NIIT UNIVERISTY

Supply Chain Management Dell Computers

9/24/2013

Submitted by:

Abhishek Vishwakarma (P301311CMG206)

Anuj Kumar Yadav (P301311CMG215)

Priyanka Singh (P301311CMG259)

Shweta Sharma (P301311CMG275)

Varun Singh (P310311CMG285)

Table of Contents Industry Overview ................................................................................................................................... 3

Growth drivers of the Indian IT hardware ecosystem ............................................................................ 4

Major Market Players in India ................................................................................................................. 5

Dell - Company Background .................................................................................................................... 6

Suppliers .................................................................................................................................................. 7

Supplier 1: Akustica ............................................................................................................................. 7

Supplier 2: Advanced Micro Devices ................................................................................................... 8

Process Flow Layout 1 ........................................................................................................................... 10

Process Flow Layout 2 ........................................................................................................................... 11

Supply Chain .......................................................................................................................................... 12

Virtual Integration ................................................................................................................................. 12

Key Principles for Dell Business Model ................................................................................................. 13

Just in Time ................................................................................................................................... 13

Capacity Management .................................................................................................................. 14

Kaizen Process ............................................................................................................................... 14

Trade Documentations ......................................................................................................................... 16

ii) FORM A1/A2: RBI form A2 is for Application for withdrawing of foreign exchange. It is

primarily used for: ............................................................................................................................. 16

Supply chain drivers .............................................................................................................................. 20

References………………………………………………………………………………………………………………………………………26

Industry Overview

The Computer Hardware industry consists of companies engaged in assembling and

manufacturing computers, computer hardware and computer peripherals. The industry

includes storage devices, keyboards, printers, monitors, mouse and other pointing

devices, Webcams and PC cameras, as well as ATM machines. Some operators,

particularly brand owners, also provide a broad range of services, including support

services. Professional services, such as IT consulting, systems integration and network

management, are also provided by some operators. Furthermore, some firms also

develop customised software for their clients to support business activity.

To buoy growth in the coming years, the industry is expanding to emerging markets,

where rising disposable incomes are boosting these regions’ demand for computers and

hardware. Complete computers account for the majority of industry revenue in 2013.

This segment includes personal computers (PCs); mainframes, super computers and

servers; and special use computers, which are designed for specific uses by a variety of

downstream industries and for personal use.

According to KPMG report the domestic hardware market comprising desktops, laptops,

servers, printers, storage, networking peripherals is the largest segment within the

domestic IT-BPO market. The segment is expected to reach revenues of nearly USD 13

billion.

Figure 1- Source: NASSCOM Strategic Review 2012

This growing market, which is currently sized at USD 13 billion, has been led by BFSI,

Manufacturing and Government, which have the maximum share in hardware spend in

India. Two factors such as infrastructure requirement in public sector, capital-intensive

nature of manufacturing firms and increasing need or modernization of banks has been

driving the spending of these three verticals. While these three verticals lead the market

in the current scenario, sectors such as Communications and Media, Financial Services

and Healthcare are expected to ride the next wave of growth witnessing growth rates of

12%, 11.6% and 11.4% respectively.

Growth drivers of the Indian IT hardware ecosystem

The key drivers of the Indian IT hardware ecosystem are:

Growth in per capita income and corporate spend on hardware: Nearly 10

million households now have income levels above USD 10,000 per annum

in 2012. Transformation of IT hardware from an aspiration to a utilitarian

need has made these products more affordable for people

Government focus on digital education: Various state governments in the

country, like Tamil Nadu and Uttar Pradesh, have mandated laptops for all

school children. This is driving a massive spike in the demand for laptops

and other computer hardware

Increasing spending from IT services industry: IT and ITES industries

continue to drive the demand for the IT equipment. With Indian firms

adopting automation, the demand for IT equipment is increasing

Need for innovative products at low cost: Innovative low cost products like

the Aakash tablet are also driving demand from both consumers as well as

the government.

