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Founded 1984
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Michael Dell
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IPO 1988
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2000, down 50% from all time high of about
$60.
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2003, stock up 30,000% since IPO
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Lean Supply Chain
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Continued to prosper during the recession of
2000.
2003, selling $49 million online each day.
Accounted for 50% of revenues.
Turning inventory 60 times per year.
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Ecosystem (Intrinsic and Extrinsic)
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Capitalized on IBM open policy
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Business ecosystem was centered on itself
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Included outside suppliers for components,
software and distribution partners.
Competitors:
Compaq, IBM, HP,
Gateway, Toshiba…
Regular Agencies: US Gov’t, State Gov’t,
Local Gov’t, Foreign Gov’t.
Telephone service co., financial institutes, third-party technical
supporters, AD companies
Suppliers:
• Phillips, Nokia,
Samsung,
Sony, Acer
• Maxtor,
Western
Digital, IBM
• Barcelona, HP
Close Proximity
to suppliers
Dell:
• Enterprise System
(Servers)
• Notebook Comp
• Desktop Comp
Direct Sales
Customers:
• Home &
Office
• Small
Business
• Fed/State/
• Local Gov’t
• Education
• Healthcare
Third-party logistics providers such as UPS,
transportation companies.
Stakeholders: Nasdaq, Investors
Complementors: Microsoft, digital makers,
Internet service providers, PC game developers
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First PC manufacturer to sell directly to users
(Dell Direct Model)*.
Build-to-Order (BTO) strategy
Customers configure their own products, with
limited option.
Internet made Dell a Successful Company.
Depends on IT to enhance its BTO strategy.
Integrated Supply Channels and Technology
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When a customer places an order for a specific
computer with a 17-inch monitor, the Dell
Information System immediately knows whether
this unit is available at the Sony plant in Mexico
from which the units are shipped.
If the 17-inch monitors are out of stock, Dell will
offer the customer the option of buying another
monitor that is in stock, at a discounted price.
(Up-Selling)
Offer Accessories (ex: Power Supply, Software)
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To get competitive advantage, Dell worked
with both customers and suppliers to
determine the right level of component
inventory to keep in its assembly facilities.
As business grew, Dell leaned-out the supply
chain by reducing its supply base.
Using only preferred suppliers with whom it
established long-term arrangements and
partnership agreements.
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Dell reduced the number of suppliers from
204 in 1992 to 47 in 1997.
Most components are made in Asia and
shipped to Distribution Centers (hubs) near
Dell’s assembly facilities.
These distribution centers are 15 to 30
minute drive of Dell facilities.
Suppliers with manufacturing facilities in U.S.
also locate their factories and warehouses
nearby.
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Dell helps its suppliers with their own
materials planning by sharing its forecasts
and production plans with them.
Suppliers can also access Dell’s
manufacturing process information to adjust
their production schedules
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Dell trusts third party providers like UPS
Logistics to manage its logistics.
So that PC and the monitor are properly
matched and delivered to the customer, even
though the PC is shipped from Round Rock
and the monitor is shipped from Sony’s
factory in Mexico.
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Gateway, imitated Dell’s model and entered
the PC market, threatening Dell.
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As competition intensified Dell strengthened
its supply chain in two way
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1). It used advanced information
technologies.
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2). It changed its relationships with suppliers
and customers.
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Dell cut firm-wide inventory from six days to
five.
Its major competitors HP, Gateway, IBM
averaged 50 to 90 days of inventory.
Dell now holds tow hours of component
inventory in its assembly plants.
Customer problems solved with 24-48 hours.
No more than 5 days of inventory on hand.
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It uses Advanced Planning Systems software
(Supply Chain Planner, Demand Planner,
Factory Planner) to make its production plans
visible to its suppliers.
Valuechain.dell.com, a secure extranet that
acts as a portal for Dell suppliers to
collaborate in managing the supply chain.
Supplier can log on, submit invoices, check
engineering change orders, review negotiated
and forecasted cost reports, and track their
performance.
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Dell managed relationships with more than
80% of its suppliers through the Internet.
At present, 90% of Dell’s purchases from
suppliers are on-line.
By using the internet for its purchases, Dell
decreased the direct costs of configuration,
orders, tracking, and support for its
transactional business by about 15%.
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With the changing environment, Dell, has to
continually renew and reinforce its
ecosystem.
Dell is also in the Enterprise Computing
market which includes
Servers
Data Storage Devices
Network Swithches
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Dell is gearing up to deal with more products
and services such as:
Personal Digital Assistants
Printers
Software
Network Integration
Internet Service
Financial Services