Theeffectiveness of a supply chain is determined by its capacity to helpthe company manufacture products effectively and deliver them tocustomers in the right time. The term supply chain is defined as thesequence of events and processes that take place during productionand distribution of goods (Davis, 2010). This paper will analyze thesupply chain of Dell, Inc., which is a multinational computermanufacturing firm that was established in 1984 (Davis, 2010). Thepaper will focus on factors that enhance the success of Dell’ssupply chain, its challenges, and changes that have occurred overtime.
Why is Successful
Dellrelies on a direct sales type of supply chain, which gives thecompany an opportunity to interact with the consumers of itsproducts. The ultimate success of this type of supply chain isattributed to the fact that it has helped Dell avoid inventoryholdup, reduce waste, time, and cost of delivering its products toits customers. According Noria Corporation (2016) Dell’s supplychain facilitates effective planning that has enabled the company toavoid the pileup of the inventory of finished products. Its employeesin the supply docket source information about the specific needs ofcustomers and the quantity that is demanded in the market, which hasenabled Dell to supply its products in real time.
Theinformation that is sourced from customers by employees who are giventhe responsibility of distributing products is shared with otherdepartments, such as the manufacturing unit. The information is usedin making products that meet the quality and quantity that matchescustomers’ preferences. Most importantly the direct contact thatDell has with its customers has facilitated the implementation of anapproach that the company calls “build to order” (Agarwal, 2014).The “build to order” method allows Dell’s customers to requestfor personalized products. A combination of these factors (includingthe ability to interact with customers, makes personalized products,reduce costs related inventory buildup, and timely delivery) hascontributed towards the success of the Dell’s supply chain.
TheDell’s supply chain allows it to distribute products in real-time.However, the short duration that the company takes between themanufacturing and delivery increase the risk of serious faults. Forexample, the distribution of over 12 million computers that hadfaulty motherboards between 2003 and 2005 was attributed to a drasticshift to a new supplier of capacitors (Ferrari, 2010). The supplychain forces the company to make instant decisions that deny it timeto assess their viability.
Inaddition, the direct supply chain denies Dell the opportunity toreach more customers through hundreds of millions of retailers whoare spread worldwide. In other worlds, the supply chain has forcedDell to serve a limited number of customers, which has been confirmedby the loss of the market share to competitors who use flexiblesupply chains. According to Lewis (2013) Dell was the leadingmanufacturer of computers in the world in the year 2007, but it hadlost its market share to Lenovo and HP by 2013. The company rankedthe third in the list of manufacturer of computers by 2013, which isan indication of an ineffective supply chain.
Moreover,the customization benefit that Dell consumers have been getting haslost value because competitors provide innovative products. Some ofthe products contain all the features that consumers would like toorder from dell. The availability of innovative products in themarket has reduced the need for customers to place orders with Delland then take time for their products to be manufactured withfeatures that they can enjoy by purchasing computers that are alreadyon the shelves (Noria Corporation, 2016).
Changesin to Satisfy Consumers
Dellhas been using a configured-to-order-direct model as its primarysupply chain since its foundation, but it has undergonetransformation since 2007 (Davis, 2010). The supply chain wasoptimized by region and product between 2007 and 2008. Since then,the supply chain has changed to an exclusive company owned strategythat is configured with the cost advantage (Davis, 2010).
Delloperated without an integrated supply chain organization and apermanent supply chain officer until 2008 when it announced itsintention to change the strategy (Gilmore, 2011). The real benefitsof adjusting the supply chain, with the objective of establishing adirect connection with consumers resulted in tangible benefits in2009 when Dell reported a 33 % decline in order to delivery time(Gilmore, 2011).
Delladjusted its supply chain in 2013 by spending $ 13 billion to buy 20companies that manufactured software and offered technology servicesto large firms (Lewis, 2013). The objective of this change was toexpand the supply chain by help Dell focus on large consumers whocould deal with the company directly.
Dellannounced plans to enhance efficiency in its direct supply chain byintroducing the “Smart Selection” strategy that will enable itscustomers suggest their PC configurations and have them deliveredwithin the first 24 hours of placing the order (Gilmore, 2011). Theprogram will help Dell reduce the shipping time from a period of 7-14days to one day in the future.
Thedirect sales type of supply chain has enhanced Dell’s competitiveadvantage for many years, but its effectiveness has been decliningwith time. The supply chain helps dell reduce the time of delivery,get consumers’ feedback, manufacture customized computers, andavoid the pileup of a stock of finished products. However, theprovision of innovative products by competitors has reduced theeffectiveness of Dell’s supply chain since consumers can accessproducts with unique features from retailers without waiting for themto be manufactured and delivered.
Agarwal,A. (2014, December 24). The key to successful commerce business issupply chain. AOL,Inc.Retrieved August 21, 2016, fromhttps://techcrunch.com/2014/12/24/the-key-to-successful-commerce-businesses-is-supply-chain/
Davis,M. (2010). Casestudy for supply chain leaders: Dell’s transformative journeythrough chain segmentation.Stanford: Gartner, Inc.
Ferrari,B. (2010). The Dell model is no longer a benchmark. SupplyChain Matters.Retrieved August 21, 2016, fromhttp://www.theferrarigroup.com/supply-chain-matters/2010/07/01/the-dell-model-is-no-longer-a-benchmark/
Gilmore,D. (2011, March 18). The lessons from Dell’s supply chaintransformation. SupplyChain Digest.Retrieved August 21, 2016, fromhttp://www.scdigest.com/assets/FirstThoughts/11-03-18.php?cid=4330
Lewis,N. (2013, February 15). Is Dell a supply chain leader anymore? UBM.Retrievedhttp://www.ebnonline.com/author.asp?section_id=1059&doc_id=259078
NoriaCorporation (2016). Inside Dell: The secrets of its supply chainsuccess. NoriaCorporation.Retrieved August 21, 2016, fromhttp://www.reliableplant.com/Read/7129/dell-supply-chain