Major Market Players in India

The PC market in India is dominated by few top players which makes this market fairly

competitive. According to latest report from Infotech Lead HP is leading the PC market —

desktop, notebook and tablets — in India with 25.4% share in the second quarter of 2013

followed by Lenovo is in the second position with 8.2% PC market share. HP increased

its market share to 25.4% in Q2 2013 from 10.9% in Q2 2012 on account of a deal for

notebooks from government.

Lenovo’s PC market share decreased to 8.2% from previous 9.7%. Acer too showed a

decline to 8% from 10.8%. The major loser however is Dell with 7.3% market share from

previously existing 10.9%. Total PC shipments in India rose 27.2% to 47, 32,410 in the

second quarter of 2013.

Figure 2- Source: Infotech Lead

Dell’s efficient supply chain management practices are widely acknowledged and have

been rated 2nd in Gartner’s Supply Chain Magic Quadrant. As customers demand for

better quality, faster deliveries, and lower costs, the need to better manage information

using ERP and CRM systems arises. Dell uses a hybrid ERP and CRM module for a much

incorporated design for collaboration among departments. Dell’s lean system has proven

to be successful with lower operating cost and higher margin. To ensure that Dell

produces and delivers the best service, it has standardized its entire organization and

also has successfully managed to certify itself with a few international standards. Dell

also manages its vendor very carefully ensuring that they are in the same track with Dell

on business optimization with a lean and go green approach. This study takes a look at

the supply chain management, lean operation and cost optimization of Dell Computers.

Dell - Company Background

Dell was founded by Michael Dell in 1984, while he was still a student at the University of

Texas in Austin. From its very first steps, the direct sales model was adopted. At the

beginning computers were sold over the phone and they were built according to the

customer specifications. After a short break of using the retail channel from 1990 to

1994, Dell returned to its direct model and grew rapidly in the mid 1990’s, thus becoming

in 1999 the number one PC seller in the United States and number two worldwide.

Dell’s headquarters is in Round Rock, Texas and has 6 manufacturing plants, business

centres and support offices around the globe. Dell started its operation in Malaysia by

Opening its first plant in 1995 and its second global business centre based in Cyberjaya

in 2007. Dell’s product offering are desktops, notebook, servers, storages, switches and

information technology peripherals.

Dell’s success remained for the following years, however could not entirely avoid the

general crisis of the PC industry of the new millennium. Dell’s growth rate has fallen,

resulting in a fall in its stock price. However, Dell has managed to remain a successful

company, as its growth rate “continues to outpace the industry as a whole”. Apart from

this, Dell has decided to enter new markets and, thus, expand its product portfolio.

Michael Dell’s strategic choices and his effective way of realizing them have played a

significant role in Dell’s success story. The key element of his successful business model

of the company is its supply chain management; hence, many theorists of Supply Chain

Management have tried to investigate Dell’s SC strategies, and several companies have

attempted to “copy” Dell’s business model, without success however. This fact shows

the complexity of Dell’s SC strategies and its unique way of putting them into practice.

The core elements of Dell’s business model are its direct sales model, usually referred as

“direct model”, and the build-to-order strategy.

Quality of a product and the image of the company are crucial for business continuity

and Dell does not taken this issue lightly. Among the certification Dell has qualified are,

ISO 9001, ISO 20000, ISO 27001, ISO 14004 and OHSAS 18001 (Dell, 2012c).

Suppliers

Dell keeps track of it supplier’s activity and records them (Blanchard, 2003). This statistics

are later used during a Quarterly Business Review (QBR). In this QBR is attended by all of

it suppliers and to discuss on the performance of previous quarter and also to qualify all

the major suppliers. Using the performance report, Dell awards the percentage of parts

to be supplied by each supplier. With 30 suppliers providing 75% of the inventory, the

suppliers make it a standard practice to hold 8 to 10 days’ supply of the inventory in SLC.

