dell_tugas kelompok

DELL’S SUPPLY CHAIN AND THE IMPACT OF E – COMMERCE OPERATION MANAGEMENT Dosen : Dr. Fahmy Radhi, MBA

Team IV (AP 13B) : Rico Bonar Andretti Reiza Deasy Dewayani Riandi Ichram Widnayanto Agus Subekti Ratriani Kartika M

PROGRAM STUDI MAGISTER MANAJEMEN

UNIVERSITAS GADJAH MADA

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Company’s Profile DELL was founded by Michael Dell in 1984 at Austin University with start up cost US$ 1000 and Dell start by simply upgrading compatible IBM PC. Dell’s unique idea is selling computer systems directly to customers through e-commerce Dell is one of the world’s leading providers of computer products and services to consumers and businesses with 57,600 employees in more than 80 countries. Dell provides computer hardwares and the services needed to set up, maintain and upgrade the hardwares. Dell has a unique supply chain based on ecommerce where Dell and it’s suppliers and business partners acts as one virtual company (integrated in a value web) due to the close cooperation and integration of their activities. The concept of the company : That Dell could best understand consumer needs and efficiently provide the most effective computing solutions to meet those needs by selling computer systems directly to customers. Dell uses its online sales, premier pages and online support to open up some if its own internal systems to its customers. It also allows corporate customers to link up their own systems such as finance, procurement, MIS, and help desk to Dell’s systems via the Internet and extranets. These links enable Dell to keep track of every customer, to inventory equipment upgrades and add-ons, to handle service and support requests directly, to facilitate entry into service and support partners, and to capture feedback on customer satisfaction with its products and service partners. For some large corporate customers, the information network is richer still, including the complete inventory of PCs worldwide for an individual company, thereplacement cycle, and the disposition plans. This extensive information bridge binds Dell more closely with its customers and allows Dell to provide better service to its customers. The Internet and ecommerce enrich the direct customer relationship that is at the core of Dell’s

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business model. Through this relationship, Dell can channel the capabilities of its value web to provide a wider range of services to its customers.

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Learning from Dell - the faithful implementer of 'Just in Time' and Supply

Chain Management Dell has gained outstanding sales achievements by resorting to the unique direct business model and highly efficient supply chain management systems. As a result, many domestic IT enterprises began to study and imitate Dell. However, their market performances have certain disparities with that of Dell, no matter whether they are the manufactures that are learning from Dell's direct business model, or whether they are like Lenovo, who is learning the supply chain model of Dell. CCID Consulting, China's leading research, consulting and IT outsourcing service provider, and the first Chinese consulting firm listed in Hong Kong, believes that by simply copying the model of Dell without fully understanding the management theory behind it is the decisive factor that leads to their failure. Lenovo has also tried to make great efforts in promoting direct business models, however, different from other manufactures, Lenovo focused on learning the advanced supply chain management system of Dell and found huge areas of development in their supply chain management, which greatly reduced the lead production time and the level of inventory control, and it also improved the level of satisfaction from customers. Also, Lenovo has poached many senior managers from Dell, after merging the PC department of IBM in order to integrate the supply chain system of Lenovo and IBM efficiently. But the inventory hour remained 18 days less than Lenovo, and with a higher efficiency of 90%. And, from a global point of view, the supply chain of Lenovo is obviously suffering losses compared with that of Dell -- Dell has consigned the production outsourcing to Taiwan manufactures that have strong manufacturing capacities and low costs from an early stage and also first finished the overall arrangement of their global supply chain. Lenovo's superiority is very much confined to China. Dell model; born from JIT

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''Just in Time'' was a production model which was implemented by Toyota Motor Corporation in the 1960s. It emphasized the need to have just the required accessories, just the required quantities and just the required time need for production and distribution. In the 1980s, many American enterprises copied the JIT model, however, with little effect. JIT exposes all kinds of problems in management though reducing different sorts of inventories, and it analyzes the reasons before resolving the problem to make improvements. And, the pulling production that arranges the production according to customer demand is one of the most effective ways to reduce inventory. We believes that the direct business model and the supply chain management system of Dell are acting as one. The two are supplementing each other with no weak area. First, the direct business model is continuing of the pulling production. The traditional IT sales model makes use of distribution channels to finish the terminal production sale. Under these kinds of circumstances, IT manufactures mainly rely on market predictions and the sales data to arrange production, which is typical pulling production. However, the direct model of Dell faces directly to the terminal customers. It is typical pulling production which embodies at the taches such as receiving initial orders from the customers, assembly and logistics. Certainly, the production of Dell bases on the difference delay but not only randomly relying on waiting for the orders of the customers. Second, direct sales promote the dynamic adjustments of the supply chain management system. The ''delivering goods in 7 days'' promise of Dell is on the basis of a consummate back-end supply chain system, however, the most important reason why IT manufactures do not dare to develop direct business on a large scale is because there is no guarantee for the delivery date. The formation of the 7-day promise of Dell is the result of the improved back-end supply chain management. Different from traditional distribution channels, the direct business model of Dell has advanced higher requirements for the prompt response to the customers. Once the order of the customers cannot get the prompt response, it means that

