Business Operations at Dell Corporation - Research Paper Example

Business Operations at Dell Corporation Introduction Operations management is a complex task of an organization and encompasses a set of complex management activities (Kim, Cavusgil & Calantone, 2006). Generally it includes planning, controlling, organizing and overseeing an organization’s operational activity. During the earlier times, operations management was viewed as a necessity for the organizations, yet managers have often ignored its significance. However, lately managers have understood the importance and significance of operations management. One of the biggest advantages of operations management identified by the managers is increased productivity. Hence, operation management also leads to increased efficiency of the workers. Another major advantage identified is the better quality of the outcome. A number of scholars have emphasized that management of the operations of a company greatly helps in improving the quality of the outcome (Petersen, Ragatz & Monczka, 2005). Management of the business operation provides companies with the opportunity to undertake small scale continual improvement process and at the same time it facilitates a large scale radical shift in the process and product design of the company. The operations management of a company carefully focuses on the management of processes so as to manufacture and distribute the products and services to the end customers in the most efficient way. According to Varila, Seppanen & Suomala (2007), management of the business operations allows a firm to streamline its process and at the same time eliminates the wastes. Expansion of the business is another viable opportunity of the business. This research paper seeks to throw light on the business operations of Dell computers. In doing so, the study will underline some of the other facts such as the macro-processes involved in the supply chain of Dell Corporation. In addition, the demand management techniques will be also highlighted in this paper. Most importantly, this study will also identify and interview three individuals of Dell Corporation so as to gain in-depth knowledge of the organization’s strategic use of operations and how the company succeeds to achieve competitive advantage in the marketplace. The next section of the study will present a brief overview of the Dell Corporation so as to make the link the findings with the company. Dell Corporation: A Brief Overview of the Company Dell Computer Corporation, commonly known as Dell Inc. is a US based multinational company involved in developing and offering computer technology services. The company was founded in the year 1984 and is currently headquartered at 1 Dell Way, Round Rock, Texas, US. The company was founded by Michael Dell, who plays the role of the Chairman and CEO of the company. The company is basically involved in developing, selling and repairing computers and associated products and services. The company currently employs around 103,300 people and is also considered as one of the biggest technological companies of the world. The company is listed at the 51th position in the global fortune 500 list. Currently, Dell operates in almost every part of the world and has allowed them to grab a significant market share (Dell, 2013). In terms of market share, the company is ranked at the third position just after Lenovo and HP. The major competitors of the company are HP, Lenovo, Compaq, IBM and Acer among others. The company sells data storage devices, servers, desktops, laptops, software products, printers, MP3 Players and other computer peripherals. Dell is known for applying innovative techniques for its sales process, manufacturing process as well as the entire supply chain process. The "configure to order" approach and "build-to-order" approach of the company in the context of manufacturing also reflects the same. The net revenue of the company for the financial year 2012-2013 was US$ 56.94 billion. On the other hand, the net income for the same financial year was US$ 2.37 billion (Dell, 2013). The above figures make it obvious that the company is financially strong and enjoys a stable position in the market place. With the maturity of the industry, the global sales of the company had declined and as a result of that analysts have suggested the company to focus on non-PC business segment such as servers, storage devices and the services. Despite the saturation of the market, the company continued to perform better, due to its sheer price advantage and lean manufacturing system. In terms of its supply chain, the company takes proactive roles in improving the capabilities of the suppliers and other partners in the supply chain. Hence from these activities it becomes apparent that the company is an enthusiastic inefficient management of the operations. The next half of the study will shed light on the macro-processes involved in the supply chain at Dell Corporation. Macro Process in the supply chain of Dell Corporation The supply chain process of a company is further classified into three major processes which are customer relationship management (CRM), internal supply chain management (ISCM) and supplier relationship management (SRM). These processes are mainly used for the purpose of managing the flow of information, funds and products required to generate, and accept and fulfill the order of a customer. However, all these three factors are aimed at serving the similar customer group. Therefore, it is evident that for a successful and efficient supply chain all the three aforementioned factors need to be properly integrated. In general, to promote and manage the relationship with the customers, a company usually depends upon the call center, specialized software packages and order management. On the other hand, the internal supply chain is managed by the use of techniques such as strategic planning; supply planning, demand planning, field service and fulfillment. Lastly, the supplier relationship is managed with the help of techniques and strategies such as design collaboration, supplier collaboration, negotiating and buying. Now these three factors will be discussed below in the context of Dell (Betz, 2003). CRM at Dell: - Dell mainly pursued a strategy in which they attempt to get in touch directly with the consumers and simultaneously gain as much information as possible. As a result of that the company always wants to erase the concept of the middleman. This not only allows them to offer better service but at the same time affordable prices can be offered to the customers. The company also focuses heavily on the need of the consumers so as to design the products according to the requirements of the client. This not only increases