Dell has about 140 supply chain partners and all these partners are help upon Social and

Environment Responsibility (SER) that Dell has set around work ethics, fair labour, and

providing safe working environment (Dell, 2012g). Dell practices supplier tiering from

Tier 1 to Tier 3 based on criticality to business, level of risk and complexity of contract.

Tier 1 partners are requires to achieve and maintain a few certification namely, the ISO

14001 environmental management system standards, the OHSAS 18001 occupational

health and safety management system standard and ISO 9001 quality management

standard.

Diversity is a key aspect of Dell’s business model. Dell welcomes supplier from

businesses that are owned by individuals of diverse backgrounds. By this, Dell promotes

entrepreneurship and gives everyone equal opportunity without neglecting individuals

with special need veterans and minorities. Dell looks at a long term business relationship

with its partners. The processes are very transparent and the information is jointly shared

for a better customer experience. With the QBR in place, Dell together with its suppliers

joins to identify problems and bottle necks in the process and collaborates for a solution

and ownership is delegated to rectify the problem.

The two major suppliers for Dell are Akustica and AMD.

Supplier 1: Akustica

Akustica was founded in 2001 in Pittsburgh, PA, to commercialize acoustic CMOS MEMS

technology licensed from Carnegie Mellon University. Akustica holds the exclusive

license to these patents and has developed additional technologies to support the

company's mission to create and commercialize a new generation of CMOS MEMS

microphone products. In 2006, Akustica introduced the world's first and only single-chip

digital-output microphone. Since introduction, Akustica’s line of digital MEMS

microphones has been chosen by top-tier laptop manufacturers for their ease of

integration, consistent performance and excellent voice quality.

In 2009, Akustica was acquired by Robert Bosch, and is now a wholly owned subsidiary

of the Bosch Group. As part of the Bosch Group, Akustica has access to the talent,

expertise and experience of one of the true pioneers in MEMS technology. Bosch has

been actively researching microsystem technology since 1988, and has developed a

complete line of MEMS products for the automotive, industrial and consumer electronics

markets. With more than 2 billion MEMS sensors shipped, Bosch is a recognized leader

in the MEMS industry.

The company is a leading supplier of digital-output microphone products that are

improving voice input quality in a host of voice-enabled applications, from Internet

telephony on notebooks to PC camera modules and mobile phones. Major customers

include Dell, Fujitsu. Since Akustica microphones were introduced in 2011, the

semiconductor industry has recognized Akustica’s CMOS MEMS technology with

accolades and honours, including an EDN Innovation award, an Electronics Products

Magazine “Product of the Year” award, and most significant Leapfrog technology of the

year from Electronic Design readers.

Supplier’s Supplier

Inertial, magnetic and pressure sensors, as well as sensor-fusion software for Akustica

are supplied from Bosch Sensortec, another Bosch Group company.

Supplier 2: Advanced Micro Devices

Founded in 1969 and headquartered in Sunnyvale, California, AMD designs and

manufactures graphics cards and microprocessors that power millions of the world’s

personal computers, tablets, gaming consoles, embedded devices and cloud servers.

Dell offers a full range of servers featuring AMD processors. The trends in enterprise

computing are driving down two distinct paths: toward greater performance and

scalability or toward greater energy efficiency and value. AMD uniquely addresses these

two markets.

AMD’s next generation of AMD Opteron™ processors, based on the new “Piledriver”

core architecture, the AMD Opteron™ 6300 series processors and AMD Opteron™ 4300

Series processors. Both processor families are designed to help customer get the

performance they need at the desired price, while offering offer low acquisition costs

that help to reduce overall TCO.

The current generation of AMD processors helps enable these features, while offering

improved energy efficiency in certain operating modes when compared to previous

generation technology.

AMD’s “Richland” mobile processor increases both CPU and graphics

performance while decreasing power consumption resulting in improved

battery life

AMD’s latest A8 and A10 Trinity APU’s for desktops offer greater power

efficiency than previous generation technology and consume as little as

1.08 W of power in idle mode.

AMD technology also supports out-of-band computer management and wakeup, based

on the Desktop and Mobile Architecture for System Hardware (DASH). Out-of-band

management offers enterprises the ability for remote power management and PC

wakeup.

