dell's value chain
TRANSCRIPT
Dell’s Value Chain
Supply Chain Management
Mert CanlıEngin BaliCan Aytekin
History Founded by Michael Dell in 1984 The single concept: Selling computer
systems directly to customers Designed and built the first computer
system of its own design in 1985 Was one of the first computer
companies to send a technician to homes to service personal computers in 1985
Dell’s Value Chain
History Introduced the 316LT, the company’s 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
Dell’s Value Chain
History For the first time, Dell achieves No. 1
ranking in global market share in 2001
Dell’s Value Chain
Dell’s Value Chain
How has Dell used its direct sales and build-to-order model to develop an exceptional supply chain?
Dell’s Value Chain
Close relationship with customers and suppliers
First-hand and pure customer feedback
High volumes of customer information
Huge amount of customer information
Exceptional and Excellent Supply Chain
ANALYSE
“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.
Dell’s 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
Dell’s 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.
Dell’s Value Chain
Dell’s Value Chain
Customization and quick response Dell
uses the Internet to sell its products offers 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
Dell’s Value Chain
Attract large business customers
To facilitate B2B sales, the Dell site offers each corporate customer an individualized interface called “Premier page” purchasing managers log on and order using an interface
customized for their company's needs While Dell’s 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
Dell’s 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.
Dell’s Value Chain
What is the main disadvantage of Dell selling PCs over the Internet?
High Shipping Costs
Economies of Scale
Dell’s Value Chain
Dell company can’t 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%.
Dell’s 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
Dell’s Value Chain
How does Dell compete with a retailer who already has a stock? (Continued) Price Advantage of Dell
Increase in Dell’s profit margin Elimination of retailer and distributer margins
Decrease in Inventory Costs 5 days inventory vs. 30-45-90 days inventory Decrease in costs of materials
Negative Working Capital Suppliers financing Dell’s growth
Better Forecasts due to better sales information/feedback
Cheaper Prices
Dell’s Value Chain
How does Dell compete with a retailer who already has a stock? (Continued)
Differentiation Advantage of Dell
Feedbacks and Evaluation
Dell’s Value Chain
How does Dell’s 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 Management
Dell’s Value Chain
How does Dell’s supply chain deal with the bullwhip effect? (Continued)
Materials costs account for about 74% of Dell’s revenues
Around $21 Billion is spent on material every year
0.1% Decrease in Material Costs
Making Supply Chain Management very critical for Dell
Dell’s Value Chain
How does Dell’s supply chain deal with the bullwhip effect? (Continued)
Sharing Data with suppliers Flexibility
Investment
Privileged Suppliers
Long time relationship with suppliers Helping suppliers become more like Dell
Dell’s Value Chain
Conclusion
Mission High 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.
Benefits Early to Market Payment Advantage Customization Option
Expert Supply Chain Management
Dell’s Value Chain
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Dell’s Value Chain
Supply chain management is a set of approaches used to efficiently integrate suppliers, manufacturers, warehouses, and customers so that merchandise is produced and distributed at the right quantities, to the right locations, and at the right time in order to minimize system wide costs while satisfying service-level requirements.
What is Supply Chain Mgt.?
What Is Supply Chain Management?What Is Supply Chain Management?