Dell has been selling computers for over 25 years with its unique, direct build-to-order sales model. After reading the related articles from the Capella library (linked in the Resources under the Required Resources heading), answer the following questions:
- Why has Dell’s direct supply chain been so successful?
- Describe the main supply chain challenges that Dell is now facing and provide your recommendations for solving them.
- Was Dell’s decision to sell its products via retail outlets a viable solution? Do you agree with this distribution strategy? Why or why not?
Solution
Why has Dell’s direct supply chain been so successful?
The success of Dell is usually associated with analysts to its effective world-class supply chain process. Dell; leading hardware, computer, and technology-based company, is capable of delivering customized computers and servers within days of order. Dell can deliver faster than any other retailer or company going through an in-store purchase. Dell is also able to make adjustments to the price as per the supply and demand. It enables Dell to offer its products at relatively lower prices than its competitors.
Dell has been successful because of its commitment to speeding up its process of manufacturing. It has led it to build a strong relationship with its suppliers and vendors. Dell believes that the time for becoming champion of every field has long past. Now, for faster service levels, the supplier with specialization of each service should be trusted into producing of each service or product or components. Thus, Dell supports and trusts its suppliers for providing specialized components (Kapuscinski, Zhang, Carbonneau, Moore, & Reeves, 2004).
For increasing the supply of computers to the customers in less time, and at cheaper rates, the suppliers also need to have lower inventory costs. Thus, for this reason, the company has invested in research and implemented systems to reduce the supplier as well as Dell handicap. By elimination of the clumpy pull by Dell, doubling of the frequency of delivery, decreasing in the replenishment time, and reduction in attach rate error, the system will enable Dell to decrease its inventory for the Power-connect Line from 20 to 10 business days. It can decrease the annual savings by $2.7 million.
Describe the main supply chain challenges that Dell is now facing and provide your recommendations for solving them.
Because of the continuous changing preferences of its customers and the tough competition given by the market, Dell has to face the challenge of continuous improvement in its supply chain for not lagging behind its competitors. Dell has to keep its inventory cost low for making the prices of the custom-made computers for customers attractive. The one disadvantage of the shipment process is the long shipment days, which range from 7 to 14 days. The cost of the inventory is directly added to the customer price. Thus reducing the inventory cost can aid in lowering the overall prices. Dell can solve it through using ready-to-buy models for the customers who do not need customer made computers. It can aid in lower shipment and processing days as the ready-to-made computer can be directly shipped and processed after receiving the order.
Another issue faced by the company Dell is that of the continuous advancement in the technology makes its inventory outdated and obsolete after some time. This issue has been handled by Dell by using low inventory level at its revolvers and thus responds with faster turnaround time. It enables them to have lower risks of storing obsolete inventory (Gray, 2007).
Was Dell’s decision to sell its products via retail outlets a viable solution? Do you agree with this distribution strategy? Why or why not?
The decision by Dell to sell via retail outlets seems to be a viable solution because the number of customers using the direct model has reduced. It is discovered by the company that’s out of four; one customer was using the model of direct sales. Thus, even when the model of direct selling was working very effectively for the company Dell; the aim of targeting the largely matures customer base was not achieved from its current strategy. The current customer base is evidently based on emerging markets, which are associated with immature infrastructures. Thus, using the current model of not using the retail outlets erased the option of reaching out to the customers via other than online mediums (Blanchard, 2012). Thus, for this reason, Dell was concerned about finding any other way for reaching out to the customers. During the 1990’s, the model of direct sales has reaped immense benefits, and it was used effectively. However, the advancement in technology has led to various technologies which are associated with the retail outlets. Dell lacks out in this area. It is one area which is needed to be looked at by Dell. Thus, moving towards retail outlet is certainly a positive step. Even though, the supply chain processes associated with the company have to be reconsidered. The opportunities that can be exploited by using the retail outlets are worth the efforts.
References
Blanchard, D. (2012, November 14). Dell taps into innovation to reach emerging markets. Retrieved February 21, 2018, from Industry Week: http://www.industryweek.com/supply-chain/supply-chain-and-logistics-dell-taps-innovation-reach-emerging-markets
Gray, M. (2007). Revolving around the customer [supply chains customisation ]. Manufacturing, 86(6), 28-31.
Kapuscinski, R., Zhang, R. Q., Carbonneau, P., Moore, R., & Reeves, B. (2004). Inventory decisions in Dell’s supply chain. Interfaces, 34(3), 191-205.
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