Supplier’s Supplier

Unimicron Technology Corporation (UMTC) located in Taiwan, is a manufacturer of High

Density Interconnection (HDI) boards for cell phones and notebooks, PCBs for

automobiles, Flip Chip Ball Grid Array (FCBGA) and other products for the consumer

electronics, portable communications and personal computer industries. UMTC stands

as the top supplier for AMD.

Process Flow Layout 1

Figure 3- Source: Dell

The above figure shows the factory design layout for a typical Dell manufacturing plant.

Upon order being received from the sales department, a credit check will be run on the

customer. Once the order is pushed to manufacturing, the line operator will be fed the

custom specification of the model through a unified communication system. There are 7

stations in line 1, besides the line operator that receives the order, the other 6 stations

operator that will several line operators to assemble the chassis, motherboard,

processor, ram, hard disk and power supply. The last operator will push the assembled

machine to Line 2. The process here is automated where the operating system, relevant

drivers and software’s is loaded to the hardware and pushed to a burn test.

Once the hardware passed the burn test, a line operator will be label the hardware with a

unique 7 digit alpha numeric code and sends it for boxing. Another operator will check

the finished hardware for any physical defect before boxing. Since all of Dell’s

manufacturing plants are located in free trade zones, the hardware’s will need to go

through a customs inspection before being delivered to the logistic hub. Once in the

logistic hub, the finished goods will be segregated to its destination by country, then

state, and then district before dispatching them for sale to final customer by distributor

and then the retailer.

Process Flow Layout 2

Figure 4- Source: Dell

Dell specializes in build to order with low inventory and low capital (Kapuscinski, et al.,

2004). With this global strategy, Dell has the edge over the competition as the pioneer of

build to order. With its Customer Factory Integration (CFI) offerings, selling service

contract is no longer about persuading customer to buy something that they don’t

require but fulfilling customers business need thus allowing Dell to lock in the customer

by building scales and efficiency that stands against the competition (Jackson, 2011).

With a uniform approach of manufacturing from hardware as simple as a mouse to as

complex as 4 socket blade server, the manufacturing process remains the same. The line

operators require very less training before they can be in production line. This also

eliminates downtime in the event of shortages of manpower as training an operator from

one line to another takes less than an hour for desktop and less than 4 hours for a server.

Supply Chain

Figure 5- Source: Dell

The above figure explains indirect and direct distribution channel for Dell. In the indirect

channel supplier send the product to PC maker who makes the product and send it to

distributor. The distributor further sends the product to retailers/resellers/integrators for

sale to final customer.

On the other hand in the direct distribution channel the suppliers send the product to

Dell who finally makes the sale to final customers. The direct model refers to the fact that

Dell does not use the retails channel, but sells its PCs directly to customers through its

website, Dell.com. This way the intermediary steps that may add time and cost are

eliminated, and Dell is directly linked to its customers. In the case of large customers, the

direct relationship is upgraded to virtual integration.

Virtual Integration

Dell set out to develop long-term relationships with select, name-brand PC component

manufacturers. It also requires its key suppliers to establish inventory hubs near its own

assembly plants. This allows the company to communicate with supplier inventory hubs

in real time for the delivery of a precise number of required components on short notice.

This “just-in-time,” low-inventory strategy reduces the time it took for Dell to bring new

PC models to market and results in significant cost advantages over the traditional

stored-inventory method. This is particularly useful in a market where old inventory is

quickly categorised as obsolete. Dell openly shares its production schedules, sales

forecasts and plans for new products with its suppliers. This strategic closeness with

supplier partners allows Dell to reap the benefits of vertical integration, without requiring

the company to invest billions setting up its own manufacturing operations in-house.

The other reason for success of Dell’s supply chain is appropriate coupling of process

and people element.