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some links in the supply chain management will have problems and Dell has to make amends and adjustments. Thirdly, information platforms build the bridge of dynamic adjustments. In order to implement JIT, the Toyota motor corporation arranged numerous raw material suppliers in Toyota, Japan. And now, the global supply chain system of Dell cannot summon all the manufactures together. However, Dell can deliver the order information to the upstream accessory manufactures efficiently and promptly through the information platform. The manufactures can produce and assemble the accessories according to the electronic order and provide the goods according to the timetable. If the supply chain bottlenecks, the information platform can trace the problem. In a word, the success of the Dell model is the result of the interaction of the direct business model and supply chain management system. If there is no rapid response demand shock from the customer, Dell may be intoxicated in its own supply chain system and lose its momentum bit by bit. And similarly, if there is no high effect supply chain system, the uncertainty of the direct business model of Dell will be larger and its fast response ability will be weakened. At the current stage, the domestic manufactures have studied the direct business model or the supply chain management model well. But few can combine the two aspects together and jointly develop them. And at the same time, once the manufactures come across difficulties in the attempting to process the direct business model, they will retreat and also lack of the JIT idea of self-denial. Dell’s Growth 

Dell was founded with start up cost US $ 1,000.

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In 1988 Dell Computer went public & raise $30 milion.

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In 1991, Michael Dell become the youngest CEO of a Fortune 500 company.

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As of January 2005, Dell Computer Corp. was the world’s largest direct selling computer company.

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In 2005, Dell was ranked as America’s most admired company by Fortune. Dell’s revenue growth at 19% (7% higher than industry average) and its

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operating efficiency resulted net margin of 6% while the rest of the industry lagged behind at 1%. 

By 2005, the company was valued at more than $100 billion.

DELL’S Strategy 

Direct Selling from manufacturer to consumer; selling computer systems directly to consumers.

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Dell outsourced all components but performed assembly.

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Dell took customized orders for hardware & software over the phone or via internet.

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Dell designed an integrated supply chain linking Dell’s suppliers very closely to its assembly factories and order-intake system.

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To augment the direct sale approach, Dell set up kiosk in malls & planned a series of marketing campaigns

DELL’s Management System Dell using flat structure organization as a competitive advantage : 

Localized decision making

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Execution speed and energy

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Efficient channels of communication and the accessibility to the management without dampening effects of bureaucracy

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Quickly roll out strategies and to respond competitive markets

Dell communicated “Facts are your friend” and “What its meant for the company’s future” to the employees, customers and shareholders.

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Situation analysis Supply Chain Management yang diterapkan di Dell : Extends the internal supply chain by linking to the external supply chain under indirect control of the firm.

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

Integrated relation with supplier and customer

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Focuses on customer orientation

Dell has executed its “E-Works” strategy through a new Information Infrastructure sales force and through partnerships with service and software providers, rather than by transforming itself into a services company.

Supply Chain Integration :

In terms of designing, building and delivering PCs, this is still roughly the way Dell operates, although a significant share of Dell’s products (particularly notebooks) are built by contract manufacturers and shipped directly to the customer. However, as Dell expands its boundaries beyond simply selling PCs, it has replaced the simple value chain with a new model that we call the value web or the virtual corporation. Figure 1. Indirect PC value chain Suppliers

PC Makers

Dstributor

Retailers Resellers Integretor

Figure 2. Direct PC value chain: Dell’s hardware delivery system

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Final Customer

Suppliers

Dell

Final Customer

Flow of Dell’s Supply Chain :

Keuntungan bagi DELL menggunakan pola Supply Chain tsb: 

Dell brings products to market faster than its competitors

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Customization and quick response

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Attract large business customers

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Reduce Bullwhip Effect

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Collecting the payments

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.Answer The Question from the CASE

1.