the sales prospect of the company but along with that the loyalty of the customers towards the company increases to a great extent. In addition to that, the company is also proactive in terms of the development and implementation of other CRM strategies. The principal objectives of the company to promote CRM is to offer better customer loyalty, stronger brand consistency, improved customer profitability, greater level of customer satisfaction and cost effective customer service. Regarding this context, the strategies pursued by the company are market segmentation and identification of the customer needs, listening to customer opinion and taking their feedbacks in terms of product development (Ignatiuk, 2013). The company also makes use of CRM software so as to strengthen the customer relationship process. For example, Dell uses Hotlink, as the software for marketing automation. Premier Pages, a web page which stores the purchase data of consumers and ProClarity, which is a data mining system and is extremely beneficial for sales. ISCM at Dell: - Supply chain is one of the most vital functions for every organization. Similarly for Dell, management of its internal supply chain is a crucial process. However, before getting into deep, it is important to look after the value chain of the company. The value chain of the company is described below. Dell mainly uses direct selling strategy so as to reach the final customer. After getting the supply of finished products, the company directly sells it to the end customers. On the contrary, other companies use a number of middlemen to transfer the products to the end customer in the form of distributors, retailers etc. (Marsdd, 2012). Dell has recognized that the management of the supply chain is extremely important for the success of a company. The company has also understood that supply chain integrates all the factors such as transportation, supplier, manufacturer and customers. Another strategy pursued by the company for strengthening its supply chain is ‘build-to-order’ strategy. Regarding this manner, the company manufactures the product as per the requirement of the client. This not only reduces the chances of failure, but also minimizes the risk of financial losses. The company implements just – in- time inventory system. This allows the company to gain higher profit margins. Dell maintains strategic alliances with the other companies so that the company gets the opportunity to sell their products directly to the customers. All these strategies help the company to become one of the eminent players of business. SRM at Dell: - Another important aspect of the supply chain is the company’s strategy towards managing the relationship with the suppliers. Supplier Relationship Management is being increasingly seen as a subject of interest among the mass. In order to maintain a cordial relationship with the suppliers the company offers a number of benefits to the suppliers. Moreover, the company also makes use of certain software packages so as to maintain the relationship with the customers (Ravichandran, 1999). Interview with the Manager The study will encompass interview with three managers of the company. The managers who were chosen for this interview are on the basis of their availability, their willingness to take part in the interview and have knowledge over the operations of the company. As a result of that, the three managers chosen for this assignment are the operations managers, the purchase manager and the service manager of the firm. The schedule and findings of the interview are presented below: - Name Designation Schedule Mr. XYZ Purchase manager 25.09.2013 (Time: 2.00 PM to 2.45 PM) Mr. ABC Service manager 24.09.2013 (Time: 11.00 AM to 11.30 AM) Mr. YYY Operations Manager 24.09.2013 (Time: 1.00 PM- 1.30 PM) The mangers were basically asked about the strategies the company pursues for the purpose of gaining competitive advantage over the rivals. In response to the questions, the operations managers of Dell accentuated that the build-to–order manufacturing strategy and along with that mass customization of the products allows them to gain competitive advantage. In addition, the service manager of the firms also mentioned that the direct selling strategy and presence of a number of services thereby expunging the concern of after sales service from the minds of the consumers is a great approach. Moreover, the service manager also highlighted that information sharing and virtual integration has allowed the company to get immediate access of the partners and the customers. However, according to the viewpoint of the purchase manager, the just-in-time inventory management has allowed the company to gain competitive advantage over the rivals. This strategy allows the company to achieve cost advantage as well as speed. The managers have also emphasized that direct supply to car assembly, lean production system and virtuosity also acts as a competitive advantage for the firm. Demand Management at Dell As a demand management strategy, the company has always believed in “Sell what you have” approach. This strategy was developed by Dell so as to match with the incoming demand. In order to balance the demand and supply, the strategy of the company is an implementation of build-to-order strategy. In this context, the company manufactures the products once it gets the order from the customers or it gets the approval from the buyer. Furthermore, the focus of the company to drive down the material cost and sustaining a lean inventory has offered the company with a competitive advantage over the competitors (Mentzer & Moon, 2004). Some of the other techniques used by the company to match up with the demands and maintain a balance between the two are tight supplier base, management of the suppliers, automation and excess inventory (Lapide, 2006). However, along with these contingency plans the company should consider other sales forecasting tools so as to accurately forecast the demands. The recommended statistical forecasting technique that can be pursued by the company is decomposition. In this technique, the company will have the opportunity to forecast the sales figures for the future. It considers four variables namely trends, the seasonality factor, cyclical component and the irregularity component. Now in the context of the statement an integral part of any demand management process is an implementation of an iterative process of sales forecasting and planning seems to be true to a certain extent. This is because the company hardly uses any kind of sales forecasting techniques to determine the possible demand. On the contrary, planning is an essential task of the company. The company spends huge amount of resources and time so as to plan