value Chain
What is the main disadvantage of Dell selling PCs over the Internet?
High Shipping Costs
Economies of Scale
Dells Value Chain
Dell company cant enjoy EoS (Economies of Scale) in shipping because it sends individual PCs to customers from its factories.
Competitors sell through distributors and middlemen ship their products with EoS using large truck shipments to warehouses and retailers
The transportation cost of a PC relative to its price is generally between 2-3%.
Dells Value Chain
How does Dell compete with a retailer who already has a stock? (Continued)Advantages of Direct Sales system over Brick and Mortar system
Price Advantage
Differentiation advantage
Dells Value Chain
How does Dell compete with a retailer who already has a stock? (Continued)Price Advantage of DellIncrease in Dells profit marginElimination of retailer and distributer margins
Decrease in Inventory Costs5 days inventory vs. 30-45-90 days inventoryDecrease in costs of materials
Negative Working CapitalSuppliers financing Dells growth
Better Forecasts due to better sales information/feedback
Cheaper PricesDells Value Chain
How does Dell compete with a retailer who already has a stock? (Continued)
Differentiation Advantage of Dell
Feedbacks and Evaluation
Dells Value Chain
How does Dells supply chain deal with the bullwhip effect? (Continued)
Bullwhip Effect
The phenomenon in which order variability is amplified as it moves up the supply chain from end-consumers through distribution and manufacturing to raw material suppliers.
Supply Chain ManagementDells Value Chain
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 DellDells Value Chain
How does Dells supply chain deal with the bullwhip effect? (Continued)
Sharing Data with suppliersFlexibility
Investment
Privileged Suppliers
Long time relationship with suppliersHelping suppliers become more like DellDells Value Chain
Conclusion
MissionHigh Customization (Mostly based mission on High Customization)Fast Response Lowest Cost (Highest Value)Fast response and cost considerations are not as high as customization considerations.BenefitsEarly to MarketPayment AdvantageCustomization Option
Expert Supply Chain Management
Dells Value Chain
References
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.htmlwww.isye.gatech.edu/~jvandeva/Classes/6203/BullWhip.ppt
Dells Value Chain
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