Dells Value Chain Essays

Dells Value Chain Essays Dells Value Chain Paper Dells Value Chain Paper Dell’s Value Chain 1. How has Dell used its direct sales and build-to-order model to develop an exceptional supply chain? Dell has used its direct sales and build-to-order model to develop an exceptional supply chain by taking customer feedback very seriously. Dell uses the feedback to further evaluate and when necessary, implement change to improve their supply chain. The company maintains close-knit relationships with customers, and maintains very close, professional relations with their suppliers. Dell collects a larger amount of customer information than is the industry norm. This also works to the companys advantage. The close-knit relationships with customers that Dell maintains allow the company to determine what products must be supplied, and how quickly they must be supplied. By doing so, Dell is able to maintain a continuously low level of inventory, while ensuring that customer demand is adequately satisfied. Dell also has used a different approach than the norm in their supply chain management. Dells strategy is to integrate every single process, from the very beginning, to the very end, without any other interference. Through strategic planning, Dell discovers exactly what it is that customers want. With the information, further research and development is implemented by the company. The company then begins strategically marketing the highest target groups for their products, before product release. Information is then automatically released to suppliers, who can in-turn develop demand projections for the marketed Dell products. This entire system is accomplished in a relatively short span of time, which adds to the exceptional supply chain in force at Dell. 2. How has Dell exploited the direct sales model to improve operations performance? The main way that Dell has exploited the direct sales model to improve operations performance is by establishing an e-commerce model accomplished directly through the Internet. By utilizing the e-commerce model, it allows Dell to bring their products directly to the consumer in a very short time span. Consumers can order their products directly from Dells website, with delivery expected in a matter of a few days. Furthermore, customers can hand-design their own Dell computer system with a handful of mouse clicks. By making this possible to the consumer, the consumer gets exactly the product that they want, designed and loaded with the exact requirements specific to each individual consumer. This allows Dell to maintain very low levels of inventory. The e-commerce model allows Dell to attract thousands of businesses, which encourages bulk ordering of Dells products. Through the e-commerce strategy, Dell also has customized supplier information. Dells suppliers can log-on to view immediate information regarding the current and waiting orders that Dell has, which allows the suppliers to know the exact supply needs of the company, at any given moment. 3. What are the main disadvantages of Dells direct sales model? The main disadvantage of Dells direct sales model is the high cost of shipping Dell products. The computers are shipped directly from the Dell factories, to consumers and businesses worldwide. Because no intermediary is used, the company cannot take advantage of any form of economies of scale, by shipping quantities of products to various destinations. Another main disadvantage is that because Dell handles the transaction from the very beginning to the very end with no other direct company involvement, Dell must also handle all aspects of the transaction, including providing all customer support from beginning to end. Dell must assume all costs that would normally be handled by a retailer or other intermediary, who ships bulk orders to stores for retail. Due to these reasons, Dell experiences an advantage in increased sales from the e-commerce model, but is at a disadvantage by having to bear the full amount of all support related expenses. 4. How does Dell compete with a retailer who already has a stock? Dell competes with a retailer who already has a stock by higher profit margins. The greatest advantage Dell experiences are the direct elimination of all retail and distribution costs for their products. Because Dell does not have to operate multiple locations, warehouses, etc, they can offer their products at lower prices, which attract even more consumers. Dell does not have the same high fixed expenses that their competitors have, who operate multiple factory locations. Dell also competes with retailers who already have a stock by doing just the opposite not carrying a stock. When a consumer wants a particular model of computer, the retailer must have the item in stock. When a customer shops at Dell, the customer designs exactly what they want. A customer can design a very basic, bare-bones model, or a model that includes almost limitless options. The computer is then built in a matter of hours. The customer has his or her own, custom-designed system in a matter of a few days. There is no waiting for out-of-stock products, and Dell holds minimal inventory by utilizing such a well-designed system. 5. How does Dells supply chain deal with the bullwhip effect? The Bullwhip Effect in itself is a situation whereby the variation in orders is heightened as it gradually moves up the supply chain through a specific process. The process moves from consumer to distribution, and then moves to suppliers. To deal with the Bullwhip Effect, Dell is open with sharing knowledge with their suppliers. They hold long-term, intimate relationships with their suppliers, who in-turn can cater to the very specific needs of Dell. Dell also deals with the Bullwhip Effect by keeping constant, vigil watch on demand for their products. Carefully planned management is vital in Dell figuring out the exact demand at any given moment. Dell has accomplished this by constructing web pages for their suppliers to log on to, to give the supplier immediate knowledge regarding current demand (orders). The suppliers then immediately know what the demand is for the components that they supply to Dell for their systems. Suppliers can also see from the web pages how much stock Dell has on-hand of the supplied components at any given moment, giving the suppliers an advantage so as to know what immediate steps need to be taken based on current demand levels. By using such a real-time process, there is no build-up, nor any stagnation of supplies or components, from Dell suppliers. Dells use of this system has virtually eliminated the Bullwhip Effect.