Fundamentals of Supply Chancellery University I Why has Dell’s Direct Supply Chain been so Successful? The direct supply chain model that Dell has been using for many years to sell customized PC’s to customers via the internet has been very successful. Dell designed and structured the supply chain to provide customized computers in a quick manner and with a reasonable price. Customers can visit the Dell website and configure the PC they desired and see the cost options they selected.
Once the order was finalized, Dell would then start the building of that customized computer to meet he customer’s selection and ship the finished product directly from the manufacturing facility to the customer. The customer expectation was they would get the designed computer they selected at the price point and Dell would ship the custom configured computer within days to their desired location. The direct supply chain model operating at Dell provides a large variety of computer configurations while keeping low levels of component inventory (Copra, 2012, Pig. 6).
Dell structured the direct model supply chain to not include the distribution and retail functions which lowered costs. Additionally, lower inventory and no warehouses in the supply chain structure lowers costs in the supply chain model. Dell uses the direct model for customers to purchase personal computers and business enterprise computer solutions. The company operates six manufacturing facilities across the globe that complies to ISO 9001 – 2000 year certification. Dell utilizes tailored standards based solutions and communicates with customers via phone, email, or in person (Dell, 2009).
Describe the Main Supply Chain Challenges Dell Faces Now and Recommendations There are changes that can impact a supply chain from many areas. The computer hardware and technology advances will impact the components and hardware configurations that Dell can use for future computer models. The predictive analysis from Moor’s Law has shown for past years that technology advances and doubles in capacity, power, and capability over a regular pattern. Using the direct model supply chain design, the company can bring these new products and capabilities quickly to market.
These changes in technology can impact how the supply chain functions, so Dell needs to properly introduce these new technologies in an effective manner, and to impact how the computer is post assembled at the manufacturing facility after the customer orders. In 2007, Dell decided to change the supply chain strategy to support the use of retailers for selling a standard configuration computer for customers. Customers could visit their local Wall-Mart or if in China, the local COME retail store to pick from the standard computer models available (Copra, 2012, Pig. 6).
The changes Dell made to support the retailer to end customer model helps utilizes the retailer’s distribution and retail store facilities which keeps the costs low or Dell and also sees lower outbound transportation costs compared to the online supply chain model (Copra, 2012, Pig. 21). There are potential uncertain events that could occur in the market or future to impact Dell’s supply chain. An example would be where Dell outsource the component assembly in low cost countries, if these areas are impacted by environmental storms or damages, this could be an impact to product deliverables.
Inbound transportation from global countries could be impacted if terrorism or political conflicts occur that shut down dock and shipping facilities. Financial markets can also fluctuate depending on the global country economic position and potential corruption issues. Dell needs to proactively prepare and manage solutions that provide backup and fully tested contingency options in case these situations occur. The more Dell can manage by internally owned facilities or functions in the supply chain, the easier the company can prepare and adapt to uncertain impacts.
There needs to be good communication with all parties in the supply chain design to ensure a full end to end information sharing occurs constantly, as this is vital to Dell’s supply chain management and success. Why did Dell decide to Sell Products via Retail Outlets? The online direct method supply chain provides a good structure and revenue stream for Dell. This methodology needs to be monitored and maintained to fulfill the customer’s demands for configurable computers and solutions in a quick and effective response.