SCM Capabilities Processes People

Demand management Direct model/Build to order Maniacal about execution/

Bias for action

Internal collaboration Information technology Culture of information

sharing

Leverage partners Linked partner planning and

execution

Value of personal/business

relationship

Business fundamentals Balance sheet & P&L Rewarded for decreasing

cost

Table 1- Source: Dell

Key Principles for Dell Business Model Key Principles

Build to order Direct sales

Exchange inventory for

information

Velocity, value and volume

Constant change Criticality of co-ordination

Table 2- Source: Dell

Just in Time

Being one of the organizations practicing Just In Time (JIT), Dell holds just enough

inventories for three to four day compared to a conventional method of holding a

month’s stock. To manage the smooth process and maintain JIT Dell has a Supplier’s

Logistic Center’s (SLC). As a vendor or supplier for Dell the SLC is like staging areas

where the suppliers keep stocks of the part that they supply to Dell just in time for

manufacturing. These SLC’s often situated nearby Dell’s plants to enable for the parts to

be delivered within the next 90 minutes upon order being placed. Averagely, orders are

placed every 2 hours to SLC by Dell upon monitoring the inventory level.

Figure 6- Source: Cheong, et al., 2007

A typical supply chain of Dell includes:

Customer

Dell Website

Dell Assembly Point

Dell’s supplier

Supplier’s supplier

The process starts with customer placing the order either on phone or official website of

Dell. On receipt of order the same is sent at assembly point for getting the product

designed as per request. In the due process the suppliers and supplier’s supplier provide

inventory at the assembly point as per requirement.

Capacity Management

Dell identifies its resources capacity by assessing it labour hours, the plant runs on a 24

hours shift and takes 25 minutes on average to finish a typical desktop or server. The

assembling machineries work at the paces of the operator. At its optimum level, the

process can be finished within 20 minutes instead of 25. If the is 5 workers at a station,

with 8 station and 2 lines, the service output is measured at 240 units of server per hour.

Dell measures the capacity requirement of most of the material and labour needed using

trend analysis.

Kaizen Process

Dell has a group of Operation Managers constantly improving and educating the

workforce for leaner and greener operations. Its Kaizen approach aims to deliberately

constructing an environment conducive to having capable and empowered people

creating and rapidly implementing idea.

Figure 7- Source: Dell

Dell has one of the best after sales support; its warranties cover next business day and

on site. Most of the IT hardware provider requires customer to send their hardware to

the service center or charges additional sum for onsite support. This has not only helped

in customer retention but only a savings in cost. It is much cost efficient to fix a product

once or replace it on the spot then to do multiple visits as it incurs more cost and more

parts. Upon returning the faulty hardware, Dell refurbishes them and sells them at a

much lower cost with standard warranty and technical support. (Dell, 2012e)

When a customer calls the customer care line to report for a faulty in hardware or break

down in software, the customer service representative solves the issue by either sending

an engineer to fix or replacing the hardware, but he also logs the case so that a root

cause analysis is done to identify the problem for ease of trouble shooting if similar

problem occurs in future. Similar process is also done in the sales department when the

sales figures are low; a root cause analysis is done to prepare for future shall the same

trend repeats.

Trade Documentations International market involves various types of trade documents that need to be produced

while making transactions. Trade document presents various aspects of the trade like

description, quality, number, transportation medium, indemnity, inspection and so on.

So, it becomes important for the importers and exporters to make sure that their

documents support the guidelines as per international trade transactions. A small

mistake could prove costly for any of the parties.

Let us see the trade documents may be required for Dell system of import and exports of

laptops or mobile devices.

