International Operational And Logistics - Assignment Example

?Executive Summary The report analyzes current operation and supply chain management of Dell Computers and based on that recommended an improvement proposal. The report in the first past discusses the business and supply chain model of Dell. Dell uses direct sale model which was different from indirect distribution channels used by rest of the industry. Dell directly sells to all its customers, regardless of a home-PC to world’s largest corporations. The direct relationship with individual customer creates a great source of competitive advantage for Dell. The special thing about the company is its relationship with its suppliers, which is the major reason for facilitating build-to-order model. In Dell, Suppliers are viewed as the integral part of operating business and a key variable for success. The last part of repot analyzes an improvement proposal that could possibly improve the logistics and supply chain of the company thereby enhancing its competitive advantage. The proposal focused on use of information technology in supply chain management of Dell through Oracle 10G and use of e-commerce in its supply chain management. Introduction Dell was incorporated in 1994 by Michael Dell while he was a student at University of Texas, Austin. From its very first initiatives, direct selling model was adopted. In the beginning PC’s were sold over the phone and they were customized according to customers’ specifications. Dell returned to its direct selling model after using the retail channel from 1990 to 1994. In mid 1990’s, the company grew rapidly, thus becoming number one PC seller in the US and number two worldwide in 1999. Dell’s success continued over the following years, but it was not able to avoid the crisis in PC industry in the new millennium. Dell’s growth rate fell, resulting in the fall of its stock price. However, over the time, Dell managed to remain a highly successful company, and its growth rate continued to outperform the industry as a whole. Dell’s strategic choices and ways of realizing those choices have played an effective role in story Dell’s success. The supply chain management of the company is the key element in its successful business model. The core element of the company’s business model is its direct sales model, referred as ‘direct mode’, with the build to order strategy. Current Operations and Supply Chain Business Model This differentiated model of dell help it creates a niche in the distribution channel and eliminates the entire mid channel members to arrive at cost leadership position in the industry. The basic principle of Resource based view is that the competitive advantage for any particular organization completely depends upon the resources which are available at any company’s disposal. It is a management tool to determine the important resources available for any organization. It is very important for success of the organization that these resources are valuable and are not imitable. The direct sales model refers to the fact that the company does not use any retail channels for selling its products, but sells its products directly to its customers through its corporate website, Dell.com. The above figure shows hot the direct model of Dell was different from the indirect distribution channel of the rest of industry. In its direct sale model, the intermediary steps that add cost and time are eliminated, and the company is directly able to link with its customers. Dell directly sells to all its customers, regardless of a home-PC to world’s largest corporations. The direct relationship with individual customer creates a great source of competitive advantage for Dell. This creates a valuable information about the end customers, and thus Dell knows who are the end users of their product, what they have purchased from the company, what are their future preferences, a fact that allows the company to stay closer to their customers by offering add-on products and services. Company distinguishes three customer segments, namely large organizations, medium and small businesses and personal consumers; and the revenue of the company is not concentrated as no customer of Dell represents more than 2% of total revenues. This provides a wide mix of customers served. The focus of the company is majorly on large customers, accounting of 70% of the Dell’s revenues. Dell has been improving its segment from past years and with the combination of direct sales model, gives them the ability to better forecast demand. In the case of large customers the direct relationship by the company is upgraded to virtual integration. With the help of IT, customers work with Dell as partners. Dell employs two main facilities that bring them and their customer’s closer i.e. Premier Councils and Premier Pages. Premier Councils are the regional meetings of the company largest customers, where salespersons, technicians and the executives discuss their experiences with Dell, and their future expectations from the company. Premier pages, now known by Premier.Dell.com, are customizes support and procurement sites for their big clients, which allows them to manage and decide their purchases from the company, thus making the role of a sales person a more consultative role. This represents Dell’s customized sales channel and the company has increased its premier pages manifold in these years. Build in order and Integration with suppliers Thus, a computer is build after the customer places and order, then just-in-time production and lean manufacturing takes place. This means when an order is placed, its configuration details reaches the manufacturing department and the assembly begins, and once the PC is configured it is shipped by a 3PL to the corresponding customer. The choice of JIT and build to order has several advantages for the company. Firstly, the level of inventories remains very low, leading to faster responses to demand changes and low inventory costs. For instance, if a new microprocessor comes into the market, the company can immediately place an order with its