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.
Ecosystem (Intrinsic and Extrinsic) Capitalized on IBM open policy Business ecosystem was centered on itself 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. Dell: Enterprise System (Servers) Notebook Comp Desktop Comp Close Proximity to suppliers Direct Sales Suppliers: Phillips, Nokia, Samsung, Sony, Acer Maxtor, Western Digital, IBM Barcelona, HP Customers: Home & Office Small Business Fed/State/ Local Gov’t Education Healthcare Stakeholders: Nasdaq, Investors Complementors: Microsoft, digital makers, Internet service providers, PC game developers Third-party logistics providers such as UPS, transportation companies. Telephone service co., financial institutes, third-party technical supporters, AD companies
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
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)
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.
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.
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
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.
Gateway, imitated Dell’s model and entered the PC market, threatening Dell. As competition intensified Dell strengthened its supply chain in two way 1). It used advanced information technologies. 2). It changed its relationships with suppliers and customers.
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.
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.
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%.
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
Dell is gearing up to deal with more products and services such as: Personal Digital Assistants Printers Software Network Integration Internet Service Financial Services