Documents Matrix:

Documents Export Import

Customer Request Letter Y Y

Export/Import License or Authorization Y Y

Certificate of Origin Y

Form A1 and A2 Y

Commercial Invoice Y Y

Consular Invoice Y Y

Customes Invoice Y Y

Legalised Invoice Y Y

Delivary Challan Y Y

Bill of Lading Y Y

Insurance Certificate Y Y

Marine Insurance Y Y

Bill of Exchange Y

Bill of Entry Y Y

GR/SDF Y

i) Certificate of origin: It is a specified document certifying the country of

origin of the merchandise required by certain foreign countries for tariff

purposes. This certificate is issued by Chamber of Commerce, Trade

Association or any other authorized body of the exporting country and

it sometimes requires the signature of the consul of the country to

which it is destined.

ii) FORM A1/A2: RBI form A2 is for Application for withdrawing of foreign

exchange. It is primarily used for:

Intermediate Trade

Outward Remittances for overseas service

Form A1 is used for import payments.

iii) Commercial Invoice: A commercial invoice is a bill for the goods from

the seller to the buyer. Commercial invoice are utilized by customs

officials to determine the value of the goods in order to assess customs

duties and taxes.

iv) Consular Invoice: It is an invoice made out in a specially printed form of

the exporter and is shown before the consul of importing country

stationed in the exporter’s country as being correct in all respect. The

consular of the importing country then certifies the invoice. A consular

invoice enables the importer country to have all accurate record of the

merchandise shipped.

v) Customs Invoice: Extended form of commercial invoice required by

customs (often in a specified format) in which the exporter states the

description, quantity and selling price, freight, insurance, and packing

costs, terms of delivery and payment, weight and/or volume of the

goods for the purpose of determining customs import value at the port

of destination.

vi) Legalized Invoice: Some Middle East countries require that the

commercial invoice should be countersigned and stamped by the

authorized officer in their Embassy or the consulate in the exporter’s

country instead of consular invoice.

vii) Delivery Challan: A document accompanying a shipment of goods that

lists the description and quantity of the goods delivered. A copy of the

delivery note, signed by the buyer or consignee, is returned to the

seller or consignor as a proof of delivery.

viii) Bill of Lading: A bill of lading is a document which is issued to the

transportation carrier by the shipper acknowledging that they have

received the shipment of goods and that they have been placed on

board a particular vessel which is bound for a particular destination and

states the terms in which these goods received are to be carried.

Normally a bill of lading contains the port of shipment and of

destination, the name of consignee, the number, contents and

identification marks of the goods shipped and the amount of freight

“paid” or “to pay”. The bill of lading serves three main purposes,

„ As a document of title of the goods

„ As a receipt from the shipping company and

„ As a contract for transportation of the goods.

ix) Insurance Certificate: Document issued by an insurance company, it

certifies that an insurance policy has been bought and shows an

abstract of the most important provisions of the insurance contract.

x) Marine Insurance: Coverage against loss of or damage to a ship; and

in-transit cargo loss or damage over waterways, land, and air.

xi) Bill of Exchange: Bill of Exchange is one of the key financial instruments

in International Trade. It is an instrument by which sellers can obtain the

payment from their buyers for the invoiced value of goods. As per

section 5 of the Negotiable Instrument Act. 1881, A bill of Exchange is

an instrument in writing containing an unconditional order, signed by

the market, directing a certain person to pay on demand or at a fixed or

determinable future time a certain sum of money only to, or to the

order of, a certain person or the bearer of the instrument.

xii) Bill of Entry: A Bill of Entry also known as Shipment Bill is a statement

of the nature and value of goods to be imported or exported, prepared

by the shipper and presented to a customhouse. The importer clearing

the goods for domestic consumption has to file bill of entry in four

copies; original and duplicate are meant for customs, third copy for the

importer and the fourth copy is meant for the bank for making

remittances.

xiii) GR/SDF: GR/SDR (Goods received/ statutory declaration form) are more

or less same documents. If the filing is done physically GR is used and

if it is online then SDR is used.

SDR: A document submitted to customs authorities by exporters

verifying that shipping bills are accurate and complete. An exporter

confirms on form SDF that the amount paid by the buyer is the same as

the full export value stated on the shipping bill.

GR: Record of goods received at the point of receipt. This record is

used to confirm all goods have been received and often compared to a

purchase order before payment is issued.