suppliers, as the company need not get rid of the excess inventory. Also, in case of Dell, customers pay in advance. That means the customer pay for the order prior to when the company pays its suppliers for the products, thus giving Dell the opportunity of operating on Negative cash flow cycle. The special thing about the company is its relationship with its suppliers, which is the major reason for facilitating build-to-order model. In Dell, Suppliers are viewed as the integral part of operating business and a key variable for success. This helps Dell to adopt an approach of the extended enterprise. According to Dell their supplier effectively becomes their partner. The company selects suppliers that show experience, expertise and ability to deliver value. The performance of suppliers is regularly evaluated against the pre-set parameters. A quarterly meeting is held between the company and its suppliers to discuss the quarterly performance and future expectations. The performance of each supplier is evaluated by comparing a scorecard consisting of quality, cost, and reliability with that of their competitor. The company’s suppliers are also provided with the support and training to improve their processes. The company demands from its suppliers that it should provide them with inventory at a high speed. This helps Dells effort of minimizing its inventories. So instead of orders like deliver 4000 to warehouse every week, the form of orders is like “tomorrow evening we need 7.25 to be delivered at door D3 of the warehouse by 6 pm. This notion of Dell, has introduced inventory velocity, and that focused on maximizing the speed and minimizing the inventory. Dell holds an average inventory of less than 6 days, while the corresponding industry average is of 6 weeks. In dealing with these rhythms, main supplier does have to maintain inventory near or in the company’s plants. All the practices above require close collaboration between the suppliers and the company; sophisticated data exchange and mutual trust are the key variables to achieve it. The information sharing facility of the company is the website ValueChain.Dell.com. Through this website, the company’s suppliers get informed of the level of inventory in the company’s supply chain, demand and supply data, new part transitions with customers and component quality metrics. This way the company share production, demand and supply forecasts with its suppliers. These help suppliers in deciding on production levels, avoiding bullwhip effect. Improvement Proposal The improvement proposal for Dell analyzes the implementation of IT in Supply Chain Management of the company. The earlier Company system used Sun E6000-Class UNIX servers operating the Sun Solaris 8 OS with Sun Cluster 2.2. The Servers, within 16 processors at 336 MHZ with 11GB of memory, managed the production database on Oracle database 8.0.6. The company’s disaster recovery server had 12 processors running at 336 MHz with 6 GB of memory. To make the systems readily available, the company’s information technology used Sun Cluster to cluster primary and secondary servers with an active/passive configuration connecting to a shared disk storage, enabling its database to fall over to the passive node if in case the active one is failed. The objectives of the project were to be achieved through the implementation of Information Technology through Oracle 10G and use of e-commerce in its supply chain management. The company’s model of IT implementation in SCM is subdivided into three central points: Company’s potent role in control and coordination of a value network, integration of the company with its business partners and suppliers and the importance of IT, internet and electronic communications. The earlier Company system used Sun E6000-Class UNIX servers operating the Sun Solaris 8 OS with Sun Cluster 2.2. The Servers, within 16 processors at 336 MHZ with 11GB of memory, managed the production database on Oracle database 8.0.6. The company’s disaster recovery server had 12 processors running at 336 MHz with 6 GB of memory. To make the systems readily available, the company’s information technology used Sun Cluster to cluster primary and secondary servers with an active/passive configuration connecting to a shared disk storage, enabling its database to fall over to the passive node if in case the active one is failed (Dave 2009). The up gradation of the company to e-commerce was kept to following design configurations: Online facility for organizing and tracking shipment Online order status and documentation Online dispatch documentation and invoice Auto reminder for payments Seamless interface with existing SCM or ERP systems Online alert for critical information through WAP/Mobile MIS reports on the past data analysis, delivery history etc. E-commerce logistics systems based on above considerations ensured benefits to all sellers, buyers and 3PL service providers. References Al-Hakim, L. (2002). Issue and Trends of IT management in Contemporary Organizations. Idea Group Publishing. Alvarado, U. &. (2001). Industrial Marketing Management. In U. &. Alvarado, Supply Chain Management: The integration of logistics in Marketing (pp. 183-198). Ashkenas. R, U. &. (1995). The Boundaryless Organization. San Francisco. Balsmeier, P. &. (1996). Supply Chain Management. In P. &. Balsmeier, Industrial management (pp. 24-27). Cohen Shoanen, R. J. (2004). Supply Chain Management: The five deciplines of top performance. New York: Mc-Graw Hill. Croom, S. (2000). Supply Chain Management: An Analytical framework for Critical Literature Overview. Wawrick Business School. Efraim Turban, J. A. (1997). Decision Support Systems and Intellegent Systems. New Jersy: Prentice Hall PTR. Gunasekaran, A. &. (2001). Performance measures and metrices in supply chain environment. International Journel of Operation & Production Management , 71-87. Handfield, R. &. (1999). Introduction to Supply Chain Management. New Jersey: Prentice Hall. Harrison, A. &. (2002). Logistics Management and Strategy. Prentice Hall. 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