their courses of action. Considering the demand forecasting in Dell, the statement true analysis of sales forecasting management often produces the conclusion that benefit of improved accuracy is worth the cost (Mentzer et al., 2001 ) is consistent to a large extent. With proper forecasting the company will be able to recognize the exact demand of the market and can produce as per the requirement. Moreover, the management of the company also believes that with the diversity and complexity of the company’s product line accurate sales forecasts will assist the company in minimizing the inventory and keeping the cost down. Business Process Integration Business process integration is a technology which is used to automate the processes and link data among customers, applications, partners and business houses. Nowadays, in this competitive business environmental organizations around the world try to make use of technology for the purpose of enhancing the productivity and offer a better customer experience. Hence, in the context of Dell, the company can implement business process integration technology so as to break down the barriers of data transfer and information flow. Moreover, the process will also be streamlined (Chan, Swarnkar & Tiwari, 2007). The implementation of business process integration in the supply chain of Dell would promote collaborative work between the suppliers and the buyers, shared information, common system and joint product development (Caridi & Cavalieri, 2007). However, in order to integrate business process with the supply chain, the technological infrastructure of the company is highly important. This is because without technology, it is extremely difficult to create an efficient and seamless workflow. Furthermore, business process integration in the supply chain of the company will allow Dell to enhance the efficiency of the staff members, minimize the inconsistencies and will assist them in saving money and time (Taylor, 2006). One of the major challenges of the company pertaining to transformation from traditional asset-driven supply chain to a customer-driven value chain is the requirement of reconfiguration. It requires a radical shift in the thinking of the company, implementation of innovative processes and perhaps infrastructural changes is also evident (Wallin, Rungtusanatham & Rabinovich, 2006). However, with proper infrastructural support and resource availability, business process integration can provide great results. Thus, it can be stated that business process integration is a feasible process. Recommended Operations and Production Strategy This section of the study will recommend the most appropriate operations and production strategy that will ensure Dell to respond with agility to the changing demands of the global business environment. The recommendations are as follows: - The company is strongly recommended to promote its online selling business. This will allow the company to remain consistent with their strategy of direct selling. Moreover, online platform will also act as the answer to the changing technology and shifting consumer trends. The company along with built to order strategy can pursue level production strategy. The level production strategy is characterized by companies continuously producing goods as per the average demand. This strategy will greatly assist the company to reduce the customer delivery time and can satisfy bulk demand of the consumers (Christopher & Towill, 2002). Conclusion The management of operations and supply chain of a company are the two vital activities of a business. Although operations management and supply chain management are two different areas of business, but both the activities are meant for streamlining the business process. This study tried to identify the operations and supply chain stagey of Dell Corporations. The study revealed that the company pursues build-to-order manufacturing strategy and mass customization for achieving competitive advantage in the marketplace. The company is also recommended to integrate technology in their operation system so as to automate the business process. In addition, to strengthen revenue and increase sales the company is recommended to open an online store. References Betz, F. (2003). Managing Technological Innovation: Competitive Advantage from Change (2nd ed.). New Jersey: John Wiley and Sons. Caridi, M. & Cavalieri, S. (2007). Multi-agent systems in production planning and control: an overview. Production Planning & Control: The Management of Operations, 15 (2), 106-118. Chan, F. T. S., Swarnkar, R. & Tiwari, M. K. (2007). Infrastructure for co-ordination of multi-agents in a network–based manufacturing system. International Journal of Advanced Manufacturing Technology, 31, 1028-1033. Christopher, M. & Towill, D. R. (2002). Developing Market Specific Supply Chain Strategies. International Journal of Logistics Management, 13 (1), 1-14. Dell. (2013). About Us. Retrieved from http://www.dell.com/learn/us/en/uscorp1/about-dell?c=us&l=en&s=corp. Ignatiuk, A. (2013). Analysis of Dell's Business Strategy. Munich: GRIN Verlag. Kim, D., Cavusgil, S. T. & Calantone, R, J. (2006). Information System Innovations and Supply Chain Management: Channel Relationships and Firm Performance. Academy of Marketing Science Journal, 34 (1), 40-54. Lapide, L. (2006). Demand Management Revisited. The Journal of Business Forecasting, 25 (3), 17-19. Marsdd. (2012). Case study: Dell—Distribution and supply chain innovation. Retrieved from http://www.marsdd.com/articles/dell-distribution-and-supply-chain-innovation/. Mentzer et al. (2001). Defining Supply Chain Management. Journal of Business Logistics, 22 (2), 1-25. Mentzer, J. T. & Moon, M. A. (2004). Understanding Demand. Supply Chain Management Review, 8 (4), 38-45. Petersen, K. J., Ragatz, G. L. & Monczka, R. M. (2005). An Examination of Collaborative Planning Effectiveness and Supply Chain Performance. Journal of Supply Chain Management, 41 (2), 14-25. Ravichandran, T. (1999). Redefining organizational innovation: towards theoretical advancements. Journal of High Technology Management Research, 10 (2), 243-274. Taylor, D. H. (2006). Demand management in Agri-food supply chains: An analysis of the characteristics and problems and a framework for improvement. The International Journal of Logistics Management, 17 (2), 163-186. Varila, M., Seppanen, M. & Suomala, P. (2007). Detailed cost modeling: a case study in warehouse logistics. International Journal of Physical Distribution & Logistics Management, 37 (3), 184-200. Wallin, C., Rungtusanatham, M. J. & Rabinovich, E. (2006). What is the ‘right’ inventory management approach for a purchased item? International Journal of Operation and Production Management, 26 (1), 50-68. Read More