Supply chain drivers The major drivers of supply chain for Dell are:

Facilities

Inventory

Transportation

Information

Sourcing

Figure 8

The role of each driver in maintaining the efficiency and responsiveness of Dell’s supply

chain are:

Facilities: Activities such as coordinating with its manufacturing facilities & managing

inventory are of primary concern for dell because they impact the price of the final

product to customers. Dell has a manufacturing arrangement with its key suppliers such

as Sony. Thus suppliers’ employees work in the dell facilities & work on the planning &

product development. Now because of the close relationship with its suppliers & their

reputation for building certain component dell does not perform quality checks on their

components .Thus dell does not maintain any inventory on its own. It is owned by its

suppliers. Moreover when required it instructs to get the components matched in the

delivery process which eliminates the need for dell to have a distribution centre to

perform all these kind of functions.

The three prime facilities component are:

Location

Capacity

Operational Design

Location Efficiency: Refers to centralization of the location to gain economies of scale,

which increases efficiency

Location Effectiveness: Refers to decentralization of locations to be closer to the

customers, which increases effectiveness.

Capacity Efficiency: Refers to minimal excess capacity with the ability to produce only

what is required.

Capacity Effectiveness: Refers to large amounts of excess capacity which can handle

wide swings in demand when required.

Operational Design Efficiency: Refers to product focus design which allows the facility to

become highly efficient at producing one single product, increasing efficiency.

Operational Design Effectiveness: Refers to functional focus design which allows the

facility to perform a specific function on many different types of products, increasing

effectiveness.

Figure 9

Inventory: The inventory in its facilities is not owned by Dell, rather owned by suppliers

which indirectly add to the components price & finally the final product. Therefore, any

reduction in inventory definitely reduces the product price & finally benefits the customer

& definitely the company. Low inventory also lead to higher product quality because it

becomes easy for Dell then to identify any defects in the inventory.

The vendor-managed-inventory (VMI) arrangement of Dell lets its suppliers decide how

much inventory they need to order and when to order while Dell sets target inventory

levels and then records deviations from the targets for each supplier. Dell choses an

inventory target of 10 days i.e. it makes a plan for 10 days about the inventory targets to

achieve.

To help suppliers in making accurate or nearly accurate ordering decisions, Dell shares

its forecasts with them once per month. They not only focus on Product-specific trends,

but also reflect the seasonality factor. Dell revives its forecast weekly according to

various factors and suppliers receive forecasts monthly.

Two primary inventory components are:

Cycle Inventory

Safety Inventory

Cycle inventory is the average amount of inventory held to satisfy customer demands

between inventory deliveries.

Cycle Inventory Efficiency: Refers to holding small amounts of inventory and receiving

orders on weekly or even daily basis.

Cycle inventory effectiveness: Refers to holding large amount of inventory and receiving

inventory deliveries only once a month.

Safety Inventory: Refers to extra inventory held in the event demand exceeding supply.

Safety Inventory Efficiency: Refers to holding small amounts of safety inventory.

Safety Inventory Effectiveness: Refers to holding large amounts of safety inventory.

Figure 10

Transportation: Dell in some cases has significantly less time to respond to customers

than it takes to transport components from its suppliers to its assembly plants which

require 7 days to as much as 30 days to transfer various components to assembly plants.

To compensate for long lead times and buffer against demand variability, Dell requires

its suppliers to keep inventory on hand. Thus small warehouses are located within a few

miles of Dell’s assembly plants. Each of the warehouses is shared by several suppliers

who pay rents for using that. Thus it stores inventory there according to the forecasted

demand keeping some level of buffer stock accordingly & thus reduces its transportation

cost by ordering purchases in batches rather than individual purchase.

There are two primary inventory components:

Method of Transportation: Refers to choosing an inexpensive method of

transportation increases efficiency, but also typically increases delivery

time.

Transportation Route: Refers to choosing an expensive method of

transportation to ensure speedy delivery increases effectiveness. The six

primary transportation methods include- truck, rail, ship, air, pipeline, and

electronic.

