Global Supply Chain Management Case Study of Dell

Global Supply Chain Management Case Study of Dell

Introduction
Today, the requirement is to effectively manage the supply in order that it will
contribute to the quality of the products and services and for organisations to make
sense of the process. For e-businesses such as Dell, supply chain management
serves as a tool for securing a large market share. As the basis of providing superior
service, Dell should continuously obtain cost leadership, differentiation and focus on
specific niche in terms of procurement, distribution strategies and delivery strategies.
This report will cover the concept of supply chain management and evaluates its role
as a value-added practice for Dell where the extent to which supply chain
management could contribute to the success of the company. It is the aim of this
discussion to learn about the internal processes at Dell taking into account the core
components of the supply chain management system.
Supply chain design and strategy
Important to e-business processes is the supply chain management (SCM) as a tool
for securing a large market share. As the basis of providing superior service, through
e-business the organization should obtain cost leadership, differentiation and focus
on specific niche in terms of procurement, distribution strategies and delivery
strategies (Hugos, 2006). Nonetheless, the practice of each company varies with the
extent of how they perceived their supply chain to contribute to the quality of the
products and services and how they could make sense of the process. Dell
Computers, for example, is very particular with costing and delivery as well as
customer relationship whereby first value innovation is the priority.
Kraemer and Dedrick (2002) maintain that although the company only entered the electronic
industry in mid-1980s Dell is now considered a company that enables to serve and maximise
the capabilities of the personal computer industry. It is reasoned that the market potential is
the driving force behind Dells general location decisions, while costs and capabilities are the
driving forces behind the specific location of Dells activities". As such, though Dell generally
appears to be receptive to its business model, the company was enabled to serve those
markets by means of effective production capabilities and cost structuring.
Going back, innovation therefore requires the supply chain management to be resilient
especially in the area of customer service. According to Administration (2008), it would be
necessary for IT companies to increase service channels and integrated design of integrated
communication structures, manage intertemporal evolvement of customer demand and

acquire adaptive learning of customer preference. Dell has eight identified customer
segments namely global accounts, large companies, midsize companies, federal
government, state and local government, education, small companies and consumers. So,
there is the need for Dell to reexamine the factors affecting the implementation of customer
relationship management at Dell within the e-business context.
Frederick Betz (2001) contends that that there are three strategic challenges for information
strategy and Dell is not an exception. These are: using the new electronic medium to its full
advantage, upgrading information capability and improving the flow of information in the
entirety of the business. Responding to these challenges means to position the business
component in the strategy in order to put focus on the application of the information system
to business purposes. It would be also necessary to implement the strategy within plans and
training to implement changes in information systems and business processes by which Dell
did. When the Internet emerged as a major business channel, Dell adopted its use to Dells
business model. Dell envisioned the Internet as an effective mode of direct sales to
customers.

Supply chain relationships

Direct selling to consumers is what sets Dell apart from its competitors, as it is only
the company which sells through catalogues before without the obstruction of instore inventories, separating bond between inventory and product selection. Dell
also had embraced online PC retailing making the company a leader in providing
customers requirements through configurator software; which allows customers to
select from an array of choice while also proving online technical support. As ICMR
(2007) puts it, Dell had developed elaborate and sophisticated decision-support
software to help its own technical staff troubleshoot problems and purports on
extending this richness back into its supply chain.
If there are words to describe the general strategy Dell have chosen it would be
optimised integration whereby the supply chain is integrated to meet and exceed
suppliers and customers expectations while not sacrificing quality and relationships.
Dell takes into account the collective performance in the creation, distribution and
support of an end-product (National Research Council, 2000, p. 27). True enough,
Dell increased integration to boost the overall performance of the supply chain
through focusing and coordinating the relevant sources of the needs of the supply
chain. Dell benefits from this process as evident in increased functional and
procedural synergy, faster response to the industry and market changes and
increased competitiveness and profitability (National Research Council, 2000, pp.
27-33).
To proactively respond to the growing demands of the consumer database, Dell established
a complex web of relationship that seemed to be serving its purpose. As such, the key
strategy that Dell implemented is the consolidation of the three technical aspects. These
aspects are online sales, online support and infrastructure. Dell resorted to online selling

outside the US but met with various challenges such as the uncommon use of credit card
and inadequate distribution and delivery systems and strict regulations of some state
regarding direct sales. Nevertheless, online selling strategies are backed by online support
and Infrastructure. Dell applied the globalised, then regionalize philosophy wherein a global
application is localised whenever necessary. To host the content of online stores in different
regions, Dell developed separate infrastructures with data centers in Ireland, Singapore and
US.

