Dell: Unlocking Innovation

Dell:

Dell: Unlocking InnovationPresented by Garikayi, Kieran Habeeb, Omari, Patrick and Jakub.Dell: The Early DaysBegan in 1984 by Michael Dell

Initially known as PCs Limited

Changed to Dell in 1988

Began selling through website in 19962002 Dell expanded its product lineBy Garikayi Brasington Madzudzo

Dell is one of the great success stories of the past decadeThe computer company business Michael Dell started while still a student at the University of Texas grew to a multi-billion dollar enterprise guided by the insight that it could bypass computer dealers and could sell directly to customers.Dell dropped out of school in order to focus full-time on his fledgling business, after getting about $300,000 in expansion-capital from his family.

2Dell Business ModelSimple in concept but involves greatcomplexity and precision in actual execution.By Garikayi Brasington Madzudzo3Build to - OrderCustomer configures the product on the web.Order fulfilled within 36 hours.From its early beginnings, Dell operated as a pioneer in the configure to order approach to manufacturing.Customers are aided by configuration management software that enables them to choose from a menu of hardware and software options.

By Garikayi Brasington Madzudzo

Dells business model is to let the customer configure the product on the web and fulfill within 36 hours. Customers are aided by configuration management software that enables them to choose from a menu of hardware and software optionsFrom its early beginnings, Dell operated as a pioneer in the configure to order approach to manufacturing delivering individual PCs configured to customer specifications

4Build-to-Order


Customers are aided by configuration management software that enables them to choose from a menu of hardware and software options.

5Direct SalesDell sells its products to customers using direct sales model via Internet and Telephone network.The direct sales approach is built on two key elements : 1. direct customer relationships.2. products and services targeted at distinct customer segments.Implements a just-in-time manufacturing approach


To minimize the delay between purchase and delivery, Dell has a general policy of manufacturing its products close to its customers. This also allows for implementing a just-in-time (JIT) manufacturing approach, which minimizes inventory cost6Dells Value Web Model


Dells business model is to let the customer configure the product on the web and fulfill within 36 hours.- Customers can check the order status and also get the technical help onlineThe high-tech components, such as microprocessors and software are provided by firms as Intel and Microsoft, they rely on big players.- The low-tech components are provided by small multiple players who compete on prices and availability

7Direct Sales ComparisonIndirect distribution channel of the PC industry

Dells direct distribution channel


A comparison of how dell gets its products to the customer in comparison with other suppliers, notice the stages that dell avoids and this leads to great savings and efficient order fulfilment and low prices.8AdvantagesBrings new products to market quicklyIncreases market shareAchieves high returns on investment in a highly competitive industry.Successful in minimizing inventoryCheap pricesEnhances customers satisfaction


9ReferencesSteven, A.: Information Systems, the foundation of E-business. Fourth edition..Prentice Hall, 2002.Kraemer K., Dedrick J., Yamashiro S.. Refining and Extending the Business Model with Information Technology: Dell Computer Corporation .2000

www.indiana.edu/~tisj/readers/full-text/16-1%20kraemer.pdf http://crito.uci.edu/papers/2002/ImpactofITonPC.pdf www.dell.com


References for the Dell Business Model by Garikayi Brasington Madzudzo10DELL INFORMATION SYSTEMS

By Habib Munir BabbaWHY WE NEED INFORMATION SYSTEMS..

Dell also uses information to manage relationships withcustomers. Senior managers need information to help with their business planning Middle management need more detailed information to help them monitor and control business activities Employees with operation roles need information to help them carry out their duties.Dell: Information System Transaction Processing Systems (TPS)

Decision Support Systems (DSS) Expert Information Systems (EIS)

Order Management Information Systems (DMIS

Office Automation Systems (OAS)

By Habib Munir BabbaTransaction Processing SystemManage customer relationships

Broker between customer and 3rd party maintainers

Call-Centre uses system to troubleshoot customer problems

Develops computerised FAQs (Frequently Asked Questions)

By Habib Munir BabbaDell also uses information to manage relationships with customers. It outsources customer service but operates as broker between the customer and the third-party maintainers (TPMs) that actually provide service. Dells call center service people trouble-shoot the customers problem and trigger one electronic message to ship the needed parts and another to dispatch a TPM to the customer. As a result, Dell knows the kinds of problems customers face, the parts causing the problems, and the performance of its TPMs. Dell uses this information to develop computerizedsets of frequently asked questions (FAQs) and problem solutions, to train service representatives.13 Order routed to finance department

Payment approved, order referred to engineering

Transferred to plant, with order specification

Order checked against inventory

Production begins.

Order Management System

By Habib Munir Babbaorder is first routed to the finance department, where thecustomers means of payment is checked. If approved,the order then goes to engineering, which reviews it to besure that the desired configuration is technically feasible.Then it goes to the plant, where a worker receives a printoutof the order, with complete information on hardwareand software configuration and any special requirements.The order is then checked against inventory to ensure thatthe required parts are available in the build area

14Dells Success: How IT HelpedThe contributionof IT to operational efficiency is reflected in measuresrelated to procurement and inventory, manufacturing production,cash management, and administrative overhead

By Habib Munir BabbaThe contributions of Dells IT investments to the firms performance are difficult to disentangle systematically from the other inputs to production and from the many process innovations continually made at all stages of the value chain. However, it is clear that IT and the information it provides, along with process improvement, have contributed to Dells exceptional performance. The contribution of IT to operational efficiency is reflected in measures related to procurement and inventory, manufacturing production, cash management, and administrative overhead.