Efficiency refers to condition when a company can save money by shipping goods

inexpensively. However, this usually causes the shipment to take longer. For example it

is cheaper to send a package by boat then it is to send it by plane.

Effectiveness costs the company money to ship goods quickly to the required customer.

Global inventory management system provides the ability to locate, track and predict the

movement of every component or material upstream or downstream in the supply chain.

Method of Transportation Efficiency: Tracks and analyses the movement of materials

and products to ensure the delivery of materials and finished goods at the right time, the

right place, and the lowest cost.

Distribution Management Software: Coordinates the process of transporting materials

from a manufacturer to distribution centres to the final customer

-Transportation route efficiency: a company can save money by shipping its products to

a distributor that ships the products to its customers

-Transportation route effectiveness: a company can ship its products directly to its

customers

Figure 11

Information: By selling directly to customers, Dell uses e-commerce to communicate

with customers, maintains low cost & customize products according to customers’

specifications. Dell computers are driven by the desire to create value for customers.

Through the use of internet, Dell’s customers gain access to the same product, service &

catalogue information as its employees. Tailor made internet sites called premiere pages

gives customers direct access to purchasing & technical information about the specific

configuration they buy from it. The website has all information with respect to product

and prices. Complaints are also registered online and technical support is provided to the

customers. Thus customers can order, configure & even gather technical advice online &

get a completely customized product.

The corresponding Web site valuechain.dell.com is an extranet for sharing such

information as points of contact, inventory in the supply chain, supply and demand data,

component quality metrics, and new part transitions. Dell envisions using this site to

exchange with suppliers current data, forecasted data, new product ideas, and other

dynamic information that might help it to optimize the flow of information and materials

in the supply chain. Value Chain is a program intended to extend Dell’s successful direct-

sales approach back into the supply chain with the goal of increasing the speed and

quality of the information flow between Dell and its supply base.

Two primary information components are:

Information Sharing

Push versus Pull Strategy

Information sharing efficiency: Refers to freely share lots of information to increase the

speed and decrease the costs of supply chain processing.

Information sharing effectiveness: Refers to sharing only selected information with

certain individuals, which will decrease the speed and increase the costs of supply chain

processing.

Pull information strategy efficiency: Refers to supply chain partners being responsible for

pulling all relevant information.

Push information strategy effectiveness: Refers to organization taking on the

responsibility to push information out to its supply chain partners.

Figure 12

Sourcing: Dell has a virtual relationship with its suppliers who manufacture components

and maintain just in time for dell which are assembled in its assembly plants. Moreover,

for the customers who want or need more personalized assistance, Dell has more than

10,000 service technicians to their site. Most of these technicians are contract

employees, that is, supply chain partners. This allows Dell employees to focus on

activities that create more value for customers.

References

Supply chain management 4/E, Sunil Chopra, Peter Meindl

http://www.inf.ed.ac.uk/publications/thesis/online/IM070456.pdf

http://www.ibisworld.com/industry/global/global-computer-hardware-

manufacturing.html

http://www.kpmg.com/in/en/issuesandinsights/articlespublications/kbuzz/p

ages/it-bpo.aspx

http://infotechlead.com/2013/08/07/hp-leads-indian-pc-market-with-25-

share-lenovo-acer-dell-apple-dip-in-q2/

http://akustica.com/about.asp

http://www.dell.com/learn/us/en/uscorp1/corp-comm/cr-ca-list-suppliers

http://www.edom.com.tw/en/index.jsp?m=newsview&cal=2&id=1393

http://www.bosch-press.com/tbwebdb/bosch-usa/en-

US/PressText.cfm?CFID=19572382&CFTOKEN=77ce1b310a7ab459-

1C133B89-E587-0427-0A235D606250FF3A&id=511

http://www.amd.com/us/Documents/AMD_2012_2013_CR_Report.pdf

http://www.amd.com/us/press-releases/Pages/amd-seven-suppliers-

2013may14.aspx