Issues related to global sourcing and outsourcing

Kraemer and Dedrick (2001) also claim that the superior supply chain is driven by
Information Technology (IT), e-commerce and virtual corporation. Initialising in
horizontally-segmented industry structure, Dell strategically assembled its own
computers from standard parts and components which is traditionally not the practice
while focusing on the customer relationship. Kraemer and Dedrick (2001) emphasise
that there had been a sound interplay between customer focus, supplier
partnerships, mass customisation, or just-in-time and coordinating IT for example in
traditional business boundaries that include in the value chain among suppliers, the
manufacturer, service and support partners and end users towards the evolution of
the virtual corporation.
For Dell, there are core and non-core activities. The already mentioned are the core
activities and those non-cores could be outsourced especially if it means furthering the
managerial, financial and informational control over the operation. Provide that with IT
sourcing must start with the business imperative, Dell accentuates cost and capability by
delegating certain functions as internal and external so as to facilitate value-added
outsourcing, equity holdings, co-sourcing, multiple suppliers and spin-offs (Willcocks et al.,
2002, pp. 174-177). As already implicated, Dell focused the business on direct selling to
large companies and on outsourcing PC assembly using just-in-time manufacturing principle.

As such, the existing business model at Dell cannot be easily imitated. Basically
because competitors lack the know-how to make it work to their advantage, or they
may embed conflicts into the models in use. Henry Lucas (2002, pp. 105-110)
highlighted that the direct ordering strategy and the Internet largely impacted Dells
business model making it well positioned in the adoption of e-commerce and take
advantage of the Internet. Following the business model within Dell is due to wide
use of technology allowing it to substitute information for physical parts and buffer
stock and thus exhibiting a competitive advantage that is built-in (Lucas, 2002, p.
110).

Conclusion

In sum, Dell has a global supply chain design that changes according to the
requirements of its immediate environment - the IT industry. Supply chain at Dell is
strategically positioned in way that core activities are prioritised in lieu with the
supply chain itself. Segmentation is critical within the supply chain as it lineates the
ongoing relationships one at a time. Supplier relationship is important also because it
is directly tied and complementing the customer relationships unique for Dell.
Technology is also a leading driver in the supply chain management of Dell as it
backed the whole process.

References
Administration (2008) Strategic Innovation: How Dell Redesigned the Value Chain.
2
July.
Retrieved
on
18
December
2009,
from
http://www.unitedbit.com/strategic-innovation-how-dell-redesigned-the-valuechain/.
Hugos, M. (2006). Essentials of Supply Chain Management. John Wiley and Sons.
Inc.
ICMR Center for Management Research (2007) Dells Supply Chain Management
Practices.
http://www.icmrindia.org/casestudies/catalogue/Operations/OPER063.htm.
Kraemer, K. L. and Dedrick, J. (2002) Dell Computer: Organization of a
Global Production Network.Irvine, California: Center for Research on
Information Technology and Organizations.
Kramer, K. L. and Dedrick, J. (2001) Dell Computer: Using E-Commerce To Support
the Virtual Company. Irvine, California: Center for Research on Information
Technology and Organizations.
Lucas, H.C. (2002) Strategies for Electronic Commerce and the Internet. Cambridge,
Massachusetts: MIT Press.
National Research Council (2000) Surviving Supply Chain Integration: Strategies for
Small Manufacturers. Washington, DC: National Academy Press.
Willcocks, L. Petherbridge, P. and Olson, N. A. (2002)Making IT Count: Strategy,
Delivery and Infrastructure. Boston: Butterworth-Heinemann.