dell biz mod kshitij
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Dell Business Model analysis
Kshitij Gondhalekar
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Intrinsic Mission and Strategies Adopted in business
Dell leverages its efficient business processes to directly reach out the
customers. It avoids layering of margins by reducing brokerage and
reliance on middlemen.
Zero inventory costing mechanism No requirements on shelf space
It better channelizes resources to optimize procurement, manufacture and
distribution, thereby shunting product obsolescence
Real time feedback mechanism to augment CRM.
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Dells Direct-to-customer approach
Suppliers DELL Consumer
Critical direct path leads to Value for money.Built to order systemMass Customization leading to increased perception of valueBetter designed tailor made service and support systemsStandardized quality metrics with fairly recent technology implemented.
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Product Development
Initial Product Development Process:
Before The New Prod Dev. Process was implemented Dell followed the ad hocmethod. This was characterized by:
Lack of predictability in results
Teams led and guided by programmers with experience.
Loosely defined goals and objectives.
Inadequate funds and inconsistent budgeting practices.
Lack of focus on quality.
New Product Development Process:
Clear definition of Product development goals
Monetary aspects involving the new project are taken into consideration,unless there is strong reason to believe that a business would create value andpass the profitability test, it is not allowed to commence forward
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Product Development ..contd
Adapted from
http://www.oocities.org/mileni
opro/Dell.htm
Build a sample/ working model of the proposed product and put it through rigorous testing.
Prepare manufacture level plans. Document and prepare plans for servicing the same.
Test market or Beta testing initiated. Sales employees are educated on the nuances of the same.
User feedback is used as one of the yardstick of qualifying the product.
Customer experience is gauged and tested. Production is initiated
Acceptance report is prepared based on customer satisfaction to give a viability estimate of the
product
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Order Placed
Order is
Processed
Financial
legitimacy and
credit
Checking whether it
is possible to
assemble the model
according to the
requirements
Sends the order
to assembly
plant
(any one in Austin, or
any other)
Product is test, built
from the parts
which are
manufactured
separately, and
then is Packaged
Shipping of the
orders
(no later than five days
after receipt)
DELLS Supply Chain
www.a2zmba.com
Proctime
through
Follows the FIFO model
SUPPLIERS REVOLVERS
Delivery
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Inventorying Mechanisms
www.a2zmba.com
Build-To-OrderModel
ValueChain
Program
Revolver
or SLCs (SupplierLogistics Centers)
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Management of Dells inventory
Built to order:
Dell follows mass customization, i.e. The customer decides the configuration
required, there is no pre-made product.
This kind of a model very accurately meets customer expectations
Revolving inventory (SLCs):
To reduce the effect of variability in demand Dell mandates the suppliers to
keep some amount of inventory at their warehouses or supplier logistics
centres.
Multiple suppliers share a revolver and also pay a small fee for using the same The inventory in these centres is owned by and charged for by the suppliers to
Dell, charging it by price.
The lean inventory management scenario is shown in the figure that follows
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Local Suppliers
Dell FactoryRevolvers
(SLCs)
Suppliers
3 days of inventory - Inventory turns of 122 per year
Delivery
Supplier Owned Dell Owned
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More about inventory
Dell has vendor managed inventory
Suppliers choose the estimated amount they think they would order. Dell
sets target inventory levels and notes suppliers deviations from targets
Suppliers choose when to restock their revolvers
Dell transfers out inventory on a need basis, on an average every twohours.
It prepares a scorecard to evaluate the management of inventory by a
supplier and reinforces required actions and renews agreements.
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Value chain program
Value chain program reintegrates Dells direct to customer approach back
into the value chain
The primary goal is to increase the speed and information quality back and
forth between Dell and the supply base
It also has a secure extranet for Dell suppliers to co-ordinate and managethe supply chain.
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Supplier metrics
Selection basis:
Quality
Price
On time supply
Feedback reported
Evaluation:
Cost
Delivery time and quality Technology available
Inventory movement rate
Successful use of online and other channels
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Distinct Advantages:
Dell slashes inventory management overheads
Inventory maintenance is reduced to nearly zero
Obsolete material is avoided and transportation costs go down with
numbers Drop in component prices due to large numbers with discounts
Handling cost is slashed down.
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References:
http://www.osnews.com/story/14763/Apple_and_Dell_Business_Models/
www.hindustantimes.com/news/.../Dells_Business_Model.pdf
http://tech.fortune.cnn.com/2011/02/10/how-dell-conquered-india/
http://content.dell.com/in/en/corp/d/corp-comm/cr-ca-business-model
http://www.osnews.com/story/14763/Apple_and_Dell_Business_Models/
http://www.dellogistics.com/why_dell.html
http://usatoday30.usatoday.com/money/smallbusiness/columnist/abrams/2010-12-10-dell-it_n.htm
http://www.authorstream.com/Presentation/aSGuest66690-519583-reverse-logistics/
http://content.dell.com/uk/en/enterprise/by-service-type-business-consulting-operational-strategy
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