Although it might seem that Dell, with its build-to-order model, is

best

equipped

to

benefit

from

e-commerce,

a

traditional

PC

manufacturer, selling through distributors and retailers, may also have a lot to gain from e-commerce. Why? 8

Traditional PC manufacturer also have a lot to gain from e-commerce : since they can reach it’s customer by advertising through internet and they can built website so the customers can see their detailed product by browsing to their website.

2.

How has Dell exploited the advantage of the internet to improve

performance? 

Dell

uses

direct

sales

via

Internet,

whereas

Traditional

PC

manufacturers previously assemble PCs ready for purchase at retail stores. 

PCs have life cycles of only a few months



uses the Internet to sell its products



offers a virtually unlimited variety of PC configurations.



Buyers can click through Dell and assemble a computer system piece by piece, based on their budgets and needs



To facilitate B2B sales, the Dell site offers each corporate customer an individualized interface called “Premier page”

3.

What is the main disadvantage of Dell’s selling PCs over the

internet? a. High Distrubution Cost b. Dell company can’t enjoy EoS (Economies of Scale) in shipping because it sends individual PCs to customers from its factories, While competitors : o Sell through distributors and middlemen o Ship their products with EoS using large truck shipments to warehouses and retailers o End user providing the final portion of delivery The transportation cost of a PC relative to its price is generally between 2-3%. 9

c.

Lack of market reach ; it can not reach new

corporate and government customers through internet, it must reach them through direct sales force d.

It does not have the benefit of distribution

channel to extend its reach, it must rely on advertising, marketing, sales representative

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How does Dell compete with a retailer who already has a PC in

stock? •

Price advantage of Dell (elimination of retailer and distributor’s

margin results in increase in Dell’s profit margin and cheaper prices for cusomer) •

Lower inventory cost due to lower days of inventory (5 vs 30-90

days) •

Lower cost of materials due to automated procurement process

which is more efficient and faster, also enabling lower days of inventory •

Negative working capital because it’s Dell’s supplier who has

inventory of materials and indirectly financing Dell’s growth •

More accurate forecasts derived from better saless information

and direct feedback from customer •

Differentiation in ability to let customers customize their orders to

meet their needs

5.

How does Dell’s supply chain deal with the bullwhip effect? Bullwhip effect is the increasing fluctuation in orders that often occurs as orders move through the supply chain. This will increase the cost associated with inventory, transportation, shipping & receiving, while decreasing customer service & profitability.

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Dell’s supply chain deal with bullwhip effect with “Drop Shipping and Special Packaging” method. : a. Dell will send directly to end user customer, rather than to seller or retailer. So it will save cost of transportation & time. b. Dell focus on Assembling PC as its core competence. Whenever their customer want to buy Dell PC, together with other component, such as printer. They will only ship to customer its Dell PC, but the printer will be drop shipped from printer manufacturer. V

Conclusion Dell started out as a specialist company in the PC industry’s horizontallysegmented industry structure. It assembled its own computers from standard parts and components manufactured by others and delivered its products directly to customers. Dell focused on the relationship with the customer, but in order to sustain a high growth rate while providing necessary customer service, Dell built a complex web of relationships rather than doing everything itself. With its build-to-order model, Dell viewed final assembly as a core competency which was kept inhouse, but it outsourced components, pre-assembly and logistics. Service and support were also viewed as a key part of relationship selling, so Dell kept control of the function but outsourced some service delivery functions to business partners (resellers, system integrators, service companies) who would help customers to install, support, and service Dell PCs. Thus, Dell became a virtual corporation as a matter of business strategy. The key to the strategy was fully exploiting information technology, the Internet, and ecommerce. Dell’s innovation was not the individual pieces of the strategy—customer focus, supplier partnerships, mass customization, or just-in-time. The real innovation was how to combine them using information and IT to coordinate across company boundaries to achieve new levels of efficiency and effectiveness for the entire value system. The fundamental insight was that IT could allow Dell to achieve coordination of the system and keep its control over the customer relationship. To do so, Dell focused on using IT and the Internet to improve internal processes such as ordering, assembly, delivery and support, to coordinate its broader value 11

web, and to enhance the customer relationship. A key idea governing process improvements is that information should be diffused as widely as possible throughout the value web to enhance the performance of the entire network and provide rapid feedback to the center. This means that Dell can analyze trends, problems, solutions, performance, and customer satisfaction in real time, creating positive feedback flows that keep the whole system functioning well.

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