15Dell - Information Access RequirementsUnique business modelConnecting participantsReal-time responseVirtual integration

by Jakub Gieryn

Based on: Refining and Extending the Business Model with Information Technology: Dell Computer Corporation Kraemer K., Dedrick J., Yamashiro S., The Information Society 16:5-21, 2000 www.indiana.edu/~tisj/readers/full-text/16-1%20kraemer.pdf [15/01/12]The Impacts of Information Technology, the Internet, and Electronic Commerce on Firm and Industry Structure: The Personal Computer Industry Dedrick J., Kraemer K., 2002 http://crito.uci.edu/papers/2002/ImpactofITonPC.pdf [14/01/12]www.dell.com

16Unique business model:knowledge drives salesTrendsTechnology Know-how Competitionby Jakub Gieryn

Connecting participants : team effort to sell & service

by Jakub Gieryn

Real-time response:key to customer care

by Jakub Gieryn

Virtual integration

by Jakub Gieryn

Dell: Management StructureBy Kieran SaeedStrategicTacticalOperationalHere at Dell, we have 3 different management levels. Strategic, Tactical and Operational. We believe, the Strategic level is WHAT we aim to do. Tactical is HOW we do it and Operational is us DOING it. 21Strategic LevelPrioritise customer satisfaction

Disdain inventory

Fully customised PCs

By Kieran Saeed

At the Strategic level it is important for us to ensure that our customers receive the best service we can possible offer. Our focus is on what the customer wants. We offered fully customisable PCs where the customer was able to choose what they wanted and how they wanted their PC. 22Tactical LevelMinimum stock

Strategically placed warehouses

Agility in staff

36 hours maxBy Kieran Saeed

There was a time at Dell when the neighbouring companies around us had 50-60 days of assembled stock. We had 30. We aimed to get it down to 20, and then 10 and eventually we had none at all. We aimed to get the completed computer to the customer in 36 hours maximum and only pay the supplier once the customer has placed the order. 23Operational LevelKeep staff motivated

Offer technical support, different levels available to buy

Conduct surveys and continue to ask for customer feedback By Kieran Saeed

Allowing staff to buy shares into the company was very popular, at the time. Other similar companies running a similar approach had less than half their staff participating as we did, and we feel this motivates staff to work harder as they are building something of their own. Once a customer 24How Dell integrates its supply chainA Supply Chain encompasses all activities in fulfilling customerdemands and requests

By Omari KondoThe activities are associated with the flow and transformation of goods from the raw materials stage, through to the end user, as well as the associated information and funds flows.25There are four stages in supply chainThe supply network,The internal supply chain (which are manufacturing plants),Distribution systems, The end users.By Omari Kondo

26Supply Chain

By Omari Kondo

Moving up and down the stages are the four flows: Material flow, service flow, information flow and funds flow. 1) E-procurement links the supply network and manufacturing plant, 2) E-distribution links the manufacturing plant and 3) The distribution network, and 4) E-commerce links the distribution network and the end users.

Dell uses Build-to-order sles model 27Supply Chain in a Dell way.Direct Build-to-orderDell has been following its unique direct build-to-order sales model for more than 20 years. Customers can plan their own configuration and place orders directly with the company via the phone or its Web site. Over the years, Dells supply chain efficiencies and direct sales gave it a competitive advantage

By Omari Kondo

Dell Supply chain works as follows: After a customer places an order, either by phone or through the Internet on www.dell.com, Dell processes the order

through financial evaluation (credit checking) and configuration evaluations (checking the feasibility of a specific technical configuration), which takes two to three days, after which it sends the order to one of its manufacturing plants. These plants can build, test, and package the product in about eight hours. The general rule for production is first in, first out (FIFO), and Dell typically plans to ship all orders no later than five days after receipt. (There are, however, some exceptions. For example, Dell may manipulate the schedule when there is a need to replace defective units or when facing large customers with specific service-level agreements (who have nonstandard quoted manufacturing lead times) for their orders).

In this supply chain, Dell Computer is the captain of thechain; the company selects suppliers, forges partnerships with othermembers of the supply chain, fulfills orders from customers and followsup the business transaction with services.

Dell has significantly less time to respond to customers than it takes to transport components from its suppliers to its assembly plants. Most of the suppliers are located in Southeast Asia. So it takes about seven days for air shipments and takes up to 30 days by water and ground.

To compensate for long lead times and buffer against demand variability, Dell requires its suppliers to keep inventory on hand in the Austin revolvers (for revolving inventory).Revolvers or supplier logistics centers (SLCs) aresmall warehouses located within a few miles of Dells

Dell does not own the inventory in its revolvers;this inventory is owned by suppliers and charged toDell indirectly through component pricing. The costof maintaining inventory in the supply chain is, however,eventually included in the final prices of thecomputers. Therefore, any reduction in inventory benefitsDells customers directly by reducing productprices. Low inventories also lead to higher productquality, because Dell detects any quality problemsmore quickly than it would with high inventories.28Challenging TimesDell lost the leading in 2006In 2006 however, Dell faced several problems. Many customers complained about long delays in supplies. The problem of Sony battery cells in its laptops brought undesirable media hype to the company. Increasing discontent of customers led to a slowdown in sales. Consequently, Dell lost its market leadership to Hewlett-Packard Co. (HP). By 2009 Dells Market Share in US and Worldwide (2009) compared to other top PC makers was still under HP.

By Omari Kondo

http://www.casestudyinc.com/dell-supply-chain-case-study

29Referenceshttp://www.casestudyinc.com/dell-supply-chain-case-studySteven, A.: Information Systems, the foundation of E-business. Fourth edition..Prentice Hall, 2002.Saunders,R.: Business the Dell Way, 10 Secrets of the Worlds Best Computer Business.www.dell.com

By Omari Kondo

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Dell